This Installment addresses one aspect of the firestorm that is raging in the aftermath of the highly controversial and complicated September 28 opinion and order in the Wilpon Case of Judge Jed S. Rakoff in the U.S. District Court for the Southern District of New York (the “Rakoff Opinion”). The Wilpon Case has been discussed in numerous recent entries in this blog series, most recently in Installments 59 and 58. (Capitalized terms used herein that are not defined herein shall have the meanings assigned to them in Installment 58.)
After Trustee Irving H. Picard received a favorable opinion in the U.S. Court of Appeals for the Second Circuit (the “Second Circuit”) and enjoyed numerous victories in the bankruptcy court of Judge Burton R. Lifland, he suffered a major setback from the potential impact of the Rakoff Opinion, not only for the Wilpon Case but also many other pending cases in the Madoff proceedings. This posting will focus on the position of Mr. Picard that the Rakoff Opinion is arbitrary and unfair, especially in view of the inconsistent decisions, perhaps to the point of unfairness, that Picard himself has made relative to certain charities that invested with Madoff, as discussed in earlier postings in this blog series.
In his Memorandum of Law filed on October 7, 2011, in which Picard is seeking an interlocutory appeal to the Second Circuit to challenge the Rakoff Opinion, Mr. Picard stated the following:
This ruling [the Rakoff Opinion] arbitrarily provides one class of [Madoff] customers—those with avoidance liability — the benefit of the fictitious trades that all customers were previously denied. In direct contravention of the [Second] Circuit’s ruling, this result places "some claims unfairly ahead of others.” [Emphasis supplied.]
It is ironic that the view of the Picard team is that Judge Rakoff has acted “arbitrarily” to provide some Madoff customers with the benefit of fictitious trades that all customers were previously denied. The Trustee has himself “arbitrarily” provided some charities that invested with Madoff “the benefit of the fictitious trades” while relentlessly pursuing others.
As discussed in Installment 48 of this blog series and earlier Installments,
Picard and Judge Lifland have allowed Hadassah to keep $32,000,000 [of a total of $77,000,000] of fictitious profits at the expense of other Madoff victims. . . . However, the inconsistent manner in which Picard is treating charitable investors with Madoff warrants further monitoring. As stated in Installments 46 and 47 of this series, Picard is seeking a total of $7,000,000 or more (which is actually more than the amount of fictitious profits subject to clawback) from the Wilpon/Katz [private charitable] Foundations, which have given away millions of dollars each year to highly respected and worthy charities. . . .
Similarly, Installment 50 and earlier Installments highlighted the seemingly favorable treatment that Picard has arbitrarily provided to the private charitable foundation formed by Senator Frank R. Lautenberg. Picard apparently determined not to claw back hundreds of thousands of dollars in revenues of the Lautenberg Foundation that appear to have been generated by distributions of fictitious profits from its investment with Madoff.
Hadassah and the private foundations are all tax-exempt charities. While Hadassah and the Lautenberg Foundation apparently receive passes from Picard, he continues his pursuit of the Wilpon/Katz Foundations and seeks to overturn the Rakoff Opinion in the Second Circuit. The Madoff proceedings move ever onward.