Almost Half of Madoff's Victims Now Fully Paid
By Bill Rochelle and Sherri Toub
Feb 10, 2015 (Bloomberg) -- Bernard Madoff's victims are receiving a fifth distribution of $355.8 million, bringing the total recovery to 48.8 percent for those not already paid in full.
The new distribution of 2.7 percent begun on Feb. 6 was about $33 million larger than the
estimate Irving Picard, the trustee unwinding Bernard L. Madoff Investment Securities LLC,
made when seeking court approval for the payments in December.
Made to creditors of record on Jan. 15, the distribution largely became possible thanks to $642
million recovered in late 2014. This year, Picard said, he looks forward to several court rulings
that would allow him to distribute "billions of dollars currently held in reserve."
Of about 2,550 in approved claims, every creditor with a claim of $976,600 or less has now
been paid in full. The 1,160 fully paid creditors represent 45.5 percent of those with approved
Picard has distributed $7.2 billion from his recoveries. In addition, the Securities Investor
Protection Corp. advanced $823.7 million, which also has been handed out. SIPC pays
customer claims of as much as $500,000 when a trustee's assets are insufficient.
Even were Picard to make no more recoveries, customers eventually should receive more than
$14.5 billion toward claims totaling about $17 billion, including $10.55 billion taken in by the
trustee and about $4 billion forfeited to the federal government.
With disputes still in litigation, Picard is holding back some $3.8 billion, including about $1.45
billion to abide by the result of an appeal on whether customers are entitled to interest on their
claims. The interest matter was argued Oct. 14 before the U.S. Court of Appeals in Manhattan.
Picard also holds $2.36 billion for what he calls "deemed determined" claims that are the subject
Picard's fourth distribution, in May, was $351.6 million, or 3.18 percent of customer claims.
From the $10.55 billion Picard has recovered so far, everything eventually goes to customers
because expenses of the liquidation are paid by SIPC.
The average payment in the latest distribution is about $330,000. The largest is $67.1 million.
Madoff's firm began liquidating in December 2008 with the appointment of Picard as trustee
under the Securities Investor Protection Act. Madoff himself went into an involuntary Chapter 7
liquidation in April 2009, and his case was later consolidated with the investment firm's. He's
serving a 150-year prison sentence following a guilty plea.
The liquidation is Securities Investor Protection Corp. v. Bernard L. Madoff Investment
Securities LLC, 08- ap-01789, U.S. Bankruptcy Court, Southern District of New York
Used with permission of Bloomberg L.P. Copyright© 2015. All rights reserved.
Madoff Trustee Blasts U.S. Solicitor General
By Bill Rochelle
June 4 (Bloomberg) -- The trustee for Bernard L. Madoff Investment Securities Inc. came out fighting yesterday after the U.S. Solicitor General recommended in May that the U.S. Supreme Court decline to hear an appeal of rulings that barred the trustee's $10.6 billion in lawsuits against HSBC Holdings Plc, UBS AG and UniCredit SpA.
Madoff trustee Irving Picard contends that the banks kept quiet when they had reason to believe Madoff was orchestrating the biggest fraud in history. Federal district judges in New York dismissed Picard's suits, saying he was barred from suing or didn't have the right to sue based on claims that belong to customers.
The U.S. Court of Appeals in Manhattan upheld the dismissals, prompting Picard in October to seek an appeal before the Supreme Court. In January, the high court asked for an opinion from the solicitor general, who said last month that the lower-court rulings were correct and another appeal isn't warranted.
Picard's brief filed yesterday accused the solicitor general of misreading decisions by other federal appeals courts and saying there is no conflict with their rulings when in fact there is.
In the opening pages of his new brief, Picard bluntly tells the Supreme Court that refusal to hear the case means that customers will lose their last chance to be paid in full on claims amounting to about $17 billion.
Picard said the lower courts misinterpreted the Securities Investor Protection Act to arrive at a “counterintuitive” reading cutting off a trustee's ability to recover defrauded investors' losses from banks that had good reason to suspect they were aiding fraud.
The trustee told the high court it should hear the “most significant test case" ever regarding SIPA. If the lower courts aren't reversed, Picard said, the precedent will impede customer recoveries for years to come.
The lower courts' rulings “undermine SIPA's deterrent effect,” increasing the likelihood that future Ponzi schemes will be unreported because banks can profit “while turning a blind eye to serious red flags,” Picard said.
Picard urged the Supreme Court to accept the case and resolve a split among the circuits on the question of when a trustee can sue if all creditors suffered the same injury. Contrary to the analysis of the solicitor general, Picard said that the Court of Appeals in Manhattan is the only one among four federal appellate courts that don't allow a trustee to sue when a claim is common to all creditors.
The solicitor general is the branch of the Justice Department that appears for the government in Supreme Court cases.
Picard so far has recovered about $9.8 billion and distributed $5.25 billion. He can't distribute $4.3 billion he's holding in view of disputed claims and money he must retain for issues still in litigation. Customers who invested $925,000 or less have gotten back everything, aside from fictitious profits.
All money Picard recovers will go to customers because expenses of the liquidation are paid by the Securities Investor Protection Corp.
The Manhattan appeals court ruled last June that Picard couldn't sue because, as trustee, he was tainted by Madoff's fraud and was thus barred from going after any banks that may have enabled the theft. Picard's appeal to the Supreme Court raises only some of the issues decided last year.
Madoff's firm began liquidating in December 2008. Madoff individually went into an involuntary Chapter 7 liquidation in April 2009, and his case was later consolidated with the firm's. He's serving a 150-year prison sentence following a guilty plea.
The case in the Supreme Court is Picard v. JPMorgan Chase & Co., 13-448, U.S. Supreme Court (Washington).
The Madoff liquidation case is Securities Investor Protection Corp. v. Bernard L. Madoff Investment Securities LLC, 08-01789, U.S. Bankruptcy Court, Southern District of New York (Manhattan). The criminal case is U.S. v. Madoff, 09-cr-00213, U.S. District Court, Southern District of New York (Manhattan).
Used with permission of Bloomberg L.P. Copyright© 2014. All rights reserved.