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CLAW BACK GUIDANCE

COMMENCEMENT, EXPECTATIONS AND PROTECTION

We have asked two top attorneys – David Bernfeld (Bernfeld, DeMatteo & Bernfeld) and Barry Lax (Lax & Neville) — for their suggestions on how people might respond regarding the claw back actions the Trustee is commencing. We realize this can be a very trying period. Please keep in mind that these claw back complaints are the Trustee’s allegations, and you will have rights to defend yourself. As David Bernfeld indicated in the prior posting [click here], this is simply the Trustee’s side of the story, and you have done nothing wrong. We are also pleased that the law firms are in dialogue with one another and sharing important concepts. We extend our gratitude to David and Barry for preparing this for Madoff victims concerned about these unfair actions.

– Ron Stein

“CLAW BACK” ACTIONS:
COMMENCEMENT, EXPECTATIONS AND PROTECTION

Under the federal bankruptcy statute, the trustee must commence “claw back” (preference or avoidance) actions within two years of the filing date or thereafter be barred from doing so.

As we are all aware, the Trustee has been commencing such cases at a rapid rate, particularly since the thanksgiving holiday, and he will shortly achieve his stated public intention of commencing approximately 1000 or more of such cases.

In the federal courts, including the bankruptcy court, actions are commenced by filing the complaint with the clerk of the Court. In the instant action, the Trustee has until December 11, 2010, to commence his “claw back” actions. Once filed, the Trustee will then serve the defendant with the summons and complaint, which service needs to be completed within 120 days from the commencement of the action.

As a result of this “commencement by filing” procedure, many of you may already be defendants in a previously filed complaint, and not even be aware of it. Moreover, since the summons and complaint in an action filed on or near to the deadline may not be delivered to a named defendant until a date after the deadline, you cannot assume you have not been sued simply because you haven’t personally received any summons and complaint; it may well have been timely filed and simply not yet delivered or served.

If you are represented by counsel, he or she undoubtedly has access to the federal web site necessary to review what has been filed. Therefore, if you are facing a likely “claw back” claim under the Trustee’s “cash in/cash out” methodology, which you would know if you received a determination letter denying your claim because you were a “net winner,” you might wish to check with your counsel to see if anything has been filed against you.

For those of you who are not represented, just a few “dos and don’ts” for the initial process before you actually retain counsel:

1. It is impractical to seek to “avoid” receiving the papers in order to avoid being served. That will only delay your being aware of the action against you-and delay taking steps necessary to properly defend yourself.

2. If you are contacted by the Trustee’s counsel or a representative of the Trustee (including a process server), be polite, but it is safest not to engage in any discussions about the case with that person. Get his or her name and phone number, and simply say that your counsel will be in touch with them. You must understand that you will not be able to dissuade that person from serving you. The only thing that may happen is that you might say something that may hurt your case that you would not have said had you been represented by counsel.

3. Do not discard any papers or even the envelopes in which they came. Your attorney will want to see the entire package so be in a position to give everything to him or her.

4. If you are nervous, and therefore concerned that you may forget certain details of what may occur, write it down promptly. You will therefore be able to provide the most accurate facts to your counsel and not have to rely on your memory during a period of high anxiety.

5. Contact counsel sooner rather than later once you become aware that you are a defendant (and in fact, many of you already have retained counsel in anticipation of these complaints). The sooner you have counsel in place, the sooner your counsel can act on your behalf, and
hopefully, relieve you of some of the anxiety and concern.

6. You are under no obligation to talk to anyone about the fact that you have been named as a defendant in a “claw back” action, including, newspaper and magazine reporters, friends, family and other Madoff victims. You are free to talk to anyone you choose, but please don’t, at least not before talking with counsel who is familiar with your circumstances.

7. Do not panic. It is the beginning of a potentially long process, not its conclusion. The complaint simply contains the Trustee’s allegations, it is not a court finding of fact, no matter how forcefully the “fact” is alleged in the complaint. You will, through counsel, have a full opportunity to respond to the claims as well as the absolute right to your “day in court.”

8. Do not get caught up in rumors, which may either be untrue or exaggerated. Try to resist seeking “advice” from your fellow victims in areas that they are not trained to advise you on. When in doubt, check with your counsel.

David Bernfeld, Bernfeld, DeMatteo & Bernfeld
Barry Lax, Lax & Neville

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This is neither intended to be an in depth presentation on the entire process nor even a complete list of the “dos and don’ts.” It is simply intended to give you an overview of the process surrounding the commencement of these actions so that, hopefully, you can get through this initial stage as free as possible of unnecessary anxiety. Hopefully, it will motivate you to get counsel of your choice in place to help you ASAP. This is the best and safest way to approach a “claw back” claim rather than to try and guess what steps can and should be taken.

For information about attorneys who may be able to provide counsel, please check out the Professional Marketplace by clicking here.

ANGRY? FIGHT BACK! We need clawback victims willing to tell their story to the media – even anonymously. If you are willing to do so, please contact us at (800) 323-9250. The time to act is now, as we await the re-introduction of legislation to stop this.

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