Bummer of a well-paying job

Diana Henriques has an article in The New York Times about the fallout from the Madoff case:

The Ponzi scheme’s victims denounce him as cold-hearted, dishonest, and just plain wrong. No, they are not describing Bernard Madoff, the author of the fraud that has ruined their lives. They are criticizing Irving Picard, the New York lawyer and trustee who has been appointed to represent their interests in the tangled scandal. As claims flow in from thousands of victims, Mr. Picard and his legal team are quietly making life-shaping decisions every day. They decide who will be paid quickly, who will be paid eventually, who will not be paid at all, and who will be asked to pay back money they got years ago. It is not a job for the thin-skinned.
“Cold, cold, cold,” one writer said of Mr. Picard in an open letter on a website. “Get off your false moral high ground and pay already,” another demanded, in comments posted on The New York Times website.
A third critic, a lawyer and Madoff victim named Helen Davis Chaitman, complained that her clients “have been forced to go on welfare, use food stamps, and sell their homes for a fraction of what they are worth” because claims were being paid too slowly.
“He’s standing in the middle of a whirlwind of emotion and has to act like Solomon,” said Kenneth Feinberg, who ran the federal compensation fund for victims of the 9/11 terrorist attacks and perhaps has the best idea of what the Madoff trustee’s job entails. Like Mr. Feinberg in his day, Mr. Picard must work both in public— primarily in the federal courts in Manhattan— and in private, at the offices of Baker Hostetler in an Art Deco office tower in Rockefeller Center. His public work has made headlines: Seeking to recover more than $10.1 billion, Mr. Picard has sued several prominent Madoff victims, accusing them of being willing beneficiaries of the fraud. He has settled with two offshore hedge funds and gathered a total of $1.25 billion for victims, so far. And he has created a hardship program to speed compensation to victims facing serious financial emergencies, like the loss of medical care or foreclosure. In the first two weeks of that program, 59 out of 144 hardship requests have been approved. Until now, the most demanding and delicate part of Mr. Picard’s work— creating a process for determining who will get up to $500,000 in upfront compensation— has been done largely out of the public eye. Mr. Picard could defend the need for privacy. He was working in a crime scene and sharing records with law enforcement. But with the claims-paying machine finally in shape— and approaching a cruising speed of nearly one hundred cases a week— Mr. Picard agreed to talk publicly about how it operates. “It has taken us awhile to get to this point,” he acknowledged. “But I think we are getting into a rhythm now where we can move things along more quickly.”
As recently as 17 April, only thirty claims had been processed, out of more than 8,800 filed. By Thursday night, with more than fifty people now working on the process, that number was 251, up from 139 ten days ago, according to Mr. Picard’s team.
The pipeline begins at a Dallas center operated by AlixPartners, a corporate consultant that is providing logistical and administrative support. About ten claims arrive each day, but Todd Brents, the director of the center, said his staff was bracing for a surge as the 2 July filing deadline approaches. Each customer’s claim is entered into a central database that allows lawyers and investigators in several locations to work simultaneously. It must be matched against the account history that the trustee’s team has reconstructed from the records found in Mr. Madoff’s offices. Records from before 1996 are on microfilm, which must be printed and scanned into the computers. Bank records go back only seven years. It can be painstaking work.
On problematic claims, Mr. Picard may then call in forensic experts at FTI Consulting, based in West Palm Beach, Florida, to investigate whether an account is tied to Madoff family members or other insiders, for example.
The claim is also reviewed online by staff at the Securities Investors Protection Corporation, the industry-financed agency chartered by Congress to oversee brokerage firm failures. After all, Mr. Picard is spending SIPC’s money. While bankruptcy trustees and their expenses are ordinarily paid from the debtor’s estate, SIPC is paying all the bills in the Madoff liquidation, using money collected from member brokerage firms, not from taxpayers or creditors. The agency also pays up to $500,000 in upfront compensation to eligible customers, who must otherwise wait for reimbursement of additional losses until they can divide the assets Mr. Picard recovers through litigation.
As of Thursday, Mr. Picard had verified customer losses totaling $759.5 million in claims. Most applicants so far have qualified for the maximum benefit, bringing SIPC’s total commitment to $122.1 million. But the decisions don’t satisfy everyone— not by a long shot. Victims who invested through feeder funds are not eligible for SIPC coverage, but think they should be. Although he almost certainly must turn them down, Mr. Picard has encouraged them to file claims anyway in case the courts side with them after the ironclad filing deadline has passed. And many victims, like Ms. Chaitman, are fiercely disputing the formula Mr. Picard is using to measure claims. They say that losses should be based on the last account statement received by victims before the fraud collapsed, which totaled almost $65 billion.
But those final balances are the result of nonexistent investments and fictional profits. Mr. Picard and SIPC say they must therefore limit claims to the difference between the cash paid in and taken out of an account. There is the widespread fear among some— unfounded, Mr. Picard says— that he will sue struggling charities or people of limited means for money they withdrew in the past but no longer have. With SIPC paying the bills, clawbacks will be pursued only if there is a reasonable prospect of a significant recovery, he said.
The best way for Mr. Picard to tame the ferocious criticism is to get as much money as possible into victims’ hands quickly. But even if he does that, he should not expect applause, warned Mr. Feinberg, the former special master for the 9/11 fund. “I told my staff at the fund: with this kind of pain, don’t expect a ‘thank you,’ don’t expect a ‘well done,’ ” he said. “The idea that they’re going to be grateful, to be satisfied? Not in this life.”