Madoff trustee wins dispute over fraud victims' damages
By Jonathan Stempel
NEW YORK (Reuters) - A federal bankruptcy judge said victims of Bernard Madoff's fraud are not entitled to interest or inflation adjustments on their claims, a decision that could speed the return of $1.36 billion to the swindler's former customers.
U.S. Bankruptcy Judge Burton Lifland in Manhattan ruled in favor of Irving Picard, the trustee liquidating Madoff's firm, in concluding that it would be unfair to award "time-based" damages to victims of the Ponzi scheme uncovered at Bernard L. Madoff Investment Securities LLC.
He said a contrary ruling would likely have "significant unintended consequences" by favoring investors who have recovered their principal over those who have not, and perhaps giving a "windfall" to traders of claims on potential recoveries from Madoff's estate who were never victims of the fraud.
Amanda Remus, a spokeswoman for Picard, said the trustee looks forward to "a final, unappealable order from the court. When that occurs, we will seek to distribute, at the earliest possible opportunity, the funds then available to defrauded BLMIS customers with allowed claims."
Picard has distributed more than $5.4 billion to former customers of Bernard L. Madoff Investment Securities LLC, roughly half of the $11.1 billion of claims he deems "allowed."
But he has kept the $1.36 billion in reserve pending a determination of whether customers who invested with Madoff for longer periods should recover more because of that extra time.
Lifland ruled on what he called a novel legal issue: whether customers' "net equity" claims could be adjusted for time-based damages under the Securities Investor Protection Act, a federal law used to help recoup money for victims of failed brokerages.
'OBVIOUS NEED' Continued...