New Madoff lawsuits and new storm clouds loom
The fall of the Bernard Madoff ponzi scheme has the potential to be a gift that keeps giving to the US legal fraternity. The latest in the wave of lawsuits may have a point, though. Two plaintiffs, a disabled retiree and a physician nearing retirement, have sued The Securities and Exchange Commission for failure to perform its duties and causing them to lose $2.4 million. They allege the SEC “closed its eyes to Madoff’s obvious crimes” and that it is directly responsible for their losses. Although legal experts argue that it’s difficult to sue a government agency in this manner, the fact remains that the SEC received several warnings about Madoff’s scheme and failed to act decisively. The audits were performed, but nothing came out of them, suggesting “serial, gross negligence” in carrying out its day-to-day duties. Should the suit be successful, of course, the precedent would open a flood of claims that could cripple the US government, with potential damage claims for Madoff’s collapse alone being $13 billion and paper losses of $65 billion. Damned if you do, damned if you don’t.