Some victims of Bernard Madoff’s investment scam have been critical of how trustee Irving Picard has tried to recover and dole out money, and now comes a potential roadblock to his actions – a congressional bill.
Rep. Scott Garrett (R-N.J.) on Thursday introduced the Equitable Treatment of Investors Act, aimed at protecting “ordinary investors” from clawback suits by Picard, who’s trying to recover and redistribute what he sees as phantom profits withdrawn by victims over the years, above the amount they had invested.
The bill would base reimbursements on victims’ last investor statements, and while those figures were shams created by Madoff, his victims said the statements should be honored by Picard because they had the seal of the Securities Investor Protection Corp.
This is an advocacy group created by Congress in 1970. Brokerages sign up as SIPC members and the SIPC seal goes on their statements. If there’s fraud by an SIPC member, the organization can step in to help get back money for investors.
“When investors see the SIPC seal of approval, they should have confidence in the account statements they receive,” Garrett said in a statement about his new bill. “These ordinary investors who knew nothing about the fraud should not be held to a higher standard than the federal government – which in the case of the Securities and Exchange Commission missed the Madoff fraud in the first place, and in the case of the Internal Revenue Service was happy to rely on these same statements to collect taxes from the reported profits.”
When Republicans gain control of the House next year, Garrett is expected to be a subcommittee chairman under the Financial Services Committee. The subcommittee on Capital Markets, Insurance covers the SEC.
“It’s time that Congress realizes that most of Madoff’s victims are not the wealthy Hollywood people,” said Richard Friedman, who moved from Jericho to New Jersey after losing his “life savings” in the scam. “Most are everyday people, some of whom pooled their money to get into Madoff.”
Picard has filed a clawback suit against his mother Shirley, 85, of East Williston, a Madoff victim who now has Alzheimer’s and needs round-the-clock care.
Picard could not be reached for comment today.
If the bill passes, some Madoff victims said, its reach will go beyond the nation’s biggest investment fraud scheme.
“This affects all American investors,” Friedman said. “That’s the important thing to realize, because there will be more scams in the future.”
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