Clawback commentary :Madoff scandal 'clawbacks:' more legalized extortion of law-abiding citizens

Madoff scandal 'clawbacks:' more legalized extortion of law-abiding citizens
01/24/2009
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Scammed investors with Bernie Madoff are now being threatened with the same unAmerican, unconstitutional flaw in bankruptcy law that has ripped off millions of Americans (including us) in prior years.
It's called a "clawback."
Madoff defrauded investors of as much as $50 billion over decades, enticing new investors by paying above-average rates of returns to old investors - using the new investors' money to pay them off, and not investing the new money at all. It's called a "Ponzi scheme," and variants of it - including Social Security, if Congress doesn't fix it - regularly bilk the gullible and even sophisticated investors.
Suppose Madoff paid profits of, let's say, $100,000, to an elderly widow way back in 1999. The courts could order that widow to repay the $100,000 - even though she was entitled to it, she has already spent it and, just to make the story even more poignant, she is now down to her last $10,000.
See, the American system is not set up to protect Americans.
It is set up to protect creditors - at the expense of ordinary investors or businesses.
The American bankruptcy system is a ripoff, in numerous ways. Too many people walk away from debt too easily; that's one way.
Here's another way.
Ames department stores declared Chapter 11 bankruptcy, trying to reorganize. During those months, Ames paid us to put ad inserts into our newspapers. We did, and we used that money to pay our insert workers and delivery people.
Later, Ames declared Chapter 11 bankruptcy, the "going out of business" kind. Major creditors claimed that the people who ran Ames should not have placed those inserts in our newspapers - and should not have paid to clean their stores, buy merchandise, all sorts of stuff.
Instead of holding those Ames officials responsible, the bankruptcy court began an action to force us to repay the money we had been paid - and, of course, had spent long ago.
We fought it, and settled for about one-third of the $7,000-$8,000 at issue - which, of course, ended up being, not $2,500, but $7,000-$8,000, counting court fees, attorneys' fees, etc.
See why we shouldn't have so many lawyers in Congress or in the Pennsylvania Legislature? No wonder people are disgusted with the American legal system. It benefits the rich at the expense of the not-as-rich.
Madoff investors include many who would be described as "rich." But even they will be subject to the "clawback," as America's courts protect America's privileged at the expense of America's ordinary citizens.
Andrew Jackson had it pretty nearly right, back in the 1830s. "Blame (Nicholas) Biddle!" he said then, targeting the country's most powerful bank president as a slimeball. Some things don't change.
- Denny Bonavita