Monday, December 21, 2009

The SEC’s Brief Filed Before Judge Lifland In Madoff.

December 21, 2009

The SEC’s Brief Filed Before Judge Lifland In Madoff.

To begin my career after graduating from law school in 1963, I joined the Honors Program of the Department of Justice in Washington. In those days, when Kennedy was still President, we pretty much thought that the Department did high level work, and it was also thought that the SEC was a premier, a very high quality, government agency.

Early-on, we new DOJ lawyers were taken around by some DOJ mucky muck who explained notable features of the DOJ building to us. At one place he stopped and pointed to an engraving on a wall which said “The Government wins when justice is done.” That meant the Government was a winner, even if it lost a case, if justice was the result of the decision. It did not take long, however, to begin to understand that the engraving had the Government’s view exactly backwards. It should have read, “When justice is done, the Government wins,” meaning that if the government does not win a case, justice has not been done. I have now seen the latter philosophy in operation for 46 years, in numerous fields of law, most publicly including all aspects of supposed national security law from illegal wars to illegal wire tapping to illegal torture to illegal whatever-you-want-to-talk-about, and now that philosophy has pervaded the Madoff case too.

Just as the statement of philosophy engraved on the wall had the government’s view exactly backwards, so too has competence taken a long, long holiday. I need not mention what happened in the DOJ’s Office of Legal Counsel starting in the Fall of 2001, need I? Nor, I presume, need I mention the fantastic, utterly unbelievable, long running incompetence and negligence of the SEC in Madoff and other fraud matters. What I will mention, though, is a tiny matter -- a matter so small as to be of absolutely no consequence, yet one which is symptomatic because sometimes it is the smallest matter which can reveal intellectual incompetence, mental sloth, lack of knowledge, lack of concern for accuracy.

On December 11th the SEC filed its brief on net equity. Two days before, on December 9th, the SEC made the same fundamental points as are in its brief at the hearing of Kanjorski’s committee. The SEC was represented by its Deputy Solicitor, a fellow named Michael Conley. As is customary, Conley submitted written testimony before appearing in person. Given the SEC’s concern that members of Kanjorski’s committee have blasted it up, down and seven ways from Sunday, it’s a safe bet that the written testimony was vetted -- was read and approved in advance -- by a host of SEC personnel, probably up to and including Mary Schapiro. If it wasn’t, there is something very wrong.

The written testimony discussed the New Times Ponzi scheme. It said that in New Times “the money was never invested, but converted by the firm’s principal, Charles Goren, for his own use.”

Charles Goren? Charles Goren? The fraudster in New Times was not Charles Goren. It was William Goren. Charles Goren was a leading bridge player and writer on bridge for decades in the 20th Century.

Now, we lawyers tend to make a big deal over a horrible mistake like that, a lot bigger deal, possibly, than laymen might, and maybe too big a deal on some abstract scale. But to lawyers, especially ones of a certain training, this kind of a mistake is unforgivable. To us it denotes intellectual sloppiness, lack of care, lack of concern with accuracy, lack of paying attention. And ask yourself: here we have testimony that must have been -- and certainly should have been -- vetted in advance by a large number of people at the SEC. And nobody caught the mistake? Nobody realized that the name that was used was Charles Goren? Nobody wondered about this even if they did not specifically know that the fraudster’s first name was actually William? Nobody wondered about it even though the SEC’s brief, filed in court only two days later, gave the fraudster’s name correctly as William Goren? It seems to me that this mistake, as small and inconsequential as it was when looked at one way, is a sign that the SEC is still as incompetent-ridden as it was before Mary Schapiro. And why not -- what makes her so competent? She, after all, was in charge of FINRA (making three mill a year, no less, I believe) when it continued to miss the Madoff fraud just like the SEC did.

Let’s turn now to what the SEC did and how it did it. Put briefly, the SEC said it agrees with SIPC and the Trustee that cash-in/cash-out must govern, but it disagrees with them that that is the sum of the matter. Rather, the cash-in must be calculated in “constant dollars by adjusting for the effects of inflation (or deflation).” This “treats all investors fairly by taking into account the economic reality that a dollar invested in 2008 has a different value than a dollar invested twenty years earlier.” (SEC Brief, p. 1.) (“[T]he Commission believes” that “calculation of the claim in constant dollars, adjusting for the effects of inflation, . . . is the appropriate method of determining net equity in this case.” (Id., p. 9.))

Now, before getting into substantive pros and cons of this approach, let me comment on the procedure by which it was brought up, insofar as I understand it.

Initially, the briefing was ordered by Judge Lifland to include the questions of cash-in/cash-out, versus the November 30th statement, plus the question of interest if cash-in/cash-out is used. But after Judge Lifland said that the briefing would include the question of interest, the Trustee and SIPC somehow got him to change his mind and to say that cash-in/cash-out versus the November 30th statements would be the only matters briefed. The briefing, he said, must be “limited” to those matters. How this happened was a puzzlement to me until, during conversations over the question of discovery, I asked one of the Trustee’s lawyers how it happened, and he forthrightly told me that his side went to Lifland and asked him to narrow the briefing. I don’t want to say, I cannot with knowledge say, that this was done like sneak thieves in the night. All I know is that I didn’t hear of it until after it was a done deed, and there seem to be a number of things happening that some of us don’t know about. And those of us who have practiced for decades know and have seen that in specific areas of law where there are a relatively small coterie of governmental or quasi-governmental lawyers who practice before a small coterie of judges, there often can be behind the scenes maneuvering, not to mention favoritism. I personally, of course, am acutely aware of the possibility of a questionable situation in this case because of the judge’s cursory -- some (accurately) describe it far less charitably -- smack-down of a request for very pertinent discovery from SIPC and the Trustee, a request for discovery on matters that go to the heart of why SIPC and the Trustee are doing what they are doing and would have been deeply relevant to recent Congressional hearings of December 9th as well.

So . . . . what happened after Lifland changed course at the suggestion of the Trustee and SIPC, and said that the only pertinent issues to be briefed were cash-in/cash-out versus the November 30th statement. Well, SIPC and the Trustee submitted briefs that also discussed preferences and the Trustee’s right to claw them back. This upset several of the victims’ lawyers because they considered that the question of preferences goes way beyond cash-in/cash-out versus the November 30th statements, and involves important questions of law not involved in those matters. One of the prominent lawyers for victims thus asked for more time to file a brief so that his office could research the questions raised by the preference issues. His request was denied. Fortunately, some large firms had the resources to do the necessary research in time, so they were able to create responses. The point remained, however, that victims’ lawyers believed that, for their own purposes, SIPC and the Trustee, in their briefs, went well beyond what Lifland’s order -- at their request -- said should be briefed, and the judge then denied an understandable request for more time made by a prominent lawyer for victims.

Then, two months after the briefs of SIPC and the Trustee came the SEC’s brief. It too has gone way beyond the order allowing briefing only on cash-in/cash-out versus the November 30th statement. For it has introduced the entire question of adjusting cash-in to account for inflation. Why introducing this subject is different in principle from discussing interest -- which the lawyers were not to discuss in their briefs -- escapes me entirely. In fact, in principle it is not different at all, since discussing an inflation adjustment is, like interest, a way of attempting to compensate for the time value of money and to provide compensation for the fact that someone else has been using your money. But, as we have seen across the board since about 1965, following the law, or proper procedure, is something that the government and quasi-governmental bodies feel no need to do when it does not suit their purposes. The Madoff case, you know, while in some ways sui generis, is distinctly not sui generis when it comes to governmental and quasi-governmental bodies screwing over law, procedure and citizens if it suits their purposes. In that regard there is nothing new here.

Related to this, and of real importance, is this: the SEC’s action -- i.e., its filing of its brief not when SIPA and the Trustee whom it supports on the question of cash-in/cash-out filed theirs, but two months afterwards and one month after the victims filed their major briefs -- gives the SEC -- and SIPA and the Trustee too -- two real advantages. For it reinforces the idea, which at least conceivably could be important to Lifland, especially after receiving the victims’ collection of excellent briefs, that it is possible to alleviate victims’ plight a bit even if he rules in favor of cash-in/cash-out, and it concomitantly lets Lifland know he will be supported by the SEC if he follows the SEC’s method of partial alleviation. It does these things while the victims have only a limited time to respond because, unlike the rest of the briefing schedule, which has approximately one month intervals between opposing briefs, the victims have only ten days, until December 21st, to respond to the SEC -- just when the Christmas season is beginning, no less, and people are heavily engaged in other things. So the victims’ lawyers have only a brief chance to respond in writing on a major question, and will have to try to overcome this disadvantage at the oral argument on February 2nd -- although most judges say that good briefing on a question is usually crucial. So the SEC’s conduct has put the victims at a significant disadvantage. (What else is new?)

Moreover, the SEC’s conduct helps SIPA and the Trustee. Not only does it support cash-in/cash-out, albeit with a modification for inflation, but SIPC and the Trustee do have a chance to respond, in briefs that are not due until mid January, over one month (not a mere ten days) after the SEC filed its brief (which I’ll bet they saw even before it was filed).

So much for the disadvantages the SEC has visited upon victims. Let’s turn to the substance of what the SEC has done.

To begin with, although it pseudo covers itself by saying it is postponing until a later brief its reasons why its suggestion is consistent with SIPA and case law, the fact remains that, like SIPC and the Trustee, the SEC’s brief ignores the legislative history of SIPA. Not for the SEC any discussion of legitimate expectations, or of Congress’ view that the statement one receives from a broker is the measure of an honest person’s legitimate expectations. What the SEC does, instead, like what SIPC and the Trustee did, is to make up its own notion of what is fair instead of using the rule established by Congress -- which, the SEC claims, without any supporting discussion, didn’t establish a rule.

Under the SEC’s rule, most people are likely to do worse, much worse, than under the November 30th statement. For inflation has never run at the rate of Madoff’s purported earnings. But the degree to which people will do less well under the SEC’s rule is variable. Someone who invested in, say, 2006 will get little inflationary adjustment because there was little inflation. Somebody who put in money in 1990 will get a major inflationary adjustment of 65.5 percent because that was the amount of inflation between 1990 and 2008. For investments in 1995 and 2000 the inflation adjustments would be, respectively, 41.9 percent and 25.6 percent. On the other hand, someone who over ten or fifteen years has taken out all her phantom earnings, but none of her principal, to pay taxes and to live will do even better under the SEC’s rule than under the November 30th statement because she had little or no accumulated income reflected in her November 30th statement but her principal will be adjusted upward by significant percentages.

In the main, however, due to the realities of what people did, most people are likely to do worse, far worse, under the SEC’s rule than by use of the November 30th statements. It is impossible to escape the conclusion that what the SEC has done is to try to salve its conscience over its own sixteen years of ineptitude in Madoff and over the harm its negligence caused so many, while finding a salve that saves SIPC’s derriere by minimizing the amounts that will have to be paid out to victims -- will minimize it far below the amounts most would receive under the November 30th statements or even under various rules of interest that could be applicable, e.g., the New York 9 percent interest rule.

There is a point about the SEC’s minimal salve that strikes me as unusual in a way. The SEC would adjust cash-in -- your invested principal -- for inflation, but not cash-out -- the phony profits a person took out. I don’t believe I grasp the SEC’s reason for this lack of symmetry. All the SEC said that may bear on it -- or may not -- is that it disagrees with the Trustee that principles used in Ponzi cases should be used here, since “the Commission is concerned that such principles could be interpreted to require calculation of claims in current dollars as of the dates of investments and withdrawals. This could preclude calculation of the claim in constant dollars, adjusting for the effects of inflation, which the Commission believes is the appropriate method of determining net equity in this case.” (SEC Brief, p. 9, emphasis added.)

I don’t pretend to necessarily understand the Commission’s logic here. But it does seem to me that, if withdrawals were adjusted for inflation, they would have to be reduced below their ostensible dollar amount because, for example, $100,000 withdrawn in, say, 2000 was worth less in constant dollars than the same amount taken out in 1990. This would mean, I believe (and I would like to be corrected if I am wrong), that while the principal invested is being adjusted upward to reflect constant dollars, withdrawals would be adjusted downwards to reflect constant dollars. This would increase the amount a person is credited with in determining his net equity, would even result in some (lots of?) people having a positive net equity who otherwise have a negative net equity, would increase, perhaps greatly, the amount SIPC would have to pay out, and therefore could not be allowed. It is conceivable, isn’t it, that this is the meaning of the otherwise at-least-to-me incomprehensible sentences in the SEC’s brief that are quoted above?

In order to justify its minimal salve, the SEC, like SIPC and the Trustee, simply makes stuff up (and presents its inventions notwithstanding its contrary statement that it will save for a later brief the reasons why its salve is consistent with SIPA and cases). Some of what it makes up is identical to inventions by the Trustee and SIPC. But, before discussing its fictions, let me congratulate the SEC for recognizing and implicitly if not explicitly making a point that, as far as I remember, was mentioned in only two or three of the many prior briefs of victims themselves: the SEC recognizes the crucial fact that, unlike what is said by SIPC and the Trustee in their effort to pull the wool over people’s eyes, this is not a mere bankruptcy case, in which bankruptcy rules are necessarily applied, but is instead a case for which SIPC was enacted in order to override bankruptcy rules. Generally speaking, the victims’ side has failed to emphasize this enough or with sufficient explicitness. Yet it is the keystone in the arch of the victims’ position, and one hopes it will be heavily emphasized in future.

Here is what the SEC itself said on the matter: It stated that, although it agrees with the Trustee that cash-in/cash-out should be used, nonetheless “the Commission disagrees with the Trustee’s view that principles applicable in Ponzi scheme cases limit the claims of BLMIS customers to the actual net cash they invested. The customers’ claims must be determined in accordance with the principles of SIPA, not by principles courts apply in resolving claims of Ponzi scheme victims.” (SEC Brief, p. 9, emphasis added.) “Brokerage firm customers caught in Ponzi schemes that result in SIPA liquidation are treated differently than investors in Ponzi schemes that do not involve SIPC-member brokerage firms. SIPA is a product of Congressional concerns that customers of failed brokerage firms received the assets that should be in their accounts when the firm is placed in liquidation.” (SEC Brief, p. 10, emphasis added.)

These statements, you know, are actually quite a smash at the position of SIPC and the Trustee, whose briefs are predicated on this being a bankruptcy case in which bankruptcy rules applicable to Ponzi schemes should be applied, and who spent perhaps ten or fifteen pages giving purported history lessons in each of their initial briefs in order to try to foist this fiction on the Court and the public. One hopes that the victims’ lawyers will make use of the SEC’s bombshell to say to Lifland in open court, and to say to other judges in future, “Your honor, the SEC itself, which has supervisory authority over SIPA, says SIPA and its handpicked Trustee are wrong in claiming this is merely a bankruptcy case in which they can apply the rules of bankruptcy to the net equity question.” Personally, I think it is very important that this be said by the lawyers who argue for victims on February 2nd.

Yet, having recognized this truth, in arguing for its constant dollar theory in order to save SIPC’s derriere, the SEC adopts certain arguments made by SIPC and the Trustee, and either elaborates on or invents others (I can’t decide which it is).

In terms of adoption, the SEC too admits that customers have a claim for securities, but then accepts the astonishing dichotomy that all of you had a claim for securities but not at the price shown on the statements you received. No innocent victim -- one excludes the Chaises and Picowers of this world (or now, in one case, the next world) -- has yet stepped forward to say he or she expected he had securities, but not at the price shown on his/her statement. The dichotomy here is simply amazing.

The SEC also accepts SIPC’s argument that the November 30th statement destroys equality by advantaging those who invested long enough ago to take out fake profits exceeding their principal, while harming those who invested later. But -- a point that only lately has begun to be understood fully enough to appear in a few writings -- the cash-in/cash-out method does not in this way achieve equality. For those who invested long enough ago to have now taken out fake profits exceeding their principal lost all of their money on December 11th, and were themselves disadvantaged vis a vis persons who took out everything -- fake profits and principal alike -- more than six years ago and therefore lost nothing and are not subject to clawbacks. The more-than-six-years-ago-withdrawers-of-all-principal-and-interest benefited from the money of the people whom Picard is now hitting just as he claims the latter have benefitted from the money of even later investors who have not taken out much or any fake profit. There is no equality among all Madoff investors here, and for Picard, Harbeck and that whole bunch to claim otherwise, as they are doing, is, shall we politely put it, untrue. I think the lawyers for victims who argue on February 2nd should make this point because SIPC and the Trustee have stressed the purported equality they supposedly are creating time and time again over the last ten months; perhaps because of its simplicity (and simplemindedness) they have persuaded reporters and others that it is right, and it is one of the linchpins of their argument for ignoring what Congress said should be done in favor of their own conception of fairness. An argument which is that influential should be discussed, especially when it is wrong.

Finally, let me now turn, at long last, to the twin hearts underlying the SEC’s argument, one heart being a matter of the Commission’s motivation and the other being a matter of its legal rationale.

In terms of motive, it seems to me, there is no great mystery, although the SEC shrewdly avoids even a hint of motive except for one part of one sentence. Recognizing fake profits when calculating net equity, it says in that one sentence, “would implicate the Second Circuit’s concern [in New Times] that basing customer recoveries on fictitious amounts would ‘leave[] the SIPC fund unacceptably exposed.’ (New Times I, 371 F3d at 88, quoting SEC Amicus Brief at 16).” (SEC Brief in Madoff, p. 8.) Which is to say, in plain English, “For God’s sake, Judge Lifland, don’t bankrupt SIPC by making its fund unable to handle the payments of net equity. This is what we told the Second Circuit in New Times, and now Judge and we are saying the same thing to you and telling you that the Second Circuit bought what we said, as evidenced by the quote we are setting forth.”

Now, there is lots wrong with this motive. It ignores what Congress dictated. It opens the door to any kind of invention to save SIPC. It is camouflage for the fact that the SEC allowed SIPC to get away with murder for years by permitting it to charge only $150 per year to multibillion dollar brokerages for the SIPC fund, so that the fund, as was known, would be unable to meet a real disaster, as has now occurred. It is based on a wholly false premise, which the SEC put to an apparently naïve Second Circuit (and which is discussed below), that, unless the SEC’s ideas were followed, fraudsters’ fake actions would bankrupt SIPC’s fund. And it sacrifices innocent investors, who have struggled and scraped and saved all their lives, to the financial necessities of an incompetent quasi-governmental agency that, it has been known for many years, does everything it can to avoid paying victims of failed brokers. As a motivational factor, the SEC’s motive is pretty bad. In a word, one now used even in polite company, it sucks.

Turning to the SEC’s legal rationales, they consist of a number of interrelated arguments, many taken from the Trustee and SIPC. But in the end, the SEC’s position comes down to a single point, which it only mentions briefly and thus tries to hide to some extent (just as SIPC and the Trustee tried in the same way to hide, in a blizzard of historical discussion, that their fundamental (wholly erroneous) point is that this is nothing but a bankruptcy case). The SEC’s fundamental point is that in the real world Madoff could not have made the returns he claimed to be making. Occasionally, the SEC admits this fundament, e.g., Madoff produced returns “that generally ranged from 10% to 17% . . . . These returns could not have been achieved through actual trading of securities.” (SEC Brief, p. 2 (emphasis added).) (See also, SEC Brief, p. 2 (emphasis added): “Victims’ account statements showed securities, but Madoff could not have acquired these securities in real market trading.” (Note that no reason is given by the SEC for this outlandish statement.))

To support this fundamental position that Madoff could not have achieved his returns in the real world, the SEC points out, like SIPC and the Trustee have, that everything was faked by Madoff, and says New Times is different because New Times investors received the benefits of what occurred in the real world to securities they thought they owned, whereas here the only world was a fake one in which Madoff made up the results after the fact to produce desired returns. In this regard, says the SEC, there is a difference between faking the ownership of real securities as in New Times and faking transactions, as in Madoff. Therefore, Madoff investors, who were victimized by fake transactions, are different from the New Times investors who were defrauded into thinking they owned real securities, and are instead like other New Times investors, who bought securities that never existed in the real world. Fake transactions equals fake securities would be the equation.

Now, if you think that some of this makes no sense, you are right. Let’s start with the idea that it was impossible for Madoff to have enjoyed as much success in the real world as in his fake world. This point is in most ways bogus if one considers the financial history of the last few decades. There were many mutual friends that did better than Madoff: lists of some of them have been compiled by Madoff victims. Has anyone considered what Warren Buffett made year after year? Or that Bill Miller beat the S&P for how many consecutive years? -- Ten? Twelve? More? There are people who do exceptionally well for long periods of time, and it was not so impossible that Madoff might be one of them.

But, the SEC will say, it couldn’t be done by using the split stock conversion strategy. Well, maybe. But maybe not. In a retrospective analysis one investment house -- I think it may have been Credit Suisse -- found that Madoff’s overall results could be duplicated, but not with his consistency. And if it couldn’t be done -- and if people should have known this, and it is therefore justifiable to punish them for it -- how come the SEC never caught Madoff in six or eight tries? How come some of the world’s savviest investors, like James Simons’ Renaissance Technologies, invested with Madoff?

The fact is that the SEC has simply made up, simply invented after the fact, its argument that it couldn’t be done, and has provided no support whatever for its claim. The claim is ex cathedra, from on high no less, has been invented to screw desperate people out of money, and ignores Congressional intent regarding protecting investors, legitimate expectations, and brokers’ account statements received by investors.

Then there is the argument that Madoff investors, whose transactions were faked, are therefore in a different position from New Times investors who owned real but unbought securities. Why the two are in different positions is truly hard to grasp. Both were the victims of fakery -- in New Times the investors were victimized because the fraudster, William (not Charles) Goren faked buying securities and, in Madoff, Bernie faked buying and selling securities. This is a legally important difference?

Are the cases different because, as the SEC claims, in a Madoff situation the amount of falsely claimed profit could be unlimited, and could bankrupt SIPC, because the transactions were faked, whereas in New Times the profit could be measured by what happened to the same securities in the real world? This, as said before, involves a bill of goods that the SEC sold the Second Circuit in the New Times case with respect to investors who bought securities that did not exist in the real world. Allowing them to recover, the SEC said, would allow the fraudster to determine profit, which could bankrupt SIPC. This was sheer poppycock and it was disgraceful for the securities regulation agency to propound it. One need not follow the fraudster’s determinations of fake profits where securities are not bought or securities do not exist. One can instead use well recognized proxies such as interest rates, the results of the S&P 500 or the S&P 100, the results of the Dow Jones, or other proxies. For the SEC to have sold its bill of goods about unlimited, bankrupting fake profits to the Court of Appeals in New Times, and for a court that is supposed to be highly sophisticated to have bought this load of bovine defecation, is a disgrace.

There are many possible proxies, and some will fit better than others in a given case, depending on the character of the investment. But one that absolutely does not fit here, yet is specifically called a proxy in the SEC’s brief, is the amount of cash invested, adjusted for inflation. That is not an apt proxy here. It is, rather, just a method of trying to lessen the loss of the greedy SIPC which, it is well known, has been screwing over victims for many years and which the SEC has failed to supervise properly.

* * * * *

I return to a matter discussed at the beginning. Notwithstanding the engraving on the wall of the Department of Justice -- which, unfortunately, represents hypocrisy more than truth -- you won’t find much in the way of justice in the SEC’s brief. There is one point of justice, and it is an important one, which the victims’ lawyers should use time and again: the SEC’s recognition that this is not merely a bankruptcy case, but is instead a case in which one must apply a law specifically enacted to override bankruptcy rules. Beyond that, however, the SEC propounds rules which screw over innocent, economically desperate, “little” people, just as has been done by the government to homeowners -- also “little” people -- who have lost their homes while the Wall Street fat cats got bailed out to the tune of hundreds of billions or even, it has been estimated, 10 trillion or more.

To most of the audience for this posting, one need not explain the history of Madoff from 1992 onward, or explain the economic experiences of the last four decades or so, for readers to grasp the background that engenders my view of the screw-the-little guy thrust of the SEC’s brief. Too much has occurred, and is too obvious, for such explanations to be needed. But I should say, however, that it seems quite possible, even very likely, that the brief should also be understood as a kind of political document rather than a strictly legal one, should be understood, in the current argot used to describe the government’s efforts to placate everyone rather than making a stand on principle, as an exercise in triangulation. The SEC has to have been in extensive talks with SIPC for many, many months over what position is correct and what position the Commission should take. The SEC has also spoken privately with lawyers for victims, including lawyers in major Wall Street firms. And it has deservedly been getting ravaged in Congress. It is as a result of all these pressures and counter pressures, one is willing to bet, that the Commission has produced a brief which, on the one hand, recognizes that SIPA overrides bankruptcy rules and that cash-in is not by itself the appropriate way to measure a victim’s holdings when determining net equity, but, on the other hand, tries every which way it can to minimize the amounts that SIPC will have to pay victims, using arguments of horrendous inadequacy to try to accomplish this. The SEC has filed a brief that, in these ways, seeks to persuade victims and Congress that it has taken account of their concerns and is acting “liberally” towards victims, while placating SIPC by minimizing what SIPC will have to pay out. As said, this is a form of politics, not law. It is mainly unprincipled, and certainly is not justice for victims. Nor is it morality in treatment of them.

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