Bernard Madoff victims are slamming a blue-ribbon committee’s report on how to “modernize” government-backed insurance for investors — saying the proposed changes will do virtually nothing to help consumers hit by future scams.
“I would say that in important respects, this is a put-up job,” said Massachusetts School of Law dean Lawrence Velvel, who lost big bucks to Madoff’s $65 billion Ponzi scheme.
The SIPC Modernization Task Force this week recommended 18 changes to the Securities Investor Protection Corp., a government-chartered insurance fund for investors.
SIPC leaders created the panel in 2010 amid criticism over how the agency handled investor losses from the Madoff scam and Lehman Brothers’ 2008 collapse.
Set up by Congress to protect consumers the way the Federal Deposit Insurance Corp. covers customers after bank failures, the industry-funded SIPC can reimburse investors up to $500,000 when brokerages collapse.
However, hundreds of Madoff’s victims didn’t get anything at all.
That’s because the SIPC ignored fake monthly statements that Madoff sent his clients and only considered how much money people put into their accounts vs. how much they withdrew.
The agency declared anyone who took out more than they put in a “net winner” who didn’t qualify for SIPC coverage.
SIPC trustee Irving Picard has also sued more than 1,000 such investors — even seniors who lost nest eggs to Madoff — to get any “net winnings” back.
“(Picard) can burn in hell for all of the trauma he’s inflicting on elderly people,” one local Madoff victim said, speaking on condition of anonymity because he’s facing a Picard lawsuit.
Victims say the task force should have endorsed a bill in Congress to base SIPC payouts on monthly statements that innocent investors assumed were correct.
“Yes, there was a scam going on, but most people who invested with Madoff knew nothing about it,” said Bedford resident George Christin, whose family feels it lost $2.5 million but got nothing because the SIPC declared the clan net winners.
Hub lawyer Dan Glosband, who represents some two dozen Madoff victims facing Picard in court, said the task force should have “at the very least” backed another bill to ban lawsuits against innocent parties.
But Velvel, who’s also squaring off against Picard, called the panel a “semi-stooge committee” that couldn’t have endorsed such ideas without weakening the SIPC’s legal position.
Agency chief Stephen Harbeck rejects such contentions.
“We understand that these people were victims, (but) even an innocent person who receives someone else’s stolen assets from a fraudulent actor has to give them back,” he said.
