I’m hoping most people have much more concerning issues to worry about than decisions made by the bankruptcy judge who has been charged with liquidating Bernie Madoff’s assets to his investors. I, however, had a meeting in Manhattan yesterday and the train ride into and out of Grand Central Station gave me the luxury of time to actually read five different newspapers. Some stories were simply junk food for the mind, like Catherine Zeta Jones’ very lovely all leather outfit and the troubles being suffered by New York Governor David Patterson.
But then I saw a story relating to a decision made relative to the Madoff case, which the article described as “controversial” and is “likely to be appealed”.
Now I’m no lawyer, although running my own business for over twenty years and reaching the age I have leads one to have had some experiences with the courts. And as much as I might have disliked some of the decisions in cases I’ve been personally involved in, usually I could at least understand the logic used by the courts in making the their rulings. With regard to this Madoff decision, I literally couldn’t find ANY reason whatsoever for there to be controversy; and I cannot imagine what grounds there will be for the decision to be overturned on appeal.
Here is the basic premise to the ruling a couple of days ago.
You and I were both investors in the Madoff fund and we both put in $1 million exactly 10 years ago. Over the years Madoff lied to us and told us our original investments had grown to be worth $4 million, which certainly seemed wonderful to us both, but of course turned out to be total fiction at the end. The difference here is that over the past few years you took several withdrawals from the fund, which just so happen to total $1 million, or your original investment. The fictional statements you receive from Madoff, however, still show you having $3 million more left invested. Since I didn’t make any withdrawals, my balance is at $4 million.
At the end of the game here, it became clear that Madoff didn’t have the $65 billion he’d been telling his investors was in the fund, and there was actually not even enough to give back people’s original investments.
What the recent ruling basically says is that your CLAIM as an investor on whatever amount of monies that are actually left is whatever you originally invested MINUS whatever you’d withdrawn. So in your case, you would have no claim whatsoever on remaining assets since you’d taken out your entire original investment. The ruling simply states that the phony $3 million in profits doesn’t count toward how the remaining assets get divided. Otherwise, you’d be able to make a claim for 75% of whatever I was trying to recover though you’d taken out ALL of your original investment and I’d gotten jack. Common sense (to me at least) would say that would be ridiculously unfair, and in this case, the bankruptcy judge agreed.
So how in the world is this controversial and appeal-able? All I can hope is that an appeal would go nowhere and that justice will actually be served, although we all know that there WILL likely be an appeal that goes nowhere and that only the lawyers will be served with fabulous fees.
What I’m curious to know is that since we both put in $1 million, what if there is only 50 cents on the dollar in assets remaining now for distribution? That would mean I’m only going to get $500K of my money back and YOU got your entire amount and are oddly ticked off. Further common sense to me would dictate that the court should rule that you have to produce $500K of the money you withdrew to compensate me for this unfairness. Now there’s an appeal I could live with.