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Comments On SIPC's Answers Of January 24th To Questions Asked By Congressman Garrett.

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Message Lawrence Velvel

Comments On SIPC's Answers Of January 24th

To Questions Asked By Congressman Garrett.


February 11, 2011



            A couple of people have asked for my reactions to SIPC's January 24th answers to questions posed to it by Congressman Garrett.   Because SIPC's answers have now been made public, I am posting some slightly redacted comments I sent on January 28th to colleagues who are in or are working with NIAP.


1.                   Pages 2, 13-14:   In discussing Picard's "compassion" and his hardship program, SIPC, as it often does, speaks in generalities (which courts, Congress, etc. too often accept without question).   Here it is pretended that the hardship program is perfectly reasonable.   Yet many victims, speaking of the information demanded of them, find the program deeply intrusive and violative of privacy.   I think we should try to get an application to see for ourselves what is demanded and how intrusive the program is.   Maybe some victims have and would give us "clean copies" of the applications that victims need to fill out.  


2.                   The Trustee has reached settlements with some large institutions in which he has agreed to recognize their claims in return for payments to him of monies the institutions took out of Madoff.   Yet these institutions would seem to be ones that at least "should have known" there was a fraud.   Why did he agree to recognize claims of institutions which should have known something was wrong?   Picard is implicitly saying that SIPA allows him to recognize the claims of the culpable, whose continuous shoveling of money to Madoff kept the fraud alive from 2000-2008 and thereby caused tremendous increased injury to a huge number of us.   And why did Picard, conversely, refuse to recognize a claim on behalf of the Picowers?   (I think it likely was because Picower himself was subject to criminal charges; also, his estate could have been sued under RICO.)   And why did Picard not recognize a claim for Norman Levy, who, as the January 24th answers show, was a major Madoff player financially.


3.                   Page 2:   Picard will need approval from Lifland to distribute funds to customers and an application is being prepared.   We know, however, that the impoverished will get little or nothing from customer property (and indeed will be subjected to clawbacks), and that the customers who will get money are mainly the very wealthy and hedge funds -- while Picard and SIPC claim all the while that this is equity.   We should try to find out who the funds and banks are who will be receiving money.   Intimately related to the distribution of money is the question of when will enough money be in Picard's coffers so that possibly he could declare that a certain amount of it exceeds the "needs" of customer property and can be considered part of the general estate and used to pay fraud damages to victims.    


Also intimately related to the forthcoming request to distribute money, I am sorry to say, is the question of the identity of the judge.   We should have every expectation that as long as Lifland remains the judge, anything Picard wants to do will be approved -- and quickly.   He is, I think, totally biased in Picard's favor -- Picard has, in fact, won everything in front of him as far as I know, except for some very minor aspects of major matters that Picard won, e.g., enlarging the number of potential mediators and removing Adele Fox's name from an injunction that applies to her anyway.   If Picard says it is equitable and legally required to claw money from the now-poor to give to the still-rich, and that this is equity, Lifland will agree.   (My experience with Lifland last Tuesday only reconfirms my views about his unshakeable bias in Picard's favor.)   Similarly, Lifland will automatically rule in Picard's favor on such crucial issues as the (lowest possible) interest rate to be used in calculating fraud damages, the Trustee's demand for interest from the dates of withdrawals, which can double or triple the amount owed, defacto liens against monies refunded by the IRS, not crediting victims with earnings from short term investments, and other crucial issues.   If Lifland continues to be the judge, it will almost certainly be deadly for our people.  


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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.
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