Memorandum objecting to the Government's motion dated September 21, 2009

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v. )

) 09 Cr. 213 (DC)

BERNARD L. MADOFF, )

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Defendant. )

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OBJECTION OF LAWRENCE R. VELVEL, AS OBJECTOR AND/OR AS AMICUS CURIAE, (1) TO THE GOVERNMENT'S MOTION FOR A RULING THAT WOULD TRIGGER THE PROCESSES OF FORFEITURE AND REMISSION, AND (2) TO THE GRANT OF THE MOTION ON SEPTEMBER 24, 2009 BEFORE ANY OBJECTORS TO THE MOTION HAD AN OPPORTUNITY TO BE HEARD, AND REQUEST THAT THIS COURT WITHDREW ITS GRANT OF THE MOTION AND ESTABLISH A SCHEDULE FOR BRIEFING AND ARGUMENT ON OBJECTIONS TO THE MOTION.

Lawrence R. Velvel submits this memorandum as objector, if objections to the Government's motion are permitted by the Court, or otherwise as amicus curiae. Velvel, like other Madoff victims, has a deep interest in this litigation. He was nearly finished preparing a memorandum objecting to the motion on September 24^th, only three days after the motion was filed, when he received this Court's order granting the motion before objections to the motion could be finished and submitted. He now requests that the grant of the motion be withdrawn and that a schedule for briefing and argument on the motion be established.

Velvel was an investor with Madoff for over thirteen years. He lost over $1.8 million that he invested, and more than $3.9 million that Madoff owed him as shown on the statement from Madoff dated November 30, 2008. Yet he is what the SIPC Trustee -- whom the Government apparently proposes to use in the forfeiture and remission process -- chooses to call a “net winner,” and is a person whom the Government says “did not sustain a net loss.” For, pursuant to a budgetary plan worked out in the early 2000s, he withdrew annual amounts, starting in 2003, that ultimately amounted to approximately $341,000 more than the amount he invested. The plan of withdrawal was necessary in order to enable Velvel and his wife to pay their federal income taxes on Madoff income -- which turned out to be phantom income -- and much of the withdrawn money went to pay the taxes. Under the concepts sponsored by the SIPC Trustee and now adopted by the Government, he will receive nothing from either SIPC or the Government (or the bankruptcy estate).

In all these regards, Velvel is typical of many Madoff investors, including ones who are far worse off than he. There are, as this Court knows, elderly Madoff investors -- people in their late 60s, their 70s and their 80s, for example[1] -- whose life plan was to live off their income from Madoff, which often was all they had to live on (except, sometimes, social security). Because of this life plan they withdrew sums annually from Madoff, and ultimately withdrew more than they had invested -- although they of course honestly believed that they had much left in Madoff because that is what their statements showed, and they had a right to hold this belief under the well-established securities law principle of legitimate expectations. Now they are wiped out, are destitute, have lost their homes, sometimes scrounge in dumpsters for food, have had to leave homes for the elderly and sick, and, as is the case of one elderly man in his 90s, are passing out flyers in a supermarket in order to obtain money to live. But all of these people are “net winners” in the paradoxical language of the SIPC Trustee whom the Government proposes to employ, and “did not sustain a net loss” in the antiseptic words of the Government. Both the SIPC Trustee and the Government appear to be deliberately blind to the reality of what has happened to people, to their life circumstances, to the situation in which they find themselves. Both the SIPC Trustee and the Government use objective sounding phrases -- “net winners,” “did not sustain a net loss” -- to argue for their positions while ignoring the human truths of the situation. How lawyerlike.

And how curious, or worse. SIPC and the Government consider persons who withdrew nothing, lost 200 million dollars or more and have hundreds of millions of dollars left to be “net losers” and to have suffered a loss for which they can recover from SIPC and from the government, but consider people who lost one or two million dollars, withdrew money in order to live and pay taxes, ultimately withdrew more than they put in, and are now hopelessly destitute to be “net winners” and to have suffered no loss. Would it be too much to say this is perverse?

Despite language in its Memorandum purportedly intended to show that it has not yet made a decision on which victims will receive assets and which won't, it is very clear that the Government intends not to give a share of the assets to those whom the Trustee calls a “net winner” and whom the Government says “did not sustain a net loss.” This clarity arises from the Government's proposed use of the Trustee, who has already refused in the SIPC proceeding to provide SIPC protection to those whom he has declared “net winners,” even though they have lost everything. Are we to believe that the SIPC Trustee will undermine his position in the SIPC proceeding by providing assets in the forfeiture and remission proceeding to those to whom he already has denied protection on the ground that they supposedly came out ahead of the game? -- to those whom the Government here says, as the Trustee has said in the SIPC proceeding, did not suffer compensable loss? The idea reminds one of the title of Judy Holliday's breakthrough movie.

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