Legal News

Madoff Civil Case Moving Swiftly; The $50 Billion Question

By Dan Slater

Beginning tomorrow, Manhattan federal judge Louis Stanton will preside over three big issues in the civil case against Bernie Madoff, accused of running a $50 billion Ponzi scheme. According to stories in the New York Times and Bloomberg, here they are:

Broaden SIPC protection? Judge Stanton is being urged to extend protection offered by the Securities Investor Protection Corporation beyond direct investors to those who invested in so-called feeder funds that, in turn, invested with Madoff. In a letter reportedly sent to the court by Daniel R. Goldenson, an indirect investor, Goldenson acknowledged that a strict reading of the SIPC guidelines would not treat him as a customer. “But in this devastating case we feel it is appropriate to broaden investors eligibility beyond direct investments,” he wrote.

Stephen P. Harbeck, the president of SIPC, told the Times that he couldn’t predict whether the judge would follow Goldenson’s suggestion. The key step now, he said, is for affected investors to submit their claims, so that they are on the record as the legal issues are worked out.

The $50 billion question: Just how many assets do Madoff and his firm have left? Stanton established tomorrow as the deadline for Madoff to provide federal securities regulators with a full accounting of his and his firm’s assets — from real estate to art works to bank accounts.

Trustee to send first communication to Madoff customers: Irving Picard, the trustee working for SIPC who recently moved to Baker Hostetler, will send out the first notices to Madoff customers by Jan. 9. That’s faster than expected, notes the Times, and will speed up the day when the legal issue of SIPC coverage can be considered in court. On Tuesday, there will be a hearing in New York bankruptcy court on Picard’s request for $28 million to cover the salaries and benefits of employees continuing to work at the Madoff revenue-producing trading business.

Photo: AP

Full post as published by Law Blog - WSJ.com on December 30, 2008 (boomark / email).