Chidem Kurdas
The Madoff estate’s government-appointed bankruptcy trustee, Irving Picard, apparently required immense amounts of counsel from his law firm in the months ending September 30th—to be exact, $19.2 million fees’ worth.
From the time Bernie Madoff shut down his shop in December 2008 through this September, the Securities Investor Protection Corp. paid $682 million for the administration of the estate. Of that total, $348 million went to Picard’s law firm, Baker & Hostetler, including the latest installment.
This is separate from the fees paid to Mr. Picard personally, a relatively modest sum of $4.4. million. He also hired other law firms and consultants, plus there are other expenses. The pattern of billings change over time. But his colleagues received the lion’s share, by far.
Goes to show, while Mr. Picard is the public face of the operation, picked by regulators and approved by courts to manage the estate, in fact the estate is in under the control of a large alliance of lawyers—as one sees from the SIPC payments.
One amazing thing about these bills is how they’ve grown. For the first billing period after Mr. Picard was named trustee, his counsel fees were less than $3 million.
A March 2012 report on the subject by the Government Accountability Office cited the estimate of $1.094 billion total cost through 2014 and possibly more to come after that. By way of how the cost might be kept down, the GAO said the number of hours billed by Baker & Hostetler partners – who have higher fees than other attorneys – has declined. Picard told the GAO that the partners were more heavily involved in 2010 because the firm was preparing numerous lawsuits and less so now.
But in fact the latest payment is higher, not lower. Lawyers not working for the estate salivate. Nice work if you can get it.
SIPC, created by Congress supposedly to protect brokerage customers, tries to save money by excluding people from its coverage. Thus a large number of Madoff victims are denied assistance, as are the victims of Allen Stanford—on the latter, see Political Sticky Wicket: The Untouchable Ponzi Scheme of Allen Stanford.
Who’s really footing the legal bills? In effect, the investing public. SIPC assesses fees on brokerages, which pass the cost on to their customers. If SIPC runs out of money, the Securities and Exchange Commission is going to lend to it using government paper—probably shifting the ultimate burden to the US taxpayer. One way or the other, it is coming out of our pocket.
Tags: Bernard Madoff, fraud, Irving Picard, Lawyers' fees, Ponzi scheme
HedgeFundSmarts 
January 24, 2013 at 4:08 pm
[…] yesterday’s court decision follows well-known precedent – for instance in the Bernard Madoff case – that “net winner” investors who took out more than they put into a fraudulent scheme cannot […]