The Wilpons essentially claim that because they had $500 million on statements with Bernard Madoff when he was arrested and shut down, they lost that amount.
However, lower courts largely have validated trustee Irving Picard's method for determining winners and losers. According to Picard, if you invested more money than you withdrew, you were a net loser. And if you withdrew more money than you invested, you're a winner, even if you thought you had more. If Picard were to rely on Madoff's fictitious statements to investors, pretty much everybody would be a winner, in essence, and there would be nobody who made off relatively OK to collect money from to distribute to people who lost principal.
Writes Anthony M. Destefano in Newsday:
Under Picard's calculation of account "net equity," there are about 2,736 investors like the Wilpons who were denied SIPC [government insurance] money and are affected, although they can ultimately file a claim in the Madoff bankruptcy as general creditors, court records show. Many net winners have argued that Picard should have relied on the last, admittedly fraudulent, account statements they received from Madoff in November 2008 to decide who was eligible to recover from SIPC. ...
John Coffee, a securities law expert and professor who teaches at Columbia University School of Law, said the Supreme Court seems unlikely to grant the Wilpons a full hearing. The net equity issue isn't a constitutional issue, said Coffee. He explained that the Supreme Court only takes nonconstitutional issues if they are part of an emergency situation or involve disagreements among a number of federal appeals courts. Neither situation exists with the net equity issue, Coffee said.
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