Econintersect: Rep. Scott Garrett (R-NJ) (pictured), chairman of the House Financial Services Subcommittee on Capital Markets and Government-Sponsored Enterprises, is calling for a “comprehensive evaluation” of Irving Picard's handling of the liquidation of Madoff Securities following the conviction of the principal, Bernard madoff for fraud. In addition to Picard's operations, Garrett wants the GAO (Government Accountability Office) to investigate the SIPC (Securities Investor Protection Corp.), for whom Picard acts as a trustee; the SEC (Securities and Exchange Commission), which supervises the SIPC; and the Baker Hostetler law firm as counsel to the Trustee. Picard is associated with Baker Hostetler.
Follow up:From Advisor One:
Among the subcommittee’s concerns, Garrett told the GAO, is the Trustee’s use of the so-called Net Investment Method (NIM) formulation for determining investor eligibility for SIPC protection in the Madoff case.
“The serious concerns we have about the NIM formulation stem from the fact that the end result it produces--namely the Trustee suing innocent investors for so-called ‘clawbacks’--causes outcomes that are in direct conflict with the SEC’s mission to protect investors, maintain fair, orderly and efficient markets, and facilitate capital formation,” Garrett said.
The GAO should also prepare a “thorough history of SIPC’s selection of Irving Picard as Trustee, and the Baker Hostetler law firm as counsel to the Trustee,” Garrett’s letter recommended, “including the status of that process at the time Picard joined Baker Hostetler, and a summary of all the significant terms of the employment or compensation agreement(s) or other agreements between SIPC, Picard, and/or Baker Hostetler.”
The bottom line: Picard has been operating on the basis that he is seeking protection for those who lost money through Madoff's fraud. Garrett apparently wants to seek protection for those who made money from the scheme.
With regard to investigating the relationships between Picard and his law firm, it remains to be seen if Garrett is acting on information giving probable cause or if this is just a fishing expedition.
Law Firm Lax Neville represents a number of Madoff "innocent victims" who made money on their Madoff investment. From the firm's web site:
Lax & Neville, LLP has been retained by many innocent victims of the Madoff Ponzi scheme, who are being sued through clawback claims by the Trustee overseeing the Madoff liquidation. These claims seek to recover funds from innocent victims who withdrew more money than they deposited into the Madoff Ponzi scheme. It appears that the Trustee is seeking to recover only these net winnings from the innocent investors’ withdrawals in the six (6) years prior to the bankruptcy filing.
We understand that many Madoff victims will not have adequate funds to pay the damages requested in the clawback claims and/or to pay counsel an exorbitant retainer to defend the actions. We will utilize our relationship with the Trustee and our knowledge of this action, as we have remained at the forefront since its inception, to offer low-cost, reliable and exceptional assistance to our clients. To this end, our firm has recruited additional bankruptcy counsel with specific experience in avoidance and preference claims, to assist both our clients and us in defense of these claims.
Strategically, the best solution for many of the innocent victims may be to attempt to settle quickly and quietly with the Trustee at a mediation based on the victims’ recoverable assets. However, some victims may have considerable assets that could satisfy the damages requested, in which case, another course of action would be appropriate. Though there are many common legal defenses and issues of fact present in this litigation, we have also noticed that each case is unique in some fashion. We could use this uniqueness as a legal defense or equitable resolution to the matter.
If you receive a clawback claim, or know someone who has, please contact either Barry Lax or Brian Neville. We are confident that our firm can assist you in providing options and guidance at this difficult time.
The Lax Neville web site lists court actions filed by the firm for the "victims" who profited.
Garrett has been joined in his request to the GAO by subcommittee members Rep. Peter King (R-NY), Rep. Ileana Ros-Lehtinen (R-FL) and Rep. Carolyn McCarthy (D-NY).
GEI News has provided extensive coverage of the clawback efforts of the Madoff trustee.