The actions of the trustee overseeing the liquidation of Bernard Madoff’s firm will be investigated by the U.S. Government Accountability Office, said U.S. Representative Scott Garrett, who requested the probe.
The GAO agreed to conduct “a comprehensive evaluation” of the activities of the trustee, New York lawyer Irving Picard, as well as the Securities Investor Protection Corp. and the Securities and Exchange Commission in connection with the Bernard L. Madoff Investment Securities LLC liquidation, said the New Jersey Republican in a statement on his website today.
In February, Garrett introduced a bill that would amend the Securities Investor Protection Act to block Picard from pursuing “clawback” claims to recover profits from innocent Madoff investors, he said in the statement. Garrett is chairman of the House Financial Services Subcommittee on Capital Markets and Government-Sponsored Enterprises.
“The public deserves to understand the trustee’s motivations for excluding so many innocent investors from SIPC protection, and questions need to be answered regarding the SEC’s role in this affair,” Garrett said in the statement. “The trustee’s approach flies in the face of the SEC’s investor protection mandate, yet the SEC has stood to the side and allowed SIPC and the trustee to go forward.”
John Nester, an SEC spokesman, didn’t immediately return a voice-mail message seeking comment. Ailis Wolf, an outside spokeswoman for the SIPC, had no immediate comment.
“We will provide our full cooperation in conjunction with any inquiry by the GAO,” Amanda Remus, a Picard spokeswoman, said in an e-mail.
In a June 3 letter, Garrett and three other House members asked U.S. Comptroller General Gene Dodaro to investigate the conduct of the Madoff liquidation, focusing on questions including SIPC’s selection of Picard as trustee, the choice of methods to determine which Madoff investors would recover money from the SIPC, the cost to pay lawyers and investigators and details of some of the settlements reached by Picard with investors.
Picard, in determining how much net equity investors had in their Madoff accounts, calculates the difference between the amount they invested with Madoff and the amount withdrawn from their accounts. Madoff victims have argued that the amount lost should be based on their final account statements at the time Madoff was arrested and his firm forced into liquidation, in December 2008. The method favored by the investors would require the SIPC to pay them more.
‘Shine a Light’
“We are pleased the GAO has agreed to shine a light on SIPC and its trustee’s approach to the Madoff liquidation,” said Ron Stein, president of the Network for Investor Action and Protection, in an e-mailed statement. “NIAP continues to have serious concerns about the trustee’s methods, compensation and accountability, as well as SIPC’s rubber stamp throughout the process.”