Power of Story Send a Tweet        
- Advertisement -
General News

More On The Bubbe Meisse of SIPC and The Trustee

By       Message Lawrence Velvel       (Page 3 of 8 pages) Become a premium member to see this article and all articles as one long page.     Permalink

Related Topic(s): , Add Tags  Add to My Group(s)

View Ratings | Rate It

opednews.com Headlined to H3 2/18/10

Author 2556
- Advertisement -

I will conclude with two matters that are major: the interesting questions of (i) the relationship between net equity and customer property, and (ii) insurance. Sheehan's argument at the hearing on net equity and customer property, strike me as confusing, even deeply confusing. But I think I've got it right. The Trustee and SIPC are saying that all distributions to victims come out of so-called customer property, which the Trustee is looking for all over the world and is suing Madoff confederates to recover. (The question of estate property is irrelevant here). Therefore the $500,000 that a victim may get comes out of customer property; it is an advance on a victim's (ratable) share of customer property. It is therefore not insurance. Rather, it is, as said, an advance on one's share of customer property.

- Advertisement -

To determine one's share of customer property - - to determine what one should get from customer property - - you must determine one's net equity. So, if a person's net equity were one one thousandth of total net equity, one would get one one thousandth of the customer property.

- Advertisement -

Because your share of customer property is based on your net equity, it is unfair to use the amount shown in your final statement as your net equity, because this would result in a portion of the customer property being allocated to people who previously took out from Madoff more than they put in, while lessening the amount of customer property going to people who have never taken out a dime. (The amount going to the latter will necessarily be lessened because there will not be sufficient recovered customer property to pay off everyone in full on the basis of their final statements.)

- Advertisement -

Since it would be unfair for people who have taken out more than they put in to get a share of customer property, and to thereby lessen the share going to people who have never taken anything out, which would be the result if the final statements were used to calculate net equity, we must instead use cash-in, cash-out to calculate net equity, because that insures that the amount you receive in customer property will only be proportional to the amount of real money you had in Madoff - - and remember, the advance of money up to $500,000 that you get from SIPC comes from, and is a part of, customer property. And coming from customer property it is not insurance. Rather, it is an advance on, and from, customer property. True, Senators sometimes said in the legislative history (e.g., in the Senate Report) that it is insurance, but they are wrong.

Next Page  1  |  2  |  3  |  4  |  5  |  6  |  7  |  8


- Advertisement -

View Ratings | Rate It


Lawrence R. Velvel is a cofounder and the Dean of the Massachusetts School of Law, and is the founder of the American College of History and Legal Studies.

Share on Google Plus Submit to Twitter Add this Page to Facebook! Share on LinkedIn Pin It! Add this Page to Fark! Submit to Reddit Submit to Stumble Upon Share Author on Social Media   Go To Commenting

The views expressed herein are the sole responsibility of the author and do not necessarily reflect those of this website or its editors.

Writers Guidelines

Contact AuthorContact Author Contact EditorContact Editor Author PageView Authors' Articles
Related Topic(s): , Add Tags
- Advertisement -

Most Popular Articles by this Author:     (View All Most Popular Articles by this Author)

Preliminary Memorandum of the Justice Robert H. Jackson Conference on Federal Prosecutions of War Criminals

Investing With Bernie Madoff: How It Happened, What Happened, What Might Be Done (Part I)

Irving Picard's Three Percent Commission In The Madoff Case.

Alan Dershowitz on Whether to Prosecute Executive Branch Criminals

Madoff And The Mafia: A Mere Speculation Or Almost A Sure Thing?

It Appears That The Madoff Scam Was Not, Repeat Not, A Ponzi Scheme.