Tuesday 10 April 2012

Comparing the Asset Recovery Efforts in the Madoff and Stanford Ponzi Schemes

Posted on April 4, 2012 by hdkotz

In my capacity as Inspector General for the Securities and Exchange Commission (SEC), I uncovered significant failings on the part of the SEC in connection with two monumental Ponzi schemes. My office found that the SEC missed numerous opportunities to uncover Bernie Madoff's $50 billion Ponzi scheme and failed to undertake an adequate investigation with respect to Allen Stanford's $7 billion fraud.

After these frauds were finally revealed, efforts were made in both cases to assist victims in recovering assets. In Madoff, the Securities Investor Protection Corporation (SIPC) appointed Irving H. Picard as a trustee for the liquidation of Bernard L. Madoff Investment Securities LLC with David J. Sheehan of Baker Hostetler, serving as his Chief Counsel. In Stanford, the United States District Court for the Northern District of Texas, Dallas Division appointed Ralph S. Janvey as receiver for the Stanford estate.

By all accounts, Picard and Sheehan have been tremendously successful. According to published reports, since being named trustee, Picard has filed more than 1,000 lawsuits, and recovered about $11 billion of the approximately $17 billion of capital believed to have been lost in the Madoff fraud. On the other hand, Janvey hasn't fared as well for the Stanford victims; he has recovered $217 million, according to recent reports, but has incurred $102 million in fees, making the actual recovery approximately $115 million. In October 2011, the U.S. District Judge in the Stanford cases stated that he thought Janvey may need to stop searching and "stand down." Janvey has been criticized by Stanford investors for his high fees, not giving them updates and the "glacial" speed of the process.

How is it that one recovery effort has been so much more fruitful than the other? Janvey defends his work saying that the recovery process was difficult because the assets were scattered across dozens of countries but Picard and Sheehan successfully found many assets in foreign countries on behalf of Madoff investors.

Perhaps the process works better through a trustee rather than a receiver or perhaps Picard and Sheehan have just been more aggressive and effective in convincing investors to settle rather than litigate. Without knowing all the facts, it is not fair to conclude anything definitive about why Madoff investors are in such a better position than Stanford ones. But we can say for sure, that the process of recovering assets can be a very difficult one, and Picard and Sheehan deserve significant credit for their successes. When Bernie Madoff first confessed, it was generally thought that investors would receive pennies on the dollar for their losses, if anything at all. When Picard and Sheehan are finished, they may end up being much closer to whole than anyone would have predicted.

2 comments:

  1. The Stanford Receiver has retrieved less than $200million and receives his legal fees from the victims retrieved assets ie;$100million.

    The Madoff trustee has retrieved $9billion and $780million in SIPC insurance,being distributed,and legal fees fromSIPC fund.What legal authority decided to victimize the Stanford victims by taking the assets to pay legal fees? SGC was SIPC insured/SEC recognized before Feb.16,2009.why are they not paying part of the legal fees?The chosen Receiver has a conflict of interest ie;worked for SEC,tried cases before SEC,inexperienced with Ponzi cases,and had no competition.

    The 21,000 victims remain victims with lack of communication to e-mails,letters,finacial help or penalizing SEC for its failure to interact since 1999,Markpolos,watching internet pornographyApril 2010).IG Kotz Madoff/stanford reports etc

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  2. The conclusion that this writer comes to regarding the "fairness" of our ability as victims to compare / reach our own conclusions regarding the efficiency or inefficiency of the efforts of these "asset recoverers" is a BUNCH OF BS!!!!! When we need your opinion HDKOTZ we'll simply, to coin a phrase, "beat it out of you" .... Get lost!

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