Ponzi - Avoidable Transactions Statute

[brett]

I seem to recall in reading about a similar situation that there was some sore of time limit on this. The intervening time between when the subscriber actually rec'd the interest/dividend, whatever and the time the program went into administration.

[JRon]

This is a serious situation so don’t ignore it. The lawyers working on behalf of the investors who lost money have a duty to get back as much as possible, but they also have the ability to negotiate. You need to get a lawyer to negotiate this. As the trust owes the money it’s possible the trust will only have to pay back what it can, which is the $5,000 remaining. Please keep this thread alive with updates as you present an interesting twist that I have not heard of before.

[VungTau]

Just to clarify a couple things:

- Yes, my brother and I are the trustees, not the executors. My mistake.
- Yes, the 50K is more or less accurate, it may have been a Ponzi but they kept good records. The 50K is money received over and above my dad's original principal.
- The Trust does have a TIN of it's own but somewhere in the process of handling the estate one of our social security numbers was required. I can't remember clearly when that occurred except that my brother used his.

My brother is really concerned that he will be solely liable for the 50K as Trustee, SS# holder and because the letter was addressed to him.

Assuming the 50K request is ligit, as it appears to be, our biggest question is who is liable. That 50K is long gone...

[MC Rider]

I agree with the theory they are looking for low hanging fruit. So ghost them for now.
Find a good lawyer to tell them to pound sand.

[RobbieB]

Hehe, yeah, love to help you guys out but, we already spent it -

[cathy63]

Here's a somewhat similar case: https://www.reuters.com/article/idUK361678461020120229

The Becker brothers inherited their mother's estate, which included a Bernie Madoff investment account. They transferred the account away from Madoff in 2004 and closed the estate in Sept 2006. In Dec 2008 the Ponzi scheme was exposed. The Beckers were sued in Dec 2010 to recover the fictitious profits they unknowingly received from the estate that had been closed more than four years previously. They ended up settling with the trustee and returned the profits minus the fees and estate taxes that had been paid on them. (The Becker's situation was complicated because one brother was the general counsel to the SEC and he actually participated in the discussion about how to compensate the Madoff investors, so he ended up under investigation for conflict of interest, was grilled by Congress, etc.)

A judge had actually ruled in another case that the Madoff bankruptcy trustee couldn't go after fictitious profits that were received more than 2 years before the fraud was exposed, and that ruling was under appeal at the time of the settlement. The supreme court eventually declined to hear the final appeal, so the ruling stood, and the Beckers probably wouldn't have been forced to return the profits from their mother's account had they not already settled the earlier case.

As others have said, you definitely need to consult a lawyer, but if the recovery effort is coming from a bankruptcy trustee, you can at least ask your attorney about the Madoff case and whether the two year window could apply to you. Your attorney can also propose a smaller settlement and see what the trustee will accept.

[JoeWras]

Quote:

Originally Posted by Gumby Under certain circumstances, and depending on the jurisdiction, you cannot support the cause of action unless you have first made demand on the other party. ...<snipped>... From that, you can guess that the first demand is often just a test of the waters, to see if you'll bite, and that it is usually not an all or nothing proposition. In any event, you should only communicate with the other side through your lawyer, with whom you should speak soon.

Thanks Gumby! I see there are many reasons behind such letters. My take away from your great description based on your legal experience is they shouldn't just be ignored, yet they can also be a starting point for settling on a compromise. In most cases, you are gonna need a lawyer, if nothing more for advice. OP definitely falls into this category.

Someday I will tell my "Lawyer Letter" story because it has an ER element to it. But I still need time to pass. It turned out well, no damages against me. No drawn out litigation. It was resolved in a few weeks. It got my attention, and it wasn't pleasant. I did lose 10 lbs over the worry though.

[lereh892]

You have a moral obligation to claw back as much as you can and return it. The people on the backend were defrauded and possibly their finances ruined. You are in possession of "stolen goods" Just my opinion.

[JohnRM]

I am not a lawyer, but I seem to recall, at least in this state, there is a set amount of time for making claims against an estate, and once the estate is closed they are out of luck. Probably because of situations like this. Get a lawyer, they will tell you the specifics of your state's probate law, then you will feel comfortable telling them to take a hike.

[sengsational]

Personally, I'd ignore them until they filed suit. Filing is cheap for them, so they might do it. Actually taking you to court is not cheap, but as mentioned, there's lots of time for talking before you go before the judge. If they file a suit, that's when I'd get a lawyer, but not to fight, just to write a letter telling them they're barking up the wrong tree, but you'd see them in court if they pursued. They will probably look at the can of worms and think "we'd spend more than $50K trying to collect" and move on to bigger fish.

[MC Rider]

Tell them to pound sand if you hear anything else. I think I'd file the letter but not respond.

[brett]

Quote:

Originally Posted by sengsational Personally, I'd ignore them until they filed suit. Filing is cheap for them, so they might do it. Actually taking you to court is not cheap, but as mentioned, there's lots of time for talking before you go before the judge. If they file a suit, that's when I'd get a lawyer, but not to fight, just to write a letter telling them they're barking up the wrong tree, but you'd see them in court if they pursued. They will probably look at the can of worms and think "we'd spend more than $50K trying to collect" and move on to bigger fish.

This is exactly what we would do. Ignore the letter. Don't bother engaging a lawyer until you know they are serious and not simply fishing.

[OverThinkMuch]

Quote:

Originally Posted by RobbieB Hehe, yeah, love to help you guys out but, we already spent it -

Oddly enough, I think going after the homeless beneficiary could be more difficult than the one that passed away. I hope OP mentions both to their lawyer, since that could lower the other side's expectations.

[Bryan Barnfellow]

Quote:

Originally Posted by lereh892 You have a moral obligation to claw back as much as you can and return it. The people on the backend were defrauded and possibly their finances ruined. You are in possession of "stolen goods" Just my opinion.

Thanks for this breath of fresh air. The moral position seems to be missing in this discussion.

-BB

[pb4uski]

Quote:

Originally Posted by lereh892 You have a moral obligation to claw back as much as you can and return it. The people on the backend were defrauded and possibly their finances ruined. You are in possession of "stolen goods" Just my opinion.

If the distribution of the trust's assets occurred after the ponzi scheme was made public then you might have a valid point that the trustee should have considered a potential clawback obligation before distributing the trust's assets to the 7 beneficiaries.

If not, then the trustee did his job properly... he paid all of the known debts of the lifetime benefiary of the trust and then distributed the remaining assets (other than the $5k) to the beneficiaries of the trust... so if anyone is in possession of "stolen goods" it would be the 7 beneficiaries.

If the attorney wants to chase the 7 beneficiaries to clawback any of the gains embedded in the distributions that the beneficiaries received then the attorney is welcome to do so

[OldShooter]

Quote:

Originally Posted by lereh892 You have a moral obligation to claw back as much as you can and return it. The people on the backend were defrauded and possibly their finances ruined. You are in possession of "stolen goods" Just my opinion.

Life is not fair. The fact that the OP's father was lucky enough to get out of the scheme before it collapsed does not make him a criminal.

BTW, you are probably in possession of stolen goods too -- the land under your house was probably stolen from the Indians. Do you have a moral obligation to correct this?

[Gumby]

That's why we are fortunate to have laws and court systems to adjudicate these cases, so that no one person's sense of morality controls what happens. It may come as a shock to some, but legal and illegal is not synonymous with right and wrong, and never has been.

[JoeWras]

So this means I can't buy a house with the $500,000 bank error?

I can't buy booze with the $50 ATM error?

Darn!

[pb4uski]

Quote:

Originally Posted by Gumby That's why we are fortunate to have laws and court systems to adjudicate these cases, so that no one person's sense of morality controls what happens. It may come as a shock to some, but legal and illegal is not synonymous with right and wrong, and never has been.

+100

[Walt34]

Quote:

Originally Posted by JoeWras So this means I can't buy a house with the $500,000 bank error? I can't buy booze with the $50 ATM error?

Well, you can, but you're smart to wait until the statute of limitations has run it's course. Either that or move to Bolivia or someplace without an extradition treaty with the U.S. You could probably get away with claiming you didn't notice the extra $50 from the ATM, but trying that with a half million would be a bit of a stretch.

When I was working I had several cases where a bank or a depositor did make an error and deposit funds to the wrong account. It does happen. Normally it's a non-issue because the recipient has sense enough to realize that there's NSTAAFL and either calls the bank or just waits to see if anyone notices, then says "Oh, sorry!". But occasionally there's someone who thinks it's "manna from heaven" and spends it, then gets a rude awakening when reality intrudes and warrants are issued if they can't pay it back.