SEC rejects Madoff claim; investor may sue
Phyllis Molchatsky, who asked the Securities and Exchange Commission to pay $1.7 million in damages resulting from the Madoff fraud, was turned down, according to a report by Reuters today. She had filed the administrative claim soon after Madoff was arrested.
Her attorney, Howard Elisofon, confirmed that her claim was rejected and said he would hold a news conference today to announce future plans. He said that since her claim has been rejected, she now has six months to decide whether or not to sue for damages in federal court. Legal experts called the claim novel because the doctrine of sovereign immunity historically has limited the type of cases that could be brought against the SEC and other federal agencies.
"We had anticipated the SEC either rejecting or ignoring our claim, and nothing here has changed our view that this will be a difficult and uphill legal battle," Elisofon told Reuters. Elisofon is a former SEC lawyer. He also told Reuters that he expects to file similar administrative actions against the SEC on behalf of other Madoff victims.
Madoff investors continue to look for ways to recoup some of the money they have lost. Some are eligible for up to $500,000 by an investor protection group. Others may get assets that are divided by the court-appointed trustee who is trying to pull together assets from Madoff's businesses that could be used to compensate investors. So far, the trustee has only found about $1.2 billion - a fraction of the estimated $50 billion in losses.
Madoff pleaded guilty to criminal charges in March and will be sentenced on Monday. He may face life in prison, even though his attorney has suggested that 12 years would be a sufficient sentence.
Lita Epstein has written 25 books including Reading Financial Reports for Dummies.