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Madoff Victims Ordered to Return Recovered Funds


But is equal distribution of pain, losses really fair?

Bernie Madoff's victims are being asked to sign up for more pain.

About 200 investors have received legal requests to return money they withdrew from Madoff's Ponzi scheme before it collapsed. Such "clawback" requests are routine, and were widely anticipated after Madoff pleaded guilty last month to running a scam that cost investors about $65 billion.

The requests were made by a court-appointed trustee who seeks to recover as much as possible on behalf of defrauded investors. The withdrawals were paid as part of a scam, the legal theory goes, and therefore should be returned and divided proportionately among all those who were defrauded.

That's a noble aim, and likely to create further problems for those who lost money in the scam.

Sharing the loss makes sense, but what if a client already spent the money he or she withdrew? Or lost it in another investment? How can spent money be recalled, and how can the court ask investors to lose the same money twice?

What if a savvy investor got a whiff of the true nature of Madoff's operation, and pulled out before the fraud became apparent to everyone? Should that person be penalized for being smart?

A few investors ignored their grandmother's wisdom and put all their eggs in one basket. Should those who failed to spread the risk around now take a bite out of those who got out before the collapse?

Apparently, the court says yes.

We'll soon know if investors can be collegial while sharing the pain. It's not hard to imagine lawsuits and countersuits flying every which way. Call it the Lawyers' Full-Employment Act.

Madoff's fraud grew into a global scam that involved hedge funds, charities and celebrities. He bamboozled thousands of individual investors, including US Democratic Senator Frank Lautenberg of New Jersey, former Dodgers pitcher and Hall of Famer Sandy Koufax, and a charity run by Nobel Peace Prize winner Elie Wiesel.

Madoff, 70, pleaded guilty last month to 11 counts of fraud, money laundering, perjury and theft. He faces a maximum of 150 years when sentenced on June 16.

The once-mighty Madoff has traded his multi-million-dollar apartment on Manhattan's hoity-toity Upper East Side for a jail cell, where he's held without bail. The detention facility in lower Manhattan is known as "The Tombs" - fitting because Bernie will croak behind bars.

Tough luck, pal.
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