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The Information Provided To Congress By SIPC. Part II.

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September 24, 2010

The Information Provided To Congress By SIPC.

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Part II.

D. SIPC was not asked, and nowhere does it say, how much money was earned in interest from Treasuries and money market funds into which Madoff put the money in the Chase/JPMC account, or how much, if any interest, was earned from Chase and JPMC themselves. To learn these numbers is essential because the interest, as explained above, is the equivalent of cash-in and must be credited to investors' accounts under CICO, which Picard has not done. If the Second Circuit upholds the use of CICO, there should be attempts to obtain these numbers via discovery. If Lifland again denies discovery, as he denied it previously, this would form one basis for appeal from his next decision on the net equity question.

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The amount of interest could, in toto, be a very significant sum. Though the chart of annual cash-in and annual cash-out provided by SIPC from 1992 onward gives rise to certain speculations discussed below, it nonetheless makes clear that there sometimes had to be many billions of dollars -- even tens and scores of billions of dollars -- in Madoff's account, especially from 1995 onward. The total amount of interest earned could have been quite large (and was surely stupendous if Chase and JPMC were themselves paying interest on the account). If the Second Circuit decides in favor of SIPC and Picard on the net equity question, and Congress does not enact a provision that net equity must be gauged by the FSM, it will be essential to seek discovery on this question upon remand to Lifland's court. If Lifland refuses discovery, which seems to be his want (he is after all deeply biased in favor of SIPC and Picard[1]), this could, as said, be a basis for appeal. (In fact, the interest earned from Treasuries, money market accounts, etc. should be added to investors' accounts under the FSM too, because it was earned with their money. Victims could justifiably demand this money from customer property, and seek discovery about it, if the FSM is used, just as they can under CICO.)

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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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