Their hardships have been told and retold. There are the college and retirement funds gone. Charities evaporated. Families forced to sell their homes. Elderly parents left with no choice but to move in with their grown children. Physical ailments borne from the emotional stress abound.
Now, those who suffered losses in Bernard Madoff’s $65 billion Ponzi scheme—the largest in history—are fighting to move on.
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They have adopted the same coping mechanisms as recovering cancer patients, referring to themselves as survivors rather than victims and lending each other their shoulders to cry on at the Long Island Support Group for Madoff Victims and others like it. And as they seethe at the government incompetence that allowed the scheme to sucker investors for another decade after the first whistleblower came forward, they continue to battle the misperception that they are “a bunch of rich, New York Jews” looking for a government bailout, says the group’s organizer Ron Stein.
Stein, a certified financial planner, coordinated an evening gathering of Madoff’s casualties at the Port Washington Library on June 16. Those who showed included people from all walks of life, from blue bloods to blue collars.
“As inept as FEMA was after Katrina, at least there was a FEMA,” said Stein. “We’re on our own.”
Packing the room were more than 130 of Madoff’s marks, the majority of which were gray-haired and took turns asking advice of the panel Stein assembled. It included attorneys from Lax & Neville, a stock broker regulation law firm in New York City. The firm last week filed a class-action adversarial proceeding in bankruptcy court disputing the definition of “net equity” being used by Irving Picard, the court-appointed trustee tasked with liquidating Bernard L. Madoff Investment Securities and using the money to compensate those defrauded.
“Your last statement should be what you’re entitled to,” attorney Brian Neville told the audience—although before that, the meeting had started with a standard lawyerly line: “Don’t hold us to what we say.” But between those in the room and the government-chartered Securities Investor Protection Corporation (SIPC), which is managing the Madoff victim’s loss claims under Picard’s direction, there are massive differences of opinion.
SIPC is different from the Federal Deposit Insurance Corporation, which is run by government appointees and insures bank deposits up to $250,000. SIPC guarantees repayment of up to $500,000 for fraud victims, but is not an insurance provider.
“We are optimistic that the case will be successful,” said Barry Lax, Neville’s partner, who described SIPC as “analogous” to an insurance policy.
Lawyers were also on hand from Herrick Fienstein, a New York-based law firm that filed an administrative claim—similar to a notice of claim required before filing suit against a local municipality—the first step in a lawsuit against the U.S. Securities and Exchange Commission (SEC) on behalf of one victim. The SEC’s former chief, Christopher Cox, had admitted that they failed to properly investigate Madoff.
“The government’s negligence is why this happened to you,” said John Oleske, an attorney with Herrick Fienstein. Oleske praised Harry Markopolis, the former investment manager credited with independently investigating Madoff’s fraud when the SEC wouldn’t, for bringing the unprecedented fraud to light.
Lawsuits, however, can take up to a decade to resolve—especially in cases this complex. In the meantime, the battle remains in the court of public opinion and in the halls of Congress, where those duped by Madoff lobby for legislation to better address their losses.
“It’s pretty easy to forget what it was like last fall,” said Jose Berra, a tax attorney with the tax law group Meltzer Lippe, recollecting on the public hysteria that ensued in the wake of the Wall Street meltdown that eventually flushed out Madoff. Even more difficult is imagining the days when Madoff seemed like a sure bet.
“People invested in Madoff more for the safety of it than the moderate returns,” said Richard Friedman, a certified public accountant, adding that 12- to 14-percent returns with Madoff were conservative in comparison to the 30 percent some investors were earning in the 1990s. He lost most of his life savings.
“At the end of the day, the question is going to be: What has changed?” said the meeting’s organizer, Stein, who launched a website called Madoff-help.com to aid those defrauded in navigating the red tape involved in attempting to recoup their losses.
Madoff, who pleaded guilty to seven felonies on March 12, is set to be sentenced on June 29 at Manhattan federal court. He faces 150 years in prison and $170 billion in restitution.
Cindy Liu contributed to this story.
““People invested in Madoff more for the safety of it than the moderate returns,” said Richard Friedman, a certified public accountant, adding that 12- to 14-percent returns with Madoff were conservative in comparison to the 30 percent some investors were earning in the 1990s. He lost most of his life savings.”
- This is the very definition of self-delusion and greed. 12-14 percent gains are NOT moderate. No one gets those kinds of returns on a steady basis. Comparing returns to a few superheated years in the late 1990s and claiming that they are “moderate” by comparison is laughable. People who enjoyed those investment gains in the late 1990s lost a chunk of it just a few years later and – as of 2008 – had lost all the remainder of it. Madoff investors wanted their 14% year after year and now want the taxpayers to pay them. Outrageous.
Their suit against the SIPC is meritless. The Second Circuit Court of Appeals has already ruled on this very issue just a couple of years ago and rejected their position. If you invest in a Ponzi, SIPC does not have to pay you for phony, non-existent gains. The idea that the SIPC should have to pay out based on whatever number Madoff made up in his final statement is totally reckless and self-serving.