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UPDATE 1-Madoff claims to be redone if court balks at method
December 17, 2009 / 10:56 PM / in 8 years

UPDATE 1-Madoff claims to be redone if court balks at method

* Hundreds of investors object to reimbursement method

* Judge to rule after Feb. 2 hearing

* Investors ready to appeal to higher court if necessary (Adds Picard letter to investors, possible appeal)

By Grant McCool

NEW YORK, Dec 17 (Reuters) - The trustee winding down Bernard Madoff’s company vowed on Thursday to redo every claim by thousands of customers defrauded in the multibillion dollar swindle if a court decides that the method he is using to determine reimbursements is wrong.

Lawyers for hundreds of investors sought help from the U.S. Congress on Dec. 9, saying they believed they were entitled to more money than what was being allowed by trustee Irving Picard, who is working under the auspices of the Securities Investor Protection Corp (SIPC). [ID:nN09128081]

“I have informed customers that if the court finally determines that the way we are doing the claims is erroneous, we will go back and redo all the claims, whether or not they filed an objection,” Picard told U.S. Bankruptcy Court Judge Burton Lifland at a hearing in New York on Madoff matters.

Defrauded investors have filed hundreds of objections with the court on the method used by Picard and SIPC. A hearing is scheduled for Feb. 2, when Lifland will listen to oral arguments and then rule.

At least one investor group, Madoff Coalition for Investor Protection, said it would appeal if Lifland agrees with the trustee, setting the stage for more court arguments on the claims.

In letters received by claimants, Picard said: “Should a final and unappealable court order determine that the Trustee is incorrect in his interpretation of ‘net equity’... the trustee will be bound by that order and will apply it retroactively to all previously determined customer claims in accordance with the court’s order.”

Picard and SIPC say claims should be based on how much money the victim invested, not the amount the victim thought he or she had made from former financier Bernard Madoff’s fictitious investments.

Madoff is serving a 150-year prison sentence after admitting to orchestrating Wall Street’s biggest investment fraud, which U.S. prosecutors have said took in as much as $65 billion over two decades. The FBI arrested Madoff on Dec. 11 last year and legal proceedings to wind down his New York company, Bernard L. Madoff Investment Securities LLC, began days later.

SIPC is a nonprofit agency created by Congress in 1970 to maintain a fund to help investors who had accounts at failed brokerage firms.

The agency can pay a single investor a maximum of $500,000. Under current law, some Madoff victims have been told that they are either not eligible to be compensated the full amount of their last balance statement, or will not be repaid at all.

Lawyers for investors argued in court papers and at a congressional hearing that by trying to “claw back” money investors withdrew over the years, Picard is working in an inconsistent manner with what Congress intended for SIPC.

A brief on Monday by investors’ lawyer Helen Davis Chaitman said that Picard and his law firm Baker & Hostetler LLP had taken an “adversarial attitude” to customers

“Rather than fulfill his fiduciary duty, the Trustee is persecuting innocent people who have lost their life savings by threatening to take away” assets they have left, she wrote.

Picard told the court on Wednesday that SIPC had committed $563 million to former Madoff customers and 11,568 claims have been decided. The official web site said those allowed claims represent an amount of $4.7 billion.

The trustee’s team of lawyers has so far recovered about $1.4 billion of assets worldwide, a fraction of the $65 billion prosecutors said was recorded in Madoff’s accounts.

The judge approved Picard’s request to be payed $835,605 for the five months ending September 30. He was previously awarded $759,229 for the 4-1/2 months ended April 30.

The judge also approved law firm Baker & Hostetler LLP’s request for $21.28 million of fees plus $280,682 to cover expenses for 56,688 hours of work in acting as counsel to Picard from May to September. [ID:nN23259643]

The case is In re: Bernard L. Madoff Investment Securities LLC, U.S. Bankruptcy Court, Southern District of New York, No. 08-1789. (Reporting by Grant McCool, additional reporting by Rachelle Younglai in Washington; Editing by Toni Reinhold)

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