Stephen Harbeck, president of the Securities Investor Protection Corp., has now stated that the $2.6 billion SIPC has on hand is enough to satisfy all legitimate claims by victims of Bernard Madoff’s Ponzi scheme. Bloomberg reports that Harbeck’s position is based on a formula with which Madoff investors take great issue.
SIPC’s decision, first announced by trustee Irving Picard at a Feb. 20 creditors’ meeting, limits victim claims to “net equity” — cash invested minus sums taken out. Madoff victims disagree with this formula because it ignores profit reported on customer brokerage statements for the past 20 years, gains that SIPC deems fictitious because Picard found no evidence that Madoff had made any trades or profits going back decades.
Helen Chaitman, a Madoff victim and lawyer with Phillips Nizer LLP who is advising 350 investors in the fraud without charge, contends that customers paid taxes on those phantom profits and “legitimately expected” that they owned the securities listed in official brokerage statements. Chaitman and others argue that SIPC should honor customers’ “reasonable expectations” by compensating them for lost profit as well as principal.