Friday, July 29, 2011

Picard hoisted on own petard

Who is Irving Picard and why is he out of control? The Madoff trustee, who has filed over 1000 lawsuits seeking to obtain over $100 billion in judgements(total Madoff losses for investors were reported to be $65 billion but most of that was not principle, just fake profits), is finally being held accountable by the legal system that he has been abusing.

No matter how obvious this abuse was, the media never questioned anything and any "villain" that Picard attacked and sued was viewed as likely to be culpable, especially since they were finanicial companies(see Gretchen Morgensen). Yesterday the U.S. District Court in Manhattan threw out Picard's suit against HSBC and confirmed that this precedent would apply to all other similar suits as well.

Picard's suits were against firms that served a back office operating function for Madoff and his investors. There was no legal precedent for his suits and plenty of precedent for the bank's innocence(as a simple example, if someone has a bank account at Wells Fargo and then writes some checks to do something illegal, say buy some cocaine for resell, is Wells Fargo now guilty of illegal drug dealing? No.) In the case that I am familiar with, Picard, on behalf of Madoff victims, sued JPMorgan Chase for $6 billion, over $5 billion of which was punitive damages. In a legal sense this was a "hail Mary", but in a PR sense the media gobbled it up with no questions asked.

All of those abusive and irresponsible suits are now tossed. Thank goodness for a dose of sanity in this world for once.

On top of that it was reported separately today that the General Accounting Office, at the direction of Congress, has opened an investigation into Picard and his huge "claims" against investors with clawback provisions. They will also investigate Picard's selection for this role, his compensation, and his expenses in being trustee. This is long overdue.

Madoff investors have already been provided unprecedented tax relief by the IRS. Picard was on a path to compensate investors for every penny of false profits that they blindly accepted(and many of these investors were not stupid people) plus some.

Finally Picard's actions are being examined.


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