While the Bernie Madoff Ponzi scheme bankrupted countless numbers of investors, some did manage to withdraw funds before the plan collapsed. But with a line of claimants and creditors longer than the Lincoln Tunnel and a list of assets shorter than a crosswalk, how can those who were left empty-handed recover funds and from where will they come?
At a spring 2011 Baruch seminar titled “The Madoff Clawbacks: Whose Money Is It?,” Law Professor Seth Lipner and New York Times blogger Peter Henning discussed the ethics of using clawbacks as a means of compensating downtrodden investors. A “clawback” is the recouping of money or benefits already paid out to a person or company that should not have necessarily been made for legal or moral reasons.
Lipner and Henning discussed pending and settled clawback lawsuits and questioned which methods to use when dividing Madoff’s assets. In one example, the two examined a settled clawback suit between the Madoff trustee and the organization Hadassah, which had essentially made a profit of $75 million on the money it invested. In that case, the courts determined that the organization had to repay $45 million, while the remaining $30 million was waived, or “forgiven.” Is this fair?
“The Madoff trustee must balance his obligation to recoup money for the losers against the hardship imposed on charities and ordinary investors who relied on their monthly statements over many years. It is an awesome responsibility, which must be exercised with discretion and compassion,” said Lipner.
This timely seminar was sponsored by the Robert Zicklin Center for Corporate Integrity (ZCCI), which provides a forum for important conversations about ethics, corporate governance, fairness, and other issues.
John Elliott, vice president and dean of the Zicklin School of Business, praised the seminar, saying, “because it examined complex legal issues as well as fundamental issues of fairness, it fit ZCCI’s objectives very well.” He added, “The question of who should be culpable and financially liable in addition to Mr. Madoff is complex and is still working through our legal system, but the seminar drew out the key issues embedded in the debate.”
—Barbara Lippman
Learn about the Zicklin Center, including a full list of ZCCI conferences
Listen to a CUNY Podcast of the event.