April 4, 2011
Discursive Comments On The Oral Argument In The Court of Appeals
In The Madoff Case On March 3, 2011.
Next up was Helen Chaitman for rebuttal. Before detailing her argument, let me describe some events that preceded the oral argument.
As said at the beginning of this essay, the question of who would argue for us was very contentious. Roughly two or two and one-half weeks before the oral argument, Helen asked me whether I would give up to her any claim I possessed to time to argue. I said I would be happy to do so if, as part of her presentation, she would agree to give a short oral argument on legislative intent that I had drafted and, on February 4th, had sent to the controlling group of NYC lawyers who were running the show. Helen agreed to this, and I notified the NYC group of our agreement. And, since legislative intent has been spoken of so much here, let me now set forth the draft argument that I wrote on this subject. Barring interruptions, the argument takes between three and four minutes to deliver orally. (Our side had a total of 20 minutes.)
The legislative history is dispositive in favor of the appellants. For the hearings, the reports and, very importantly, the scores of floor statements on the 1970 Act and the 1978 Amendments reveal Congressional intent completely at odds with the use of CICO. These Congressional statements, particularly the scores of statements on the floor which the Trustee, SIPC and the Court below do not mention, repeatedly make clear:
- That the purpose of SIPC is to protect small investors -- who are here being devastated even when innocent;
- By protecting small investors, confidence and investment in markets were to be built;
- That the reasonable expectations of investors are to be satisfied;
- That account statements and confirmations are the measure of reasonable expectations and net equity, especially because the change to holding securities in street name left investors no other way to know their holdings;
- That investors are to be paid promptly, which is inherently impossible under CICO because of the need to reconstruct complex accounts over many years;
- That investors are to receive securities where they can be acquired in a fair and orderly market, as can be done here where the securities are S&P 100 stocks that can be acquired in blocs over time. SIPC ignores this requirement, though it was a "principal purpose" and "essential feature" of the 1978 amendments;