Statement from the office of Irving H. Picard, SIPA Trustee for the liquidation of Bernard L. Madoff Investment Securities LLC (BLMIS)
Attributable to Heather Wlodek, spokeswoman for Irving H. Picard, SIPA Trustee for the liquidation of Bernard L. Madoff Investment Securities LLC (BLMIS) and his counsel:
On Thursday, March 15, 2018, the SIPA Trustee and his Counsel at BakerHostetler filed their 26th Interim Fee Application with the United States Bankruptcy Court for the Southern District of New York for their work on the global liquidation of BLMIS from August 1, 2017 through November 30, 2017.
• The Application seeks approval of fees, representing approximately 80,558.80 hours of professional and paraprofessional services, which were billed at an average, public interest discounted rate of approximately $423.68 per hour.
• The public interest discount applied represents a reduction of 10 percent from standard rates and it resulted in a total voluntary reduction during the four-month Compensation Period of approximately $3,792,391.56. Additionally, the SIPA Trustee and BakerHostetler voluntarily adjusted their fees by writing off $2,015,879.60 (not including the 10% public interest discount), and wrote off expenses customarily charged to other clients in the amount of $306,170.69.
• The fees requested are reasonable based on the customary compensation charged by comparably skilled practitioners in Chapter 11 matters as well as comparable bankruptcy and non-bankruptcy cases in the competitive national legal market.
• After applying the public interest discount, the total fees requested for the period were $34,131,524.04 (of which $30,718,371.64 is to be paid currently and $3,413,152.40 is to be held back through the conclusion of the liquidation period or until further order by the Court), representing an average of approximately 20,139.70 hours worked per month on the international and domestic investigations, negotiations and litigation resulting from the largest financial fraud of its kind in U.S. history. In addition, $290,520.17 was requested as reimbursement of the actual necessary costs and expenses incurred by the SIPA Trustee and BakerHostetler in connection with the recovery effort.
As noted in the Fee Application:
• During the Compensation Period of August 1, 2017 through November 30, 2017, without the need for protracted litigation, the SIPA Trustee settled 38 cases for $797,072,849.02. The SIPA Trustee entered into settlements subsequent to the Compensation Period that will bring additional funds into the Customer Fund.
• As of the end of the Compensation Period (November 30, 2017), the SIPA Trustee dismissed 280 Hardship Program applicant-defendants from avoidance actions after reviewing the facts and circumstances presented in each application and through additional information requested and verified by the SIPA Trustee.
As of January 31, 2018, the SIPA Trustee has recovered or entered into agreements to recover approximately $12.846 billion, representing over 73 percent of the estimated $17.5 billion in principal lost in the Ponzi scheme by BLMIS customers who filed claims. This recovery far exceeds any prior restitution effort related to Ponzi schemes both in terms of dollar value and percentage of stolen funds recovered.
The costs associated with the SIPA Trustee’s recovery and settlement efforts are paid by SIPC, which administers a fund drawn upon assessments on the securities industry. No fees or other costs of administration are paid from recoveries obtained by the SIPA Trustee for the benefit of BLMIS customers with allowed claims. One hundred percent of the SIPA Trustee's recoveries will be allocated to the Customer Fund for distribution to BLMIS customers with allowed claims.
The SIPA Trustee has distributed approximately $11.441 billion to BLMIS customers with allowed claims through February 22, 2018, which includes a total of $10.597 billion in distributions from the Customer Fund and $844.313 million in funds committed to be advanced by SIPC.
The first pro rata interim distribution commenced on October 5, 2011 and to date equals approximately $769.1 million. A second pro rata interim distribution commenced on September 19, 2012 and to date equals approximately $5.6 billion. The third pro rata interim distribution commenced on March 29, 2013 and to date equals approximately $782.2 million. The fourth pro rata interim distribution commenced on May 5, 2014, and the SIPA Trustee has distributed approximately $526.1 million. In the fifth pro rata interim distribution, which commenced on February 6, 2015, he has distributed approximately $453.3 million. In the sixth pro rata interim distribution, which commenced on December 4, 2015, the SIPA Trustee distributed approximately $1.4 billion. The seventh pro rata interim distribution commenced on June 30, 2016 and to date equals approximately $214.0 million. The eighth pro rata interim distribution commenced on February 2, 2017 and to date equals approximately $283.0 million. The ninth pro rata interim distribution commenced on February 22, 2018, and the SIPA Trustee has distributed approximately $620.9 million.
In addition, SIPC has made advances available to the court-appointed SIPA Trustee to distribute to accounts with allowed claims (up to $500,000 maximum), as a way to expedite financial relief to those account holders. To date, SIPC has committed $844.313 million to the BLMIS liquidation for this purpose. SIPC-committed advances will continue to increase as claims that are currently in litigation are allowed as a result of settlements or the conclusion of litigation. Under SIPA, SIPC must be reimbursed for its advances to customers. To date, SIPC has received approximately $205 million in reimbursement.
The Bankruptcy Court hearing for approval of the 26th Fee Application has been scheduled for April 25, 2018 at 10 a.m.
The BakerHostetler attorneys who worked on behalf of the SIPA Trustee filing this Fee Application include David J. Sheehan, Seanna R. Brown and Heather R. Wlodek.
The filing is available on the Bankruptcy Court’s website: www.nysb.uscourts.gov; Case No. 08-01789. The Fee Application as well as additional information on recoveries, settlements and court filings can be found on the SIPA Trustee’s website: www.madofftrustee.com.