Beyond all this, the Government's proposal has about it the odor of collusion with the Trustee for the purpose of establishing, implicitly or explicitly, via the requested decision of this Court, the answer to the most hotly contested issue being litigated in the bankruptcy proceeding: how does one define net equity? It is the Trustee's position that, despite decades of contrary practice, net equity is defined by the cash-in/cash-out method, not by what was shown on the Madoff statements of November 30, 2008. The Trustee's position that net equity is established by the cash-in/cash-out method, so that those who took out more than they put in are supposedly net winners who have no net equity and get nothing from SIPC because they suffered no loss regardless of what is shown by the statements of November 30, 2008, is identical to the Government's position that those who took out more than they put in have no interest in the proceeds of the forfeiture and remission proceeding, and get nothing from the Government, because they did not sustain net loss. In both instances, if you took out more than you put in, you get nothing due to the supposedly dispositive fact that you allegedly suffered no compensable loss.
What is more, the Trustee's position, which has now been adopted by the Government, is what creates the complications in determining losses that the Government claims to exist. For there are no complications, and the matter of determining losses is completely straightforward and simple, if the amounts shown on the November 30th statements are taken to be the amount of loss -- as they should be and as many are arguing in the Bankruptcy Court. It is the Trustee's attempt to recreate the amounts of cash put in and cash taken out over scores of years -- an attempt now defacto claimed appropriate by the Government -- which creates complications due to complexity, lost records, difficulties in recreating records, etc. Use of the November 30th statements -- as is the proper thing to do, especially under the well established concept of legitimate expectations -- reduces complexities in favor of using straightforward, easily ascertained numbers shown on those statements. Those straightforward, easily accessible numbers provide the appropriate measure of loss.
The idea that one has suffered no loss, has no net equity, and should get nothing -- the idea of the SIPC Trustee that has now been adopted by the Government -- is in process of being heavily litigated in the Bankruptcy Court. It is the subject of a new briefing schedule in that court, and already was the subject of powerful briefs filed there before the new briefing schedule was established. Two of those briefs, submitted by attorneys Brian Neville and Helen Chaitman, are appended, as are two short amicus briefs filed by Lawrence Velvel, so that this Court will see the wide range of powerful arguments against the position taken by the Trustee and adopted here by the Government. By seeking an order from this Court on an issue which is for all practical purposes the same as the issue to be heavily briefed in the Bankruptcy Court under a new schedule by constellations of lawyers, and by seeking the order here without similar briefing, the Government and Trustee at least appear to be colluding in an effort to steal a march by getting this Court to rule, implicitly or explicitly, and without the benefit of full briefing and argument, that the Trustee is right in his position on net equity -- i.e., on who is a "net winner" and who a "net loser" and on who did or did not suffer loss - - and to rule defacto if not de jure that the Trustee's opponents in the Bankruptcy Court are wrong. This apparently collusive effort, if deliberate collusion it was, is dishonorable. If the effort was not deliberate collusion in an attempt to preempt the Bankruptcy Court, but is merely inadvertent, it should not have been entertained. Yet it has now succeeded by virtue of an order of this Court granting the motion, an order delivered only three days after the motion was filed, and before an objector could respond, and claiming that it would be too difficult to assess the amounts of losses even though the issue of how to determine losses is being extensively litigated in the Bankruptcy Court, and the losses can be easily and readily determined by use of the November 30th statements, which is the position taken by many in the Bankruptcy Court, is to be extensively litigated there, and is already the subject of a briefing and argument schedule there.
For all the foregoing reasons, this Court should withdraw its order of September 24th granting the Government's motion and should establish a schedule of briefing and argument on the motion.
Respectfully submitted,
Lawrence R. Velvel
MassachusettsSchool of Law
500 Federal StreetAndover, MA01810
Tel: (978) 681-0800
Fax: (978) 681-6330
Email: Velvel@mslaw.edu
Dated: September 25, 2009
CERTIFICATE OF SERVICE
I, Lawrence R. Velvel, hereby certify that I have caused the foregoing Objection to the Government's Motion For a Ruling That Would Trigger the Processes of Forfeiture and Remission to be served on counsel listed below by first class mail, on the 25th day of September, 2009.
Lawrence R. Velvel
Stephen P. Harbeck
