Re: Irving Picard's Motion To Dismiss The Complaint Filed By Helen Chaitman.
My last, four part post said I had been informed that Judge Lifland, who is presiding over the Madoff matter in the Bankruptcy Court, had rejected Helen Chaitman's requested briefing schedule. Apparently, even if this is true, it is irrelevant as a practical matter. For a few days ago, I obtained a motion and brief filed by the Trustee on July 17th seeking dismissal of the complaint filed by Chaitman; the motion says a reply brief is due from Chaitman on August 17th and a hearing will be held on August 25th. This schedule is not terribly different from what Chaitman wanted, if I remember correctly. Something called "Objections," the Trustee said, are due on August 10th; as best that our librarian and I can figure out, objections are filed by others than the Trustee or Chaitman (acting for her clients).
Some of what the Trustee's brief says was contained in David Sheehan's threatening letter to Chaitman discussed in the four-part prior post. I shall not reiterate those points, except briefly if and where necessary. What shall largely be done instead is to discuss, relatively briefly (at least for me), some additional points made by Picard in his brief.
Let me begin with a matter that leaps off the page. Picard's brief does not so much as mention matters that should be the determinants of net equity: the legislative history showing the purpose of SIPA, Congress' desire to protect legitimate expectations, the wording of the provisions of SIPA defining net equity, past statements by Harbeck and Wang that people will receive the securities shown on their statements -- even if the securities were never bought, or the New Times proceedings or opinions. The lack of any mention of these things is amazing to me.
One would like to leap to the conclusion that the absence of mention is because SIPC and Picard realize that all of the unmentioned matters are dead against them (which would mean they regard the unmentioned as unmentionable). But one is reluctant to take this leap, because lawyers can and do always find reasons to support their views.
Perhaps, then, the failure to mention Congressional purpose, legislative history, legitimate expectations, etc., has to do with the difference, in legal terms, between what lawyers call a motion to dismiss, which is what Picard filed, and a motion for summary judgment, which he did not file. Somehow I doubt this, however. Rather, it seems to me that the Trustee and his lawyers think it may be easier to win their motion, not by arguing the proper definition of net equity, but (i) by claiming Chaitman's clients are trying to stop the Trustee from seeking to claw back alleged "preferences," (ii) by pointing out that both Chaitman and her clients will personally make out better economically under the Trustee's method of calculating net equity (cash in minus cash out) than by use of the November 30th statement to calculate net equity, and (iii) by blasting Chaitman for what she has written and said. My views are, it should be said, my personal speculations. But that doesn't make them wrong.
It seems to me, however, that Picard is incorrect in claiming Chaitman is trying to stop him from clawing back preferences, and that the argument he is making in this regard is therefore an effort, to some extent, to pull the wool over the court's eyes. Certainly Chaitman is not attempting to stop Picard form clawing back billions in preferences from the guilty -- or at least non-innocent -- whom he has sued because of their participation in the Ponzi scheme.
If Chaitman is trying to prevent a clawback of any preferences, it is, I would think, the clawbacks of "alleged" preferences from the innocent. But even here, if my understanding is correct (which I hope it is), monies received from Madoff by innocent investors cannot be obtained by Picard, except perhaps for monies received by the innocent within 90 days of December 11th.