|  | | 2009 News and Press Releases | | |
HEADLINE NEWS:
Alleging Negligence, Madoff Victims Sue SEC for $2.4 Million
Andrew Longstreth
The American Lawyer. October 15, 2009
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EXCERPT: After the relentless pounding the Securities and Exchange Commission has received for failing to expose Bernard Madoff's fraud, it was probably only a matter of time before the agency was sued for negligence. That time came Wednesday, when attorneys at Herrick Feinstein filed a complaint against the government (pdf) in Manhattan federal district court. Herrick represents two of Madoff's victims -- disabled retiree Phyllis Molchatsky and Dr. Steven Schneider -- who lost more than $2.4 million between them. The lawsuit said the SEC had "countless opportunities to stop the Ponzi scheme Madoff operated over 16 years, and botched all of them." Howard Elisofon, the lead attorney on the matter, said Molchatsky quit working when she was diagnosed with Parkinson's disease and decided that her $1.7 million in savings would be safest with the steady income Madoff promised his customers. "Now, she may lose her house," Elisofon said. The lawyer said Schneider invested $750,000, nearly all of his retirement money, with Madoff. "He had planned to slow down and retire, but now he cannot." "Instead of watching the backs of Ms. Molchatsky and Dr. Schneider and the backs of the other investors, the SEC -- through its negligence -- was effectively watching Bernie Madoff's back," Elisofon said in a statement. "Now it is time for the SEC to be held accountable and for the federal government to do what the law says it must do: compensate the victims for its negligence." Elisofon told us that to his knowledge, this is the first-ever suit seeking to hold the government liable for the SEC's alleged negligence. The complaint, which is brought under the Federal Tort Claims Act, relies heavily on a report issued by the Office of Inspector General for the SEC, which was critical of the agency's handling of warnings about Madoff. |
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