With regard to the foregoing, we note that not only should Madoff family members be required to give up their wealth because it is attributable to a fraud, but it was impossible for family members not to have known of the fraud. For at minimum they had to be aware that Madoff was telling many people that the reason he was not charging investors more for his investment “services” was that he was content to have the broker-dealer arm of his company make huge amounts of commissions executing the claimed trades, and they also had to be aware that the broker-dealer arm, which they supervised, was not in fact executing the purported trades and making the commissions. As well, the family members had to have lied to the SEC about vital matters, or else the SEC necessarily would have discovered early on that Madoff was running a huge unregistered investment management business, had thousands of customers rather than none or only a handful, and had different sets of books.
If conditions discussed above are met, so that every penny obtainable by the government to repay victims of Madoff’s fraud will have been identified and collected, then the Steering Committee of MadoffSurvivors would not object to some reduction in the sentence meted out to Bernard Madoff.
Judge Chin, it is a fact, and it often is no secret, that people victimized by Madoff, plus many not victimized by him but aware of the situation -- like investigative reporters and even federal legislators -- have completely lost faith in the federal government in connection with this matter. The incompetence of the SEC, actions by the Trustee that people think niggardly, the failure to date of the IRS to provide guidance or to show lawful generosity towards victims, the now-three-months-long silence on so many relevant matters by so many in government, have exacted their toll. As well, to those who think about the matter, it is obvious that you occupy a position very similar to that initially occupied by Judge Sirica in the Watergate matter. Like him, you could take action that opens the gates for truth -- and, in this case, for recovery by victims -- or you could choose, as he did not, to act in a way that will allow much truth to remain hidden. Obviously, it is the request of MadoffSurvivors that you opt for truth, recovery, and transparency.
Sincerely yours,
Lawrence R. Velvel
On Behalf Of
The Steering Committee
of MadoffSurvisors
cc: Honorable Lev Dassin, Esq.
Response To An Email Regarding The Bond Proposal The present value to the investors of receiving a collective total of $4.55 billion per year for ten years at a rate of seven percent is approximately $32 billion. Also, the present value to the investors of $65 billion in principal to be received in ten years, calculated at a discount rate of seven percent, is $33 billion. So investors receive a total present value of about $65 billion, not $88 billion. This total present value of $65 billion “replaces” accounts worth $65 billion plus, assuming an after tax “return” from Madoff of eight percent, another $5.2 billion per year every year for the next ten years, or a present value of $36.5 billion. The total of $65 billion plus $36.5 billion is $101.5 billion. So the total value on November 30th was $101.5 billion. Thus, the present value of $65 billion to be received from the government “replaces” but is much lower than the 65 billion dollars that was shown in accounts plus the $36.5 billion which represents the value of $5.2 billion per year discounted at seven percent, for a total of value on November 30th of $101.5 billion. Investors are accordingly, much less well off under the bond proposal than they expectably would have been had Madoff been for real. To repeat, had Madoff been for real, their present value would have been $101.5 billion and under the bond proposal it is $65 billion. Moreover, though the present value to be received from the government is $65 billion, (1) the government’s outlay per year is only $4.55 billion until the tenth year, when it must repay the principal. This is very important. The government emphatically is not writing us a check now or at anytime for $88 billion. It is writing annual checks for only $4.55 billion until the tenth year, when it must also repay principal. (2) Thus the only way for an investor to physically obtain the present value now or at any time before the tenth year would be to sell his or her bonds on the market that will develop for them. That the government can borrow at 2.8 percent does not affect the present value of what the investors will get at a discount rate of seven percent. Rather it simply means the government can borrow at far less than seven percent (sort of analogously to the fact that banks borrow at, say, three percent (the interest rate they pay depositors) and lend at, say, six percent (the rate they charge their borrowers). Being able to borrow at a rate of 2.8 percent, far less than the seven percent the government is paying us, simply makes it easier for the government to pay us, just as it is easier for a bank to lend at six percent when it pays only three percent on deposits than it would be if the bank paid 5½ percent on deposits. It must also be kept in mind at all times that the government is largely responsible for our losses, the losses of innocent investors, yet will be paying us only $4.55 billion per year for ten years, while it is giving ten trillion dollars immediately in bailout money to the culprits who caused the current economic disaster. Moreover, almost three billion dollars of that bailout money has already been given to the culprits. In such circumstances, I find it impossible to understand how, under any fair analysis, the innocent investor can be getting too much under the bond proposal. I stress, of course, that my view necessitates that the analysis need be fair rather than merely political. Larry Velvel cc: MadoffSurvivors Madoff VictimsVelvelOnNationalAffairs is now available as a podcast. To subscribe please visit VelvelOnNationalAffairs.com, and click on the link on the top left corner of the page. The podcasts can also be found on iTunes or at www.lrvelvel.libsyn.com
In addition, one hour long television book shows, shown on Comcast, on which Dean Velvel, interviews an author, one hour long television panel shows, also shown on Comcast, on which other MSL personnel interview experts about important subjects, conferences on historical and other important subjects held at MSL, and an MSL journal of important issues called The Long Term View, can all be accessed on the internet, including by video and audio. For TV shows go to: www.mslaw.edu/about_tv.htm; for conferences go to: www.mslawevents.com; for The Long Term View go to: www.mslaw.edu/about_LTV.htm.
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