Legal News

Madoff?s Victims are Mad, Mad, Mad But Do They Have a Right To Be?

By Dionne Searcey

Did Madoff victims have a reasonable expectation for privacy–that they should be able to cry in their pillow at night without all their friends knowing why they’ve been down?

Victims of Bernie Madoff’s Ponzi scheme are hopping mad that their names and home addresses have been plastered all over the Internet, as we explore in this story on today’s WSJ front page. Along with the new high-profile victims, regular investors were included as part of a bankruptcy court filing from trustee Irving Picard who is charged with liquidating Mr. Madoff’s assets.

More than one Madoff investor who appeared on the list has inquired of their attorneys about whether they could sue Picard, who according to our legal experts likely had some amount of discretion over whether to release the list.

The bankruptcy code encourages disclosing the names of creditors, because it can help other creditors “turn over every stone,” when looking for restitution, says Stephen Selbst, a bankruptcy lawyer with Herrick, Feinstein. In rare situations, trustees will ask to keep such a list sealed or hidden from view in the interest of creditors’ privacy. The bar to do that can be high, says Mr. Selbst, but he said that a good argument could have been made to keep the Madoff list private. “It’s a close call, I think. A lot of people on this list are going to be unhappy.”

Selbst said that it’s not likely a suit against Mr. Picard would be successful, however, because the presumption of openness in bankruptcy proceedings is very strong. Victims would have a hard time showing they suffered anything other than humiliation

When asked to respond to the concerns about why the list was made public, Mr. Picard’s office sent this short reply via an email: “Bankruptcy Code and Rules.” Guess that settles it.

Full post as published by Law Blog - WSJ.com on February 06, 2009 (boomark / email).