Madoff Victims Frustrated as Wait Continues for Claims to be Paid
Money repaid slowly as investors' retirements stalled and homes in jeopardy.
April 20, 2009— -- 8,500 victims of Bernard Madoff's self-confessed $65 billion Ponzi scheme have filed claims to recover the remains of their investments. But more than three months after those claims began being filed, only 30 -- totaling $15 million dollars -- have been paid; a snail's pace resolution that has left many Madoff investors with retirements stalled, home ownership in jeopardy and an unforeseen return to the workforce well in their sunset years.
And those personal setbacks and tragedies have been set against the backdrop of what a federal bankruptcy judge today stopped just short of calling a "turf war" between agencies asserting their actions are on the victims' behalf.
"I don't want to see or hope not to see a turf war," U.S. Bankruptcy Judge Burton Lifland said at a hearing today, where he put Madoff's personal assets under control of a separate bankruptcy trustee. The assets of Madoff's business have been under the control of a trustee since December.
Lifand's ruling came at about the same time as the federal judge presiding over Madoff's criminal case blocked him and his wife Ruth from disposing of assets including their homes, investments, boats and business ventures as well as real estate, cash, bonds, art, boats and cars. The government has identified $100 million in such assets. The couple's residence in Palm Beach, Florida, a yacht called "Bull" and a smaller boat have been seized by the U.S. Marshals Service.
At issue for the agencies is who will control the personal assets. That was not immediately clear. And from the perspective of the trustee already in place to oversee the bankruptcy of Madoff' investment vehicle, according to sources, there was great potential for overlap since ownership of assets is often difficult to ascertain when a business, such as Madoff's, is largely controlled by one person, and some of its fruits are in the business name – vehicles for example - and others are in the owner's name or the names of his family members or associates.
At issue for the victims is just how well their interests are being represented by the agencies involved in the matter — the Securities and Exchange Commission, the Department of Justice and the Securities Investor Protection Corp. The U.S. Attorney's office would not comment on the issue, when it was raised by ABC News on Friday.
Forcing Bernie Madoff into Personal Bankruptcy
"We do not believe they have an overall strategy," says Jonathan Landers, a bankruptcy attorney who heads that practice at Milberg LLP and is representing between 70 and 80 clients whose losses to Madoff exceed a half billion dollars. "We think it is very much catch as catch can," he told ABC News.
Lifland's ruling today echoed that concern. "It's quite plain that there has been disjointed, uncoordinated activities taking place," Lifland said.
Landers brought the successful action on behalf of his clients to force Madoff into personal bankruptcy. His clients are part of a larger group that is angry over the perception that they have been publicly stigmatized as rich and greedy and not worthy of sympathy, frustrated over the pace of claims processing, and worried that by the time any of the money arrives it may be too late.
Hundreds of these Madoff victims – roughly 400 in all – have banded together into two affinity groups and have launched a campaign of letter writing, telephone calling, media appearance and lobbying their local political representatives
"The unrest is growing," says Ronnie Sue Ambrosino. A 56-year-old retired computer programmer, Ronnie Sue and her husband Dominic, 48, a retired New York City Corrections Officer, had spent the last four years travelling the United States in their 42-foot motor home. Their $1.66 million life's savings wiped out, they are currently stalled in an Arizona RV park where site owners are allowing them to park rent free. "First and foremost I'll say SIPC has been negligent. That's number one. They have not been prompt," she says.
But beyond the Securities Investor Protection Corp, which helps protect burned investors, Ambrosino and numerous others have anger at the Department of Justice and the Security and Exchange Commission for what appears to them to be a sloppy orchestration of efforts that does not feel as though it is in the investor's best interest.
"I don't have a lot of confidence in the information that is being sent out," she says. Ambrosino's mission now – through media appearances, articles, letters, helping to organize the Madoff Survivors and web postings at secure site bernardmadfoffvictims.org and telephone calls - is to get attention to the victims' plight.
"The frustration level is rising. We have educated ourselves. We have learned the intricacies. Nobody is listening," she says.
Madoff Victims and the Securities Investor Protection Corp
The Ambrosinos and the other direct investors with Madoff are covered for up to $500,000 by a fund set up under the Securities Investor Protection Act and overseen by the Securities Investor Protection Corp, a not-for-profit funded by securities brokers and dealers whose mandate is to act as a first line of defense for investors whose brokerage house went belly up. In the instance of Madoff's victims, Irving Picard, the court appointed bankruptcy for Bernard L. Madoff Investment Securities, is acting as the claims arbitrator.
"Claims are processed on a regular basis," according to lawyer David Sheehan, the senior investigator for Picard.
In addition to the $15 million already paid. ABC News has learned that another $5 million in SIPC money is approved for payment to another 10 claimants as soon as documentation is received, perhaps as early as this week, according to the trustee's office. In general, Picard's office prefers to be fairly methodical and not address investor questions on an individual basis as they go through the process of identifying and securing Madoff assets, determining the validity of claims, and disbursing money to the victims through the SIPC fund and, at some future point, through the assets recovered from Madoff.
"The Trustee and his staff appreciate the sense of urgency that attaches to each individual's customer claim. However, under the circumstances of this liquidation proceeding, neither the Trustee nor his staff is in a position to advise about the status of or the time frame for the determination of any particular claim," notes the trustee's website www.madofftrustee.com.
But the satisfaction or partial satisfaction of a handful of claims has done little to quell anger and frustration by hundreds and hundreds of victims – relatively small investors in many cases – who had placed their life savings or a large portion of it in Madoff's hands, believing it to be a safe harbor from the volatility of Wall Street.
"We lost 95 percent of everything we had worked for and saved for our entire life," says Stephie Halio, 66. Now she and her 68-year-old husband Robert – admittedly once well to do after decades in business – have put a one-time vacation home in fashionable Wainscott, New York on the market. They expect to take a loss. "We want to cover the mortgage," she said, and, as importantly, get out from under the area's notoriously high utility and fuel bills which they can no longer afford.
Madoff Victim Blames Government
From Halio's perspective, the Madoff investment was "endorsed by the government." Although the SEC does not endorse investments, she felt that at the end of a 1992 SEC investigation into two accountants who fed money into Madoff's fund, "the government sanctioned this outfit as a safe investment."
For its part, some SEC officials concede that they, as much as any investor, were duped by Madoff.
"We worked night and day and saved everything. We didn't go out and buy flat screen TVs. We didn't go in to credit card debt," Halio said. Now she and her husband sit in a darkened Boca Raton, Florida home – a nice home bought with the proceeds from his process serving business – but one where electricity is conserved, the air conditioning it turned to off and two one-time retirees are looking for work.
"We sit in the dark. We haven't bought a thing. We don't go to restaurants. We don't go to movies. We live in a beautiful home but we know we won't be able to keep it. We are in the process of sending out fliers and offering transportation to people and house watching," she said.
SEC officials tell ABC News that they are working with SIPC and the U.S. Attorney to ensure that the victims are compensated fairly for their losses.