To deal with situations exactly like the one described in Mr. Third, the trustee in the Madoff case didn’t sue people like Frank and Sally, the hypothetical victims mentioned by the author. A dollar of fictional “profit” given to one person who has received more than he or she contributed is a dollar that can’t be given to a victim that was unlucky enough to have lost principal. To enable other victims to recover the amounts they invested, a trustee has a duty under the law to those other victims to recover funds where possible. Second, the author fails to note that any money a participant receives in such a case, over and above the amount deposited, is money stolen from other innocent investors.
The Court of Appeals also agreed, and stated that using those statements “ would have the absurd effect of treating fictitious and arbitrarily assigned paper profits as real and would give legal effect to Madoff's machinations.” The court overseeing Madoff’s fraud agreed, and stated that using the phony account statements to determine what each victim should receive was “absurd.” Using those statements would have allowed the thief, Madoff, to decide who wins and who loses. Under the law, what each investor was entitled to receive was the return of the net amount deposited with Madoff. The account statements the victims received in that case were complete fictions.
The author omits facts which are very important to understanding the reality here.įirst, the author fails to mention that the brokerage firm he describes was Bernard Madoff’s firm and that the fraud in question was a Ponzi Scheme. The article by Laurence Kotlikoff entitled “ Close Your Brokerage Account!” (Forbes, June 30, 2014.) is misleading in the extreme.
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