First off, it is always a huge mistake not to diversify.  My husband and I lost money with Madoff but we only put a fraction of our savings there.  We put the money there in the nineties, on the advice of a friend (who lost a lot more than we did, as did many in his circle of close friends) and never took out a dime, hoping to leave our children a nice nest egg.  In the nineties, a return of eight to ten percent was not greedy; remember that the dot.com boom and other hedge funds were reeling in much larger returns.  We watched our money grow in the nineties and in the years since 2000, when we never put any money in, we were content to see our complex monthly statements "prove" that our money continued to grow through careful "conservative" S and P 500 investments. There is nothing funny or satirical or even greedy about what we did; we never even took any money out.  Our initial investments were much much less than a million dollars but the (non-existent) amount that we lost was, of course, much larger. 

I anticipate a refund from the IRS of the capital gains tax that we paid for the last three years and, perhaps, the return (from SIPC, which insured accounts with Madoff up to $500,000 per account, as it insures many similar accounts with other organizations) of the principals that were invested.  The IRS won’t go back more than three years with capital gains tax, which makes sense from their perspective (not mine, of course), but people with large losses can also claim "theft losses" into the future against future taxes.

Yes, we got swindled and some people are penniless.  But don’t imagine that many of the people who lost everything are much different from my husband and me.  Most started with nothing or came from nothing (my husband’s parents and mine were all penniless refugees; I came to the USA with a scholarship to study and a few hundred dollars and my husband had a few thousand saved when we got married) and put all their savings with a "landsman" whom they trusted.  They don’t deserve to be ridiculed even if you don’t feel any sympathy.

And one more thing…

According to the law, if an investor can be proved to have taken out his or her capital within the past six years BECAUSE he or she suspected that something fraudulent was going on, that person is, according to the LAW, a prime target for "claw back" by the Trustee.  Indeed, anyone who took out money in the past six years is not going to rest easy, in case the Trustee decides to claw back from everyone who took out money, in order to "spread the pain".  

Thus, taking out money at any time in the past SIX years is insufficient to protect an investor from having to give that money (which might include the PRINCIPAL) back to the Trustee.  Think about it.  If Joe Blow thought in 2003, "Hey, there’s something funny going on.  How can Madoff be making all this money?  I’m going to take my money out," Joe is now shaking in his shoes, wondering whether the Government can prove that he suspected fraud and whether, if they can, they will ask for ALL his money back (principal and interest) even though he quit Madoff in 2003.  NOT FAIR (on the surface) and NOT NICE, but the LAW wants Joe to share the pain too since his gains were fraudulent and he got paid with someone else’s money.

I see an Erin Brokovich movie in the making.  C’mon.  Where’s that pro bono attorney that’s willing to take this on…and the feisty little clerk who’s ready to dive in and dig, dig, dig!  I hope this group can find them, ‘cause it sounds to me like they have a great case! 

There is no reason for those who had direct accounts with Madoff to hire attorneys (it’s, in fact, a waste of money and I had to dissuade my husband from throwing money away).  Whatever assets the Trustee can recover will be distributed to those (with individual accounts) for whom the SIPC maximum of $500,000 isn’t enough to make them whole.  Those who invested indirectly, via hedge funds and pension funds, can try to get money out of the funds or from those who ran the funds, claiming lack of oversight.  However, there is no legal reason for the IRS to change its practices and there is no legal reason for the Government to bail us out.  There is no point getting a lawyer if there isn’t a legal basis for a case and if Madoff’s additional assets are going to be distributed, proportionally, by the Trustee eventually to those (with individual accounts) who are entitled to them.

 

Another way to look at the Market  

 http://www.jewishworldreview.com/toons/deering/deering030909.php3

Yes, Elaine.  A lot of people who invested in the market might wish that they had put their money with Madoff so that, at least, it would have disappeared in a SIPC-insured manner. 

If anyone wants to see some of the "regular people" defrauded by Madoff, they should look at some of the videos  of depositors asking the trustee questions at a meeting that was held on Feb. 20 in New York:

http://www.madoff.com/CreditorsMeetings.aspx

The Madoff site also includes the following update…

TRUSTEE HAS BEGUN ISSUING DETERMINATION LETTERS and MAKING PAYMENTS to CUSTOMERS
Irving H. Picard, Trustee for the liquidation of Bernard L. Madoff Investment Securities LLC ("BLMIS"), began issuing determination letters on customer claims during the last week of February. To date, the Trustee has allowed 12 customer claims and will be paying each of those claimants $500,000.00 from funds advanced to him for that purpose by the Securities Investor Protection Corporation ("SIPC"). Each of the allowed claims exceed the statutory limit and those claimants will be entitled to participate in future distributions of customer property that the Trustee will make from recoveries. [as I noted earlier - Sam] The Trustee expects to issue additional determination letters as promptly as possible and to make appropriate payments from funds advanced by SIPC. The review of customer claims is fact sensitive. Each claim requires not only the review of documents provided by the customer but also in depth research and analysis of information about the customer’s account that is available from BLMIS’ books and records.
    The Trustee and his staff appreciate the sense of urgency that attaches to each individual’s customer claim. However, under the circumstances of this liquidation proceeding, neither the Trustee nor his staff is in a position to advise about the status of or the time frame for the determination of any particular claim.

Couple of things come to mind when reading this article.

First of all, the couple profiled in this are still relatively young and can go back to work.  Spending 16 hours a day blogging on revenge at age 56? Why not spend that time, oh, I don’t know, developing a business or looking for a job?  And what about your husband?  He’s only 48!!!!!  Why aren’t you guys accepting the fact that although you had plans, they just didn’t work out and move on?  Millions of other Americans, not as blessed as you to have friends who are willing to pay their trailor fees, are being forced to do just that.

I feel for the Eli Wiesel Foundation and the other foundations who lost a ton of money through mis-management by Madoff.  But two able bodied obviously intelligent people hell bent on revenge when they should be working towards the next stage of their lives just appalls me and it cheapens the situations of the REAL retirees who are not able to maintain their standard of living because of a scam artist.

Next thought: just throw this guy (Madoff) in the slammer already!  What are you people (NY/Fed government) waiting for?  Why not give him a passport:  if he has the ability to be online, he’s probably diverted his funds anyway so the cause is lost.  Only by throwing his A$$ in the can will there be any message sent to other people like him that this behaviour will not be tolerated.

My reaction to my Madoff loss was to cancel an expensive (Earthwatch; non-profit environmental research) vacation and to try immediately to regrow the business that I had allowed to shrink because I am nearing retirement age.  However, for most people, it’s a tough economy in which to try to make money from scratch.

I was lucky because, since my parents were penniless refugees from Hitler, I was taught that you scrub toilets if you have to and that education is something nobody can take away from you.  My education has given me very marketable skills so I don’t have to scrub toilets but I have, for example, cut my monthly credit card bill down by 66%.  However, I count my blessings daily or even more frequently.  Others, without marketable skills and not brought up with the knowledge that one can go from rich to not rich or even poor in a heartbeat, are not so lucky in both practical and psychological terms.

Madoff’s victims get so little sympathy compared to the venom that people spit at them.

Yes, I’d like to see Madoff in the slammer but I think he’ll be there soon enough.  I am content to let the law take its course.  I do agree, however, that they should have shut off his contact with the internet and that he is, probably, hiding money faster than any of us can make it!!!!