Academic

At the AALS annual meeting, I attended the Law & Economics panel and heard Michelle Boardman and Katie Porter speak on the topic of disasters.  Though their substantive areas are different (insurance v. bankruptcy), I enjoyed both talks and walked away remembering specifically two points that were made.  First, Michelle pointed out that when catstrophes strike individuals, they feel entitled to be compensated by someone, either by insurance companies or by the government.  Second, I think I remember Katie asking why when one loss happens to an individual, it's not a catastrophe unless the same loss happens to a bunch of people.  These thoughts were swimming around my head a few days ago when I began to read the victim impact statements that the prosecution submitted to the court for the sentencing of Bernard Madoff.

These victims certainly believe that they were victims of a catastrophe and that the government should step in.  Although they were asked to speak to sentencing, they often urge for changes in the law so that they will receive additional compensation and tax relief.  In fact, Madoff victims asked for tax relief in March and this request was honored with two new IRS guidelines (Rev. Rul. 2009-1 and safe harbor Rev. Proc. 2009-20).  Last month, victims testified in front of Congress again to urge for changes in SIPC rules to allow certain claimants to receive more compensation.  However, note that the SEC routinely sniffs out Ponzi schemes that have bilked much smaller numbers of victims.  The IRS rules are not specific to Madoff victims, and I assume that no new SIPC rules would be either.  But I have to wonder about the difference in expectations when your losses are shared by thousands versus your losses being limited to yourself or a few others.

In the victim impact statements, I was struck by how the Madoff victims compared themselves to disaster victims (even Holocaust victims).  Here are a few examples: 

Letter from Natalie Erger (?It?s very hard to go on.  Madoff investors are victims of a catastrophic event. . . .but like the Holocaust survivors before us we won?t be alive to see restitution and if we are the process is only adding to our hardship.?)

 

Letter from Stephanie Halio (?He is cruel, amoral and a killer. . . . .It?s like people in the concentration camps during WWII watching the Nazis enjoying themselves using the property, money and other possessions that they had stolen.?).

 

Letter from Ken Kohl, dated June 10, 2009 (?When a disaster hits Federal and state governments step in to help those devastated by the disaster offering housing, low interest loans and grants.  No such relief has been provided to the victims of the Madoff disaster.?).

 

Undated letter from John and Beverly Neal, dated (?It seems that victims of natural disasters in this country and even the poor victims of Sept. 11 had more opportunity for help and assistance than the innocent victims of these terrible frauds perpetrated by what is no less than financial terrorists.?)