Harriet Davies
Editor - Family Wealth Report
27 July 2012
Daily News Analysis
The SIPA trustee for the liquidation of Bernard L Madoff Investment Securities has filed a motion in the US Bankruptcy Court for the Southern District of New York seeking approval for a second distribution of customer funds, and an allocation of around $5.5 billion recovered assets to the customer fund.
The motion asks for a distribution of between approximately $1.5 billion and $2.4 billion from the customer fund to customers with allowed claims. If made, this distribution would bring the funds returned to BLMIS customers to at least 46 per cent of allowed claims, the trustee said, and up to 50 per cent.
The motion for a second distribution follows a decision by the US Supreme Court not to review the net equity calculation formula in the liquidation procedure. The formula determines customers’ eligibility for pro rata distributions with allowed claims from the customer fund, based on “cash-in, cash-out” of Madoff’s scam. The Bankruptcy Court’s approval of the methodology was appealed, but the Supreme Court’s decision ended that appeal process.
Following that, on July 16, the deadline for further appeals on the Picower forfeiture of some $7.2 billion to the US government expired, making the forfeiture order final. This released $5 billion of Picower settlements funds to the trustee, “a portion” of which will go toward this distribution, Irving Picard, the SIPA trustee, said. Jeffry Picower, now deceased, was a long-time investor with Madoff.
“The denial of certiorari by the Supreme Court and the release of the Picower settlement funds are great news for BLMIS customers and we will move quickly to make the distribution,” said Picard.
However, obstacles remain. For a start, a large portion of allocated funds (to the customer fund) need to be reserved until certain objections are resolved, such as relate to inflation and interest rate adjustments to claim amounts, as well as appeals to other settlements. According to an update from the trustee in June, appeals over the $1.025 billion Tremont settlement and the $220 million settlement with the Norman Levy family still need to be resolved. In addition, the IRS settlement requires a $103 million settlement reserve. Further reserves are also needed until litigation over 237 claims, which may become allowed claims, are resolved.
