Statement from the office of Irving H. Picard, the Securities Investor Protection Act (SIPA) Trustee for the liquidation of Bernard L. Madoff Investment Securities LLC (BLMIS)
Attributable to Amanda Remus, spokeswoman for the SIPA Trustee & his Counsel at BakerHostetler:
On Monday, November 23, 2015, the SIPA Trustee and his Counsel at BakerHostetler filed their 19th Interim Fee Application with the United States Bankruptcy Court for their work on the global liquidation of BLMIS between April 1, 2015 and July 31, 2015.
• The Application seeks approval of fees, representing more than 100,137 hours of professional and paraprofessional services, which were billed at an average, public interest discounted rate of approximately $412 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 $4,588,000. In addition to the public interest discount, the SIPA Trustee and BakerHostetler also adjusted fees by writing off an additional $1,204,171 for the four-month period, as well as expenses in the amount of $155,459.
• 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 $41,292,007 (of which $37,162,806 is to be paid currently and $4,129,200 is to be held back through the conclusion of the liquidation period or until further order by the Court), representing an average of approximately 25,034 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, $315,058 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 April 1, 2015 through July 31, 2015, without the need for protracted litigation, the SIPA Trustee settled fifty five cases for $183.8 million.
• As of the end of the compensation period (July 31, 2015), the Trustee dismissed 210 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 November 23, 2015, the SIPA Trustee has recovered or entered into agreements to recover more than $10.911 billion, representing more than 62 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 the Securities Investor Protection Corporation (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.
To date, the SIPA Trustee has distributed approximately $7.960 billion to BLMIS customers with allowed claims, which includes a total of $7.255 billion in distributions from the Customer Fund and $704.9 million in net funds advanced by SIPC.
The first pro rata interim distribution commenced on October 5, 2011, and to date equals approximately $675.7 million. A second pro rata interim distribution commenced on September 19, 2012, and to date equals approximately $4.908 billon. The third pro rata interim distribution commenced on March 29, 2013 and to date equals approximately $686.5 million. The fourth pro rata distribution commenced on May 5, 2014 and the SIPA Trustee has distributed $461.6 million. In the fifth pro rata distribution, which commenced on February 6, 2015, he has distributed $397.7 million. The sixth pro rata distribution was approved by the Bankruptcy Court on November 18th, 2015. Once it becomes a final, unappealable order, the distribution will commence (expectation is before the end of the year.)
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. As of November 23, 2015, SIPC has committed more than $830.2 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 $125.3 million in reimbursement.
The Bankruptcy Court hearing for approval of the 19th Fee Application has been scheduled for December 17, 2015 at 10 a.m.
The BakerHostetler attorneys who worked on behalf of the SIPA Trustee filing this Fee Application include David J. Sheehan, Seanna Brown and Heather 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.