Bill on Bankruptcy: Secret Madoff Agreement May Harm Victims
Feb. 27 (Bloomberg) — Money stolen from victims of the Bernie Madoff Ponzi scheme is earmarked for someone who may have been an accomplice in the fraud, and the agreement is being kept secret by a federal district judge. That’s the first item on the new video with Bloomberg Law’s Lee Pacchia and Bloomberg News bankruptcy columnist Bill Rochelle.
The log jam in the Residential Capital LLC reorganization may be broken as the result of the company’s decision to terminate a pre-bankruptcy agreement where parent Ally Financial Inc. would have paid $750 million in settlement that some creditors found insufficient. Bloomberg News made news itself by prevailing on the bankruptcy judge to unseal papers in the bankruptcy of Indonesian tanker owner PT Berlian Laju Tanker Tbk.
The video ends with discussion of three significant opinions from federal circuit courts of appeal. The Fifth Circuit in New Orleans differed with the circuit court in St. Louis and ruled that so-called artificial impairment is no reason for nixing a Chapter 11 plan confirmed using cramdown. Rochelle discusses two opinions from the Second Circuit in New York upholding initiatives by the trustee liquidating Bernard L. Madoff Investment Securities LLC. One tells customers that the trustee alone has the right to sue for damage done to customers generally. The second is a disappointment for investors in Madoff feeder funds because they learned they don’t have customer claims in the liquidation. Consequently, they’re not eligible for a payment of $500,000 on each claim from the Securities Investor Protection Corp.