Madoff Trustee Mistreating Victims, Lawmakers Say
ReutersSeptember 24, 2010
WASHINGTON/NEW YORK (Reuters) - Investors who fell victim to Bernard Madoff's estimated $65 billion Ponzi scheme should not be forced to return profits they believed they had legitimately made, U.S. lawmakers said on Thursday.
Members of a subcommittee of the House Financial Services Committee questioned the Securities Investor Protection Corp's defense of efforts by Irving Picard, the court-appointed trustee liquidating Bernard L. Madoff Investment Securities LLC, to "claw back" money from former clients.
Picard may sue 1,000 so-called "net winners," or former Madoff clients who withdrew more money from the firm than they put in. Hundreds of former clients, in contrast, believe they should recover sums shown on their final account statements, even if those amounts were bogus.
"You look at your bank statement, why would you think you don't have it?" Democratic Representative Gary Ackerman said on the sidelines of the hearing. "If you took some of it out and spent some of it and somebody now comes along and tells you that it wasn't yours, that it was stolen ... it's already gone."
Picard has said he had recovered more than $1.5 billion through March for Madoff's former clients.
But Republican Representative Pete King said the trustee is not treating those same investors fairly.
"They are not being treated as citizens," King said at the hearing. "They should be treated as victims, not as criminals."
Under current law, the SIPC and the trustee determine how much money will be reimbursed.
The SIPC is an agency created by Congress to help investors who had accounts at failed brokerage firms. It can pay a single investor a maximum of $500,000 -- far less than many investors claim to have lost with Madoff.
SIPC Chairman Orlan Johnson said the agency is trying to "create the largest pool possible" for Madoff victims.
"We are trying to go through the process in the most equitable way possible," he said on the sidelines of the hearing. "My concern is that we just try to do what we can to help the most number of people that we can."
More than 16,000 claims have been filed from people who said they were Madoff victims.
Through September 17, Picard has reviewed 13,379 claims and determined that just 2,219, or 17 percent, should be allowed.
Some alleged victims have been told that they are entitled to recover nothing, or less than they claim, and still others have been told they actually owe money.
(Reporting by Rachelle Younglai, editing by Gerald E. McCormick)