The Madoff Coalition for Investor Protection is pleased to announce that numerous briefs have been filed in the United State Bankruptcy Court Southern District of New York in opposition to the trustee's motion for an order upholding the trustee's determination denying customer claims for amounts listed on their last account statement.
The briefs concern an issue of vital importance to every investor in the United States. The briefs set forth that Irving Picard, Trustee, and the Securities Investor Protection Corporation ("SIPC") have no legal authority for re-defining "net equity" so as to save money for SIPC which, by law, is required to insure customer accounts of SEC-regulated broker/dealers up to $500,000 against the dishonesty of a broker.
The firms filing briefs include Phillips Nizer LLP, Davis Polk Wardwell LLP, Shearman & Sterling LLP, Schule Roth & Zabel, LLP, Sonnenschein Nath & Rosenthal, LLP, Milberg Weiss LLP, Lax Neville LLP, Bernfeld, Dematteo & Bernfeld LLP, Morrison Cohen LLP, and Lawrence Velvel.
The attorneys acted independently yet the briefs all echoed the same theme-that being that the trustee, Irving Picard is working in an inconsistent manner with what Congress intended when it created SIPC in 1970. Picard's actions, contrary to SIPC's history and ignoring case law, will deny SIPC coverage to more than half of Madoff victims.
The briefs state that the Trustee has no legal authority for the position he is taking and that his position contradicts 38 years of SIPC's history, as well as positions taken by SIPC in its brochures, on its websites, and in court submissions over 38 years.
"Reduced to its essence the position of the Trustee and SIPC is that, because Bernard Madoff was a monstrous thief, SIPC is entitled to violate the clear mandates of the Securities Investor Protection Act, by which it was created. In the process, the trustee and SIPC are single-handedly destroying the investor confidence in the capital markets that Congress enacted SIPA to instill." (Chaitman, Phillips Nizer LLP)
"The Trustee's approach is improper because under SIPA and SIPC's own Rules, when a customer entrusts funds with a broker to invest in securities and the broker sends the customer written confirmation that specific securities were purchased, the customer has a "net equity" claim for those securities, even if they were never in fact purchased. " (Milberg Weiss LLP)
"Here, the value of the securities on a customer's November 30, 2008 BLMIS account statement is equal to that customer's "net equity" under SIPA. Despite the simplicity of the statutory language, the Movants have chosen to ignore and replace SIPA's definition of "net equity" with an unprecedented and unsupported "cash-in/cash-out" approach based upon a policy argument for fairness and unsubstantiated avoidance claims." (Lax Neville LLP)
The hearing is scheduled for February 2, and The Coalition anxiously awaits the ruling of Judge Lifland to determine whether Irving Picard's definition of "net equity" will hold, or whether the Congressionally defined definition will be used. A positive ruling by the Judge to use the definition that has been in place for 30 years would mean that thousands of victims will receive the SIPC advance (up to $500,000) based on the value of their November 2008 Madoff statement. This statement is what the IRS used to collect income taxes for more than 30 years.
The Madoff Coalition for Investor Protection feels confident that, based on the legal arguments by all the above attorneys, Judge Lifland will act to follow the attorney's recommendations to use the statutory definition of "net equity" that currently exists. The Bankruptcy Court will decide the issue on February 2, 2009, after which the matter will undoubtedly be appealed to the United States Court of Appeals for the Second Circuit.