Madoff Trustee Picard’s First Interim Report: Customer Claims

At the end of last week, Madoff liquidation trustee Irving Picard filed a 53 page interim report with the bankruptcy court in Manhattan overseeing the process. The report is available at http://www.madofftrustee.com/press/TrusteeInterimReport_090709.pdf.

There is a great deal of important information here. For example, with respect to the process for dealing with customer claims, the report indicates:
 
·                     As of July 2, 2009, the statutory claims bar date, the trustee had received at least 15,400 customer claims and had determined more than 543 customer claims. (The trustee also received over 395 claims from general creditors and 16 claims from broker-dealers.)
·                     The trustee has developed “a comprehensive claims administration process for the intake, reconciliation, and resolution of customer claims.” At the initial intake stage, AlixPartners, the trustee’s claims agent, receives and reviews each filed claim to insure each claim is filled out properly and all relevant information is included. If any information is missing, the claims agent sends a request for supplemental information. As of June 30, 2009, AlixPartners had mailed over 425 requests for supplemental information.
·                     In the next stage, FTI Consulting, the trustee’s forensic accountants, review each claim, information gathered from Madoff’s books and records regarding the account at issue and information submitted directly by the claimant. The results of this review are noted on each account and are ultimately used by the Trustee in assessing his determination of the claim.
·                     At the third review stage, the claims are moved to the Securities Investor Protection Corporation ("SIPC") where a SIPC claims review specialist provides a recommendation to the trustee regarding how each claim should be determined. Once a recommendation has been made by a SIPC reviewer, the trustee decides upon a resolution of a claim and issues a determination letter to the claimant.
·                     If a claimant does not object to the trustee’s determination within 30 days of the date on which the trustee mailed the determination letter, the trustee’s determination will be deemed confirmed by the court and binding on the claimant.
·                     As of June 30, 2009, the trustee had determined and allowed 543 claims and committed to pay $231,017,981 in cash advances made by SIPC. As of June 30, 2009, the total amount of customer claims allowed was $2,971,725,899. The total over-the-limit claim amount on these claims – the amount by which allowed customer claims exceed the $500,000 statutory limit of SIPC protection – was $2,740,707,918.
 
The interim report also discusses the “Hardship Program” by which the trustee sought to speed up the process for Madoff customers who had been “hardest hit” by the Ponzi scheme. The “Hardship Program” is for customers who could demonstrate the inability to pay for necessary living or medical expenses, among other things. As of June 30, 2009, the trustee had received 258 Hardship Program applications and approved 152 applications. Interestingly, the trustee agreed to pay the undisputed portion of approved Hardship Claims even if there was a dispute over the full amount of the claim.