Chaitman Responds: Nocera’s Column ‘Full of Errors’
When New York Times columnist Joe Nocera wrote about the $162 million settlement between Madoff trustee Irving Picard and N.Y. Mets owners Fred Wilpon and Saul Katz, we here at the Financial Fraud Law Blog and the Financial Fraud Law Report took notice. Madoff’s Ponzi scheme of course is a topic of interest for us. In addition, though, we saw that Mr. Nocera’s column, The Mets Switch Teams, contained a scathing attack on attorney Helen Davis Chaitman, a partner in the Commercial Litigation Practice Group of Becker & Poliakoff P.A.
Ms. Chaitman, a litigator with a diverse trial practice in the areas of lender liability, bankruptcy, bank fraud, RICO, professional malpractice, trusts and estates, and white collar defense, has been advocating for Madoff’s victims for the past three years. We spoke with her about Mr. Nocera’s column, which she says is “full of errors.”
Financial Fraud Law Blog: Mr. Nocera talks about New York law and “clawbacks.” Can you comment on his view?
Ms. Chaitman: It is not New York law for creditors of a Ponzi schemer to have to disgorge funds they received from a dishonest debtor. Mr. Nocera is confusing cases where people made equity investments in a Ponzi schemer's business and received dividends based on fictitious profits with numerous cases where courts have recognized that a creditor of a Ponzi schemer is entitled to repayment of his debt. The confusion, I believe, stems from the word "investor." People entrusted their life savings to Bernard L. Madoff to be invested by Madoff in Fortune 100 company stocks for the customers' accounts. They did not buy an equity interest in Bernard L. Madoff Investment Securities LLC. Thus, under New York law, there is no authority for requiring them to disgorge money they received from Madoff in reduction of Madoff's debt to them.
Financial Fraud Law Blog: The Picower settlement proposes to return $7 billion to Madoff’s estate, for distribution to those who were victimized by Madoff’s Ponzi scheme. Why would you be challenging that?
Ms. Chaitman: Jeffry Picower was, according to Irving Picard's own complaint against his widow, the primary co-conspirator of Madoff and the principal beneficiary of his crimes. Over a period of 25 years, Picower invested $650 million into his accounts with Madoff and he withdrew $7.8 billion. If he had taken that money and simply invested it in US Treasury notes, it probably would have tripled in value. Despite the fact that Picower was a criminal, Picard settled with his widow for a mere repayment of the money he took out in excess of what he put in. No accounting for profits, interest, or the fact that he was a massive criminal. Yet, Picard has sued my clients – who he acknowledges are totally innocent of any wrongdoing – for the money they took out in excess of what they put in plus nine percent interest!
Financial Fraud Law Blog: OK, so what are the specific legal grounds for your objection?
Ms. Chaitman: If Mr. Nocera had read the court papers I have filed, he would know that my appeal of the Picower settlement was solely on the ground that Picard gratuitously obtained for Picower's benefit an injunction against any victim of Picower's crimes suing his estate. This injunction was not a condition of the settlement; it was something that Picard felt he wanted to do for Barbara Picower. To me, the hundreds of people that I represent who are the victims of Picower's thievery are entitled to sue Picower's estate to recover the damages they are entitled to under state law. Why would Picard (and Nocera, for that matter) want to protect a thief's family from the victims of his crimes?
Financial Fraud Law Blog: What are you trying to accomplish in the Madoff case?
Ms. Chaitman: My motive is solely to protect the victims of the crimes of Madoff and Picower. As Mr. Nocera knows, because I gave him more than an hour of my time over a year ago, I was a "net loser" in that I never took any money out of my Madoff account. Thus, I had an allowed claim and, in fact, would have been the beneficiary of Picard's clawback suits against innocent investors because the recoveries would have increased my distribution from the fund of customer property. However, I am deeply convinced that the clawback suits against innocent investors are illegal and immoral. At my own expense and against my own economic interests, I have lobbied on a pro bono basis in Congress against the clawback suits and I have testified twice in Congress against them.
Financial Fraud Law Blog: Finally, what do you think about Picard’s settlement with Wilpon and Katz?
Ms. Chaitman: As to the settlement with Fred Wilpon and Saul Katz, I confess that I have never met either of them, I am not a Mets fan, and I don't care about baseball. But I do care about people who abuse their power and Irving Picard is such a man. His campaign, conducted largely in the New York Times, against the Mets and Messrs. Wilpon and Katz, was vicious and unjustified. Picard settled on the eve of trial because he had no case against them and he didn't want to subject himself to the public humiliation of allowing the world to see that he was all bluster and no substance. The settlement costs the defendants, at most, $29 million three years from now. Quite a discount off the $1 billion that Picard bragged he could recover. Picard's firm has been paid almost $300 million in legal fees and probably well more than $29 million just for the work in the Wilpon case.
Mr. Nocera's attack on me is difficult to comprehend unless he is expressing the emotions of Irving Picard and his legal team.
Financial Fraud Law Blog: Thank you, Ms. Chaitman.