Picard gets appeals court decision

Trustee Irving Picard won a federal appeals court ruling affirming how he calculated who is a net loser in Bernard Madoff's Ponzi scheme.

Bob Van Voris and Linda Sandler in Business Week write that the court ruled Picard's calculation of money invested minus money withdrawn is the proper way to calculate whether a person was a winner or a loser. The authors write:

A group of Madoff victims urged the court to require Picard to use their final account statements, reflecting fictitious profits on money Madoff never invested, to determine losses. ... “Mr. Picard’s selection of the net investment method was more consistent with the statutory definition of ‘net equity’ than any other method advocated by the parties or perceived by this court,” Chief U.S. Circuit Judge Dennis Jacobs wrote in the opinion. ... Madoff investors who removed more from their accounts than they invested, including the owners of the New York Mets baseball team, stand to lose from today’s ruling. Picard has claimed $300 million in fictitious profits from a group of defendants tied to Mets owners Fred Wilpon and Saul Katz. He is also seeking $700 million in principal from Wilpon and Katz, claiming they should have known Madoff was running a fraud.

Fred Wilpon and family have a federal court hearing Friday afternoon in which the judge may rule on their motion to dismiss the case, or to rule in their favor on a summary judgement. While they still could get the portion of Picard's suit seeking them to forfeit $700 million in principle tossed, the $300 million in alleged fictitious profits might now be a taller order from which to wriggle free with the appeals court ruling.

Sterling Partners issued a statement suggesting the appeals court ruling did not contradict their assertion that they were protected as investors through a broker -- and thus did not bear responsibility for checking the validity of the person with whom they had placed money.

“The decision of the 2d Circuit upheld the Trustee’s approach to determining the amounts that customers can claim against the SIPC fund and the BLMIS estate for recovery of the losses in their brokerage accounts," the statement read. "The decision did not address the validity of lawsuits filed by the BLMIS estate against brokerage customers, including the Trustee’s lawsuit against the Sterling Partners. As we have made clear in our motion to dismiss that lawsuit, which is pending before the District Court, the claims and allegations in the Trustee’s lawsuit against the Sterling Partners are without factual or legal merit.”