Feb 24, 2009 3:16 pm US/Eastern
Madoff Judge Denies Motion On Claim Deadline
Madoff Trustee Says Financier May Have Never Even Invested Their Money
NEW YORK (CBS) ―
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Bernard L. Madoff walks down Lexington Ave to his apartment on Dec.17, 2008, in New York City.
Don Emmert/AFP/Getty Images
A bankruptcy judge in the Bernard Madoff case refused Tuesday to waive a deadline for claims against the disgraced financier by people who may be subject to so-called "clawback" efforts.
At a hearing in lower Manhattan, U.S. Bankruptcy Judge Burton Lifland said he saw no need to clarify an earlier order approving the July 2, 2009 deadline. He also indicated he would deal with any future disputes about claims on a case-by-case basis.
The FBI arrested Madoff in December after investigators said he confessed to his sons that he had swindled investors of $50 billion in a Ponzi scheme. The 70-year-old former Nasdaq chairman remains confined to his Manhattan apartment under house arrest.
A trustee overseeing the liquidation of Madoff's assets had told victims they must submit claims in order to qualify for a piece of whatever he recovers and for up to $500,000 from the Securities Investor Protection Corp., or SIPC.
The trustee, Irving Picard, also warned that he will go after -- or claw back -- false profits of investors who withdrew far more than their principal investment for redistribution to others who were wiped out.
Lawyers for some investors argued that the judge needed to protect their right to file claims past the deadline if they became the target of a clawback.
Without that protection, the lawyers wrote in court papers, the investors "who have no existing claims to file would nevertheless be forced to make an impossible choice" of whether to file protective claims that could expose them to unwanted scrutiny and hamper their defense if Picard sued them for false profits.
Picard's attorneys countered in their written reply that the judge had no jurisdiction to alter a deadline established by a federal statute "in order to ameliorate the consequences of a remote and speculative controversy."
In a separate ruling, Lifland tossed out a lawsuit by a Long Island fuel service company seeking to recover $10 million it invested with Madoff just six days before his arrest.
The Great Neck, N.Y., company had sued the trustee and JP Morgan Chase & Co., where the company said it deposited the money.
The company said the funds were supposed to be invested after the first of the year with Bernard L. Madoff Investment Securities LLC. It argued that, unlike other investments that have vanished, it could trace the money to a Chase account, and should be able to retrieve it without going through the claim process.
The judge said he was sympathetic, telling a plaintiff lawyer, "It doesn't feel good to be the last one to be ripped off."
However, the timing of the investment, he said, "shouldn't make a difference."
On Friday, Picard told a packed auditorium of the investors there was no indication the disgraced financier had bought securities for his clients for over a decade.
"We have no evidence to indicate securities were purchased for customer accounts" in the past 13 years, Picard said.
"They say misery loves company, but it doesn't really make me feel a lot better," said Madoff investor Sharon Lissauer.
Lissauer and numerous other victims got a better idea what's left for them Friday after the disaster that may wind up being the world's dirtiest Ponzi scheme.
"I thought it was a very informative meeting," said investor Burt Ross, who lost $5 million, but was glad to know he'll be getting a few hundred thousand back.
"I have that money spent. I'm gonna pay off the mortgage on my house so I can't wait to get that check in the mail," Ross said.
Despite learning that some of their missing funds will be returned to them, many say they won't believe it til they see it.
"I don't know. I don't know how long it will take," said Lissauer. "I'm not very hopeful."
(© 2009 CBS Broadcasting Inc. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. The Associated Press contributed to this report.)
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