Investors told they won't get what Madoff promised
Thousands of investors who gave money to scammer Bernard Madoff -- including companies with interests in the New York Mets -- learned Monday that they won't be able to recover anything from Wall Street's largest Ponzi scheme.
The decision from Judge Burton Lifland in federal bankruptcy court in Manhattan had been widely anticipated. The losers are expected to appeal, a process some legal observers think could delay final resolution in the multibillion-dollar fraud until 2013.
"We are pleased with the decision and I certainly expect it will be appealed," said bankruptcy trustee Irving Picard, whose office prevailed.
In his ruling, Lifland said Picard was on sound legal footing when he refused to repay investors based on the value listed on their last Madoff account statements dated Nov. 30, 2008. Doing so would result in an "absurd result," Lifland said.
Madoff is serving 150 years in prison for his fraud scheme.
Picard has said the statements listed fictitious amounts and that customers should only recover the cash they actually invested, less any withdrawals. Such customers are called "net losers." But thousands of others - labeled "net winners" because they took out more money from their accounts than they deposited - filed legal challenges and charged Picard was violating the law.
While sympathetic to the net winners, Lifland said the "plain meaning" of the law, legal precedent and "considerations of equity and practicality" back Picard's method of determining which investors can recover.
Picard and the nonprofit Securities Investor Protection Corp. have been advancing net losers up to $500,000 from SIPC coffers. But since the thousands of net winners already got back more than they invested, Picard and SIPC have denied their claims. An estimated $649.6 million in SIPC payments has been authorized to 1,936 investors. But SIPC has denied claims of 10,111 investors, mostly net winners.
"We are disappointed and expect that this will be appealed to a higher court in the future," said Richard Friedman of Jericho, who said he lost $3.1 million.
But others cheered Lifland's ruling.
"The judge was faced with an impossible decision to make very many people happy," said Stephen French, founder of Legalbills, a Nashville consulting firm that examines legal fees. "It looks to me as though he made a very rational and balanced decision."
Legal sources said Picard has recovered about $1.7 billion in assets and could get about $8 billion more in legal settlements.