Interesting Legal Case In New York

[FIRE'd@51]

A man in New York is suing his ex-wife to have their divorce agreement revised due to money lost in the Madoff Ponzi scheme. If he wins, this could potentially have far-reaching effects on other contracts.

 

[Moemg]

A man in New York is suing his ex-wife to have their divorce agreement revised due to money lost in the Madoff Ponzi scheme. If he wins, this could potentially have far-reaching effects on other contracts.

After I finished laughing I would pack up & move to a remote location .

 

[donheff]

This one is insane. Why is it even in court? It isn't like the settlement itself forced him to use Madoff. He chose to stay with Madoff, she chose to go her own way. He lost, she won -- live with it. I could see the argument if this was an alimony situation. E.g. if the guy had to pay his wife $1M/year and then lost all his money. But these two split the dough and went their own ways.

 

[Texas Proud]

Very interesting.....


One of the issues that I have is that the trust lawyer is going after people who did pull out their money... so let's say that at the time of the divorce all the money was pulled out and distributed to each..

Now, the lawyer sues to get the money over and above what they had put into the account... (not sure if he has won any lawsuits, but I think some people has paid him alread)... who would he go after? Or would he go after both of them...

IOW, I would think that there is a 'fairness' issue here that is hard to decide...

 

[FIRE'd@51]

It isn't like the settlement itself forced him to use Madoff. He chose to stay with Madoff, she chose to go her own way. He lost, she won

Simkin is arguing that the value of the Madoff account when they split it at the time of the divorce was not what they thought, so she got half of an incorrectly valued asset. From the article:

But once the Madoff empire collapsed, Mr. Simkin began arguing that he and Ms. Blank were mistaken about the existence of the account. "There was in fact no account and no securities or other assets," wrote Mr. Simkin's lawyers in a recent filing. "There was only a Ponzi scheme of unprecedented size and duration."

 

[Gumby]

As I read the article, they split the real property. She got the apartment in the City and he got the house in Scarsdale. Suppose she sold the apartment as soon as the decree was final and got out at the peak of the market, while he held on to the house and saw it decrease drastically in value. Does he get to reopen the divorce decree for that? I don't see much difference.

 

[FIRE'd@51]

As I read the article, they split the real property. She got the apartment in the City and he got the house in Scarsdale. Suppose she sold the apartment as soon as the decree was final and got out at the peak of the market, while he held on to the house and saw it decrease drastically in value. Does he get to reopen the divorce decree for that? I don't see much difference.

I'm not a lawyer, but it seems to me that the difference between Simkin's argument and the one you are making is that Simkin is claiming that the Madoff portfolio was, in reality, worthless at the time the divorce settlement was reached (although no one knew it at that time). That is different from holding on to a valuable asset and watching its value decline going forward due to normal market forces.

 

[SteveR]

I'm not an attorney and don't play one on TV but even I can see this is a crock of legal toro crappo.

The key paragraph for me from the article is:
"Just as she would not have benefited from any increase in the value of the account, she should not have to bear the burden of its loss," she wrote. "Steven received exactly what he bargained for. He alone took on the risk that he might not be able to recoup his investment."

Having been through a divorce myself I can see the need for closure at the time of the divorce. Future value of assets should not enter into the calculations at the time of the divorce just as future earnings or losses should not be considered because they did not exist at the time of the divorce.

The fact that his law firm is doing the litigation gratis is the icing on the cake. This is litigation for the sake of it and should not tie up the legal system one second longer but being NY I can see this going on for a long long time.

 

[MichaelB]

This case is not about the law, it is about the lawyers.

 

[Gumby]

I'm not a lawyer, but it seems to me that the difference between Simkin's argument and the one you are making is that Simkin is claiming that the Madoff portfolio was, in reality, worthless at the time the divorce settlement was reached (although no one knew it at that time). That is different from holding on to a valuable asset and watching its value decline going forward due to normal market forces.

But the Madoff portfolio was not worthless at the time. In fact, its value was established when Mr. Simkin sold off a portion of that investment to pay cash proceeds to his ex-wife. He could have sold the rest of it at the same time and gained cash for himself, but he held on instead. Indeed, he could have taken cash and turned around the next day and invested with Sir Alan "whatever in the hell his name was" or some other scoundrel. We wouldn't feel sorry for him then, would we?

To be fair to Mr. Simkin, it is my understanding that the trustee of the Madoff bankruptcy estate sued those who had cashed out for a portion of the amount they took in order to redistributed some money to those who were later investors or who had never sold. The equities of the situation may require that the former Mrs. Simkin return the same proportion of her proceeds that she would have been required to return if she had cashed out directly, instead of indirectly through Mr. Simkin.

However, I side with those who say a contract is settled and should not be disturbed due to subsequent events, absent truly extraordinary circumstances. If you want to return to my real property hypothetical, what would you say if a tornado wiped out the Scarsdale home two years after the divorce? Would that change your analysis? That event probably would not have been within the contemplation of the Simkins when they split the assets.

 

[Nords]

This case is not about the law, it is about the lawyers.

There's no such thing as bad publicity, especially for lawyers. Everyone loves to talk trash about a vicious litigator while secretly keeping their phone numbers in their "in case of emergency" bailout directory.

It's my understanding that the lawyer(s) will be able to collect on their invoices whether they win or lose...

 

[GregLee]

But the Madoff portfolio was not worthless at the time.

Maybe it would clarify to consider a hypothetical analogous situation where there was a lockbox purported and assumed by all to contain 200 pounds of pure gold, which is later shown to be mere pyrite. Before the box was opened, it was used to settle a large debt. When the box is opened and the fraud revealed, do we count the debt as, nonetheless, still settled? Similarly, suppose a debt was settled using money assumed genuine, but later shown to be counterfeit.

 

[Gumby]

Maybe it would clarify to consider a hypothetical analogous situation where there was a lockbox purported and assumed by all to contain 200 pounds of pure gold, which is later shown to be mere pyrite. Before the box was opened, it was used to settle a large debt. When the box is opened and the fraud revealed, do we count the debt as, nonetheless, still settled? Similarly, suppose a debt was settled using money assumed genuine, but later shown to be counterfeit.

Standard mutual mistake of fact scenarios. But in either of these cases, he could not have cashed out on the day of the divorce. With the Madoff investment, he could (and did, partially)

 

[Texas Proud]

Standard mutual mistake of fact scenarios. But in either of these cases, he could not have cashed out on the day of the divorce. With the Madoff investment, he could (and did, partially)

But as you said, the Madoff trustee is suing people who got more out of the estate than they put in...

You did not answer the question that I posted... what if he DID take all of the money out and split it with his wife... but now the trustee comes along and asks for the 'gains' back... who should pay

IMO, both should pay... because it is a debt that was not known at the time of divorce and it was not addressed in the divorce....


The difficulty would be on the amount... how much of her money should she have to pay?

 

[haha]

But as you said, the Madoff trustee is suing people who got more out of the estate than they put in...

You did not answer the question that I posted... what if he DID take all of the money out and split it with his wife... but now the trustee comes along and asks for the 'gains' back... who should pay

IMO, both should pay... because it is a debt that was not known at the time of divorce and it was not addressed in the divorce....


The difficulty would be on the amount... how much of her money should she have to pay?

Speaking as a man, all of it!

Ha

 

[MichaelB]

There's no such thing as bad publicity, especially for lawyers. Everyone loves to talk trash about a vicious litigator while secretly keeping their phone numbers in their "in case of emergency" bailout directory.

That’s for sure

It's my understanding that the lawyer(s) will be able to collect on their invoices whether they win or lose...

Yes. Like stock brokers, financial advisors, mutual fund and hedge fund managers. It’s no wonder they’re so popular and well respected.

 

[Gumby]

You did not answer the question that I posted... what if he DID take all of the money out and split it with his wife... but now the trustee comes along and asks for the 'gains' back... who should pay

I think I did address your question, at least obliquely. See post #10, second paragraph.

Ultimately, this is what horse races and lawsuits are all about. We know the issues and the arguments on each side. We won't know the outcome until the Court of Appeals rules.

 

[Texas Proud]

I think I did address your question, at least obliquely. See post #10, second paragraph.

Ultimately, this is what horse races and lawsuits are all about. We know the issues and the arguments on each side. We won't know the outcome until the Court of Appeals rules.

Sorry... missed that part..

But that is exactly why I said it was not an easy call to make... I would lean to the return of gain aspect... but then again, there is nothing mentioned about returning money to the Madoff trust... if there is not, then I do think it is to bad for Mr. what's his name....