FOR IMMEDIATE RELEASE
October 19, 2010
Contact: Phil Singer/Ron Bonjean
(202) 349-1402
NIAP: SIPC MUST STOP STONEWALLING & MAKE MADOFF RECORDS AVAILABLE TO VICTIMS
The Network for Investor Action and Protection (NIAP) today called on the Securities Investor Protection Corporation (SIPC) to make all records related to ongoing liquidation proceedings stemming from the Madoff Ponzi scheme available to his victims. In a letter to SIPC Trustees Harbeck and Johnson, NIAP President Ron Stein called on SIPC to immediately provide transparency for Ponzi scheme victims so that victims can better understand how the Trustee has arrived at their calculation for victims’ net equity.
“It’s been nearly two years since the Madoff schemes and his victims are still struggling to get their living affairs in order. Many of these people are finding themselves victimized again when they go to SIPC for help,” Stein said. “It shouldn’t take an act of Congress to get SIPC to do the right thing for Madoff’s victims.”
SIPC has thus far refused to open its books to investors and others looking to evaluate how it is going about identifying Madoff transactions that were fraudulent. At a House Financial Services Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises hearing in September, Rep. Scott Garrett expressed concern about SIPC denying “access to Madoff’s records for the victims and their attorney.”
Garrett said “access to these records is important for several key aspects of the case, including whether or not, at all, transactions reported by Madoff, over the years, were actually fraudulent transactions. If some of them weren’t, then the trustee’s net equity formulation would completely be called into question.”
“Inequitable access to these records results in a fundamental imbalance of the scales of justice in this case, and also calls into question whether ultimately there will be fair trial at the end of the day in this case,” Garrett continued. SIPC’s Johnson claimed at the September hearing that it might lack authorization to make the records available but would it make the records available if it had the ability to do so.
In its letter, NIAP writes “Given that ‘lack of authorization’ was never cited as a reason for denying victims discovery, it is our hope and expectation that you will make good on the commitment offered to the Subcommittee Members and expeditiously arrange a mechanism for allowing victims to access fully the records associated with the Madoff affair – particularly those accounts held by Bernard Madoff himself – including the deposit of customer funds into accounts in Mr. Madoff’s name (or the name of family members) and the purchase of real securities with customer funds going back to inception of BLMIS.” A copy of the letter is attached.
Stein added, “Under the current construction of net equity, victims will pay more – by several billions – to resolve the Madoff fraud than the guilty. This is simply unacceptable.”
SIPC was founded on the same principles as the Federal Deposit Insurance Corporation (FDIC), but for broker-dealers. The law that created the SIPC intended to give investors a portion of their money and holdings back if their broker-dealer goes bankrupt or steals cash and securities.
SIPC has not operated the way Congress intended, leaving American investors with vague protections of their investment accounts and little understanding of the considerable limitations of those protections. The public unraveling of several major broker dealers and investment theft losses exceeding $75 billion during the recent financial crisis has exposed the need to bolster the SIPC.
The Network for Investor Action and Protection (NIAP) is a not-for-profit organization founded by former investors of Bernard L Madoff Investment Securities Inc. An advocacy group for all victims of Ponzi frauds, NIAP supports regulatory reform to enforce effective policing for the prevention of future investment and securities fraud, and improved and proper support for all victims currently suffering from the unfortunate and potentially devastating fallout from this type of crime.
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