Irving Picard

Transcription

- HELLO. I'M DAVID COAR, RETIRED DISTRICT AND BANKRUPTCY JUDGE FOR THE NORTHERN DISTRICT OF ILLINOIS. WELCOME TO OUR PROGRAM ABOUT COOPERATION AND COORDINATION BETWEEN DISTRICT AND BANKRUPTCY JUDGES WHO FIND THEMSELVES WITH SIMULTANEOUS CASES INVOLVING ASSET FORFEITURE AND BANKRUPTCY. OFTEN SUCH CASES ARISE FROM CRIMINAL PROSECUTION OF A PONZI SCHEME AND THE BANKRUPTCY FILING BY THE LEGITIMATE BUSINESS THROUGH WHICH THE SCHEME WAS OPERATING. NOT ALL OF THESE CASES INVOLVE PONZI SCHEMES, BUT THE COMMON ASPECT IS ASSET FORFEITURE BY THE DEPARTMENT OF JUSTICE. TO DISCUSS THIS WITH ME ARE SEVERAL INDIVIDUALS WHO HAVE EXPERIENCE IN SOME OF THE MOST INFAMOUS CASES, WHO WILL HELP US GAIN INSIGHT AND CONFIDENCE IN DEALING WITH SUCH CASES, LARGE AND SMALL. FIRST, DISTRICT JUDGE ANN D. MONTGOMERY FROM THE DISTRICT OF MINNESOTA WHO DEALT WITH THE THOMAS PETTERS CASE; BANKRUPTCY JUDGE MARTIN GLENN FROM THE SOUTHERN DISTRICT OF NEW YORK, WHO DEALT WITH THE MARC DREIER CASE; IRVING PICARD, TRUSTEE FOR THE SECURITIES INVESTOR PROTECTION CORPORATION, WHO CONTINUES TO LITIGATE CASES INVOLVING THE BERNARD MADOFF PONZI SCHEME; AND SHARON COHEN LEVIN, WHO IS THE CHIEF OF ASSET FORFEITURE UNIT-- CHIEF OF THE ASSET FORFEITURE UNIT FOR THE SOUTHERN DISTRICT OF NEW YORK. WELCOME TO EACH OF YOU, AND THANK YOU FOR BEING WITH US TODAY. MR. PICARD, LET ME ASK YOU ABOUT THE PLAYERS IN BANKRUPTCY. WHO ARE THEY, AND WHAT ARE THEIR ROLES? - THE PLAYERS ARE-- IF IT'S A BANKRUPTCY CASE, YOU HAVE THE U.S. TRUSTEE, WHO PROBABLY WOULD BE CALLED UPON TO APPOINT A TRUSTEE, OFTEN FROM A PANEL IF IT'S A CHAPTER 7 CASE. BUT OTHERWISE, IN A CHAPTER 11, WOULD APPOINT A TRUSTEE. AND IN...YOU COULD HAVE A STATE COURT OR A FEDERAL COURT RECEIVERSHIP, AN SEC-TYPE RECEIVERSHIP, FOR EXAMPLE, WHERE THE JUDGE WOULD BE APPOINTING A RECEIVER. THAT WOULD BE A FEDERAL OR A STATE COURT JUDGE. OR YOU WOULD HAVE, AS IN MY CASE, A LIQUIDATION OF THE SECURITIES INVESTOR PROTECTION ACT, WHERE THE SECURITIES INVESTOR PROTECTION CORPORATION RECOMMENDS TO THE JUDGE WHO SHOULD BE THE TRUSTEE, AND THEN THE TRUSTEE GETS APPOINTED. AND THEN ONCE YOU GET INTO THE CASE, YOU HAVE, OF COURSE, THE DEBTOR, WHICH COULD BE AN INDIVIDUAL OR A CORPORATION OR SOMETIMES A COMBINATION. YOU HAVE...OF COURSE, THERE ARE EMPLOYEES, AND IF IT'S A BUSINESS AND A LOT OF VENDORS, YOU HAVE VICTIMS. AND THERE MAY BE OTHER ACTIVITY GOING ON THAT BEARS SOME RELATIONSHIP, LIKE THERE COULD BE CLASS-ACTION CASES THAT ARE ALREADY ONGOING. AND OF COURSE, THE PRIMARY... A PRIMARY PLAYER WOULD BE A JUDGE, WHETHER IT'S THE DISTRICT JUDGE OR A BANKRUPTCY JUDGE. - MS. LEVIN, WHAT IS ASSET FORFEITURE? - WELL, ASSET FORFEITURE IS A LEGAL PROCEDURE WHERE THE GOVERNMENT REMOVES THE PROCEEDS OF CRIME OR PROPERTY USED IN FURTHERANCE OF CRIME, AND IT'S A MANDATORY PART OF MOST CRIMINAL CASES, AND IT'S FORFEITURES ORDERED AT SENTENCING. IN ADDITION, THERE ARE ACTUALLY-- THE GOVERNMENT HAS THE ABILITY TO BRING IN... BRING IN REM CIVIL ACTIONS AGAINST CRIME PROCEEDS OR PROPERTY USED IN FURTHERANCE OF CRIME BY THEMSELVES OR IN COORDINATION WITH CRIMINAL PROSECUTIONS. AND ONE OF THE MOST IMPORTANT PURPOSES OF ASSET FORFEITURE IS TO GATHER AND SEIZE THE ASSETS SO THAT THEY CAN BE USED FOR VICTIM COMPENSATION. - JUDGE MONTGOMERY, WHAT WAS THE CASE THAT YOU WERE INVOLVED IN? - I WAS INVOLVED IN THE THOMAS PETTERS CASE. THOMAS PETTERS WAS A... MAYBE NOT A HOUSEHOLD WORD, BUT A VERY WELL KNOWN PERSON IN MINNESOTA, AN ENTREPRENEUR WHO HAD STARTED SELLING ELECTRONICS WHEN HE WAS IN COLLEGE AND HAD ALLEGEDLY BUILT AN INCREDIBLE EMPIRE OF A NUMBER OF PETTERS-RELATED BUSINESSES, ULTIMATELY INCLUDING POLAROID CORPORATION AND SUN COUNTRY AIRLINES. SO HE HAD BEEN SEEN AS A VERY, VERY SUCCESSFUL ENTREPRENEUR AND BUSINESS DEVELOPER. - AND JUDGE GLENN, WHAT CASE WERE YOU INVOLVED IN? - I WAS INVOLVED IN THE BANKRUPTCY OF DREIER LLP, A 200-PLUS LAWYER FIRM, THE UNDERLYING CHAPTER 11 BANKRUPTCY, AND THE INDIVIDUAL CHAPTER 7 BANKRUPTCY OF MARC DREIER HAD BEEN PENDING BEFORE MY COLLEAGUE, JUDGE STUART BERNSTEIN. AFTER THE CHAPTER 11 TRUSTEE HAD FILED A GROUP OF FRAUDULENT CONVEYANCE ADVERSARY PROCEEDINGS AND MOTIONS TO DISMISS HAD BEEN MADE, FOUR OF THEM WERE TRANSFERRED TO ME FOR A DECISION ON THE MOTIONS TO DISMISS. AND THAT WAS MY FIRST FORAY INTO THE AREA OF CRIMINAL FORFEITURE. - MS. LEVIN, WHAT HAPPENS IN... AS A PRACTICAL MATTER IN THESE CASES? YOU'RE OUT, ON BEHALF OF THE GOVERNMENT-- REMOVING I THINK WAS THE WORD YOU USED--PROPERTY. BUT THERE IS A TRUSTEE OR A RECEIVER OUT THERE WHO IS ALSO REMOVING PROPERTY. WHAT HAPPENS WHEN THE TWO WORLDS COLLIDE? - WELL, I MEAN, THAT HAPPENS MORE AND MORE FREQUENTLY, PARTICULARLY IN LARGE FINANCIAL FRAUD CASES OR LARGE FRAUD CASES. AND THE GOVERNMENT... THE POWERS THAT WE HAVE ARE WE'RE ABLE TO SEIZE OR RESTRAIN DIRECTLY TRACEABLE CRIME PROCEEDS. AND UNDER ASSET FORFEITURE LAW, TITLE VESTS IN THE UNITED STATES AT THE TIME OF THE COMMISSION OF THE CRIME. SO IT, YOU KNOW, IT DOESN'T-- THAT PROPERTY DOESN'T BECOME PROPERTY OF THE BANKRUPTCY ESTATE. SO THE GOVERNMENT'S RESPONSIBILITY IS TO GO AROUND AND TO SEIZE OR TO FREEZE THAT PROPERTY SO IT'S AVAILABLE FOR FORFEITURE AND FOR RESTITUTION TO BE USED TO COMPENSATE VICTIMS. AND IT HAPPENS A LOT THAT IN THOSE CIRCUMSTANCES, WE RUN INTO A BANKRUPTCY TRUSTEE WHO ALSO HAS SIMILAR RESPONSIBILI-- SIMILAR TYPE OF RESPONSIBILITIES. AND WHAT WE TRY AND DO IS TRY AND WORK IN COOPERATION, IN COORDINATION WITH A BANKRUPTCY TRUSTEE. SOMETIMES THAT'S SOMEWHAT CHALLENGING, BUT, YOU KNOW, IT'S SOMETHING THAT WE, YOU KNOW, WILL STRIVE TO DO. - NOW, TELL ME ABOUT THIS VESTING IN THE GOVERNMENT AT THE TIME OF THE CRIME. THE GOVERNMENT DOESN'T KNOW ABOUT THE CRIME AT THE TIME USUALLY. SO HOW DOES THAT WORK? - WELL, IT'S A LEGAL FICTION. IT'S THAT THE CRIME PROCEEDS, ONCE THE CRIME IS COMMITTED AND THE DEFENDANT OBTAINS PROPERTY, IT BECOMES U.S. GOVERNMENT PROPERTY. TITLE VESTS IN THE UNITED STATES AT THE TIME OF THE CRIME, BUT THE PROPERTY DOESN'T ACTUALLY TRANSFER UNTIL THE DEFENDANT IS CONVICTED AND SENTENCED. SO THERE'S SORT OF AN AMORPHOUS PERIOD WHERE IT BECOMES-- IT IS U.S. PROPERTY, BUT UNLESS SOMEONE BRINGS A PROSECUTION, THERE'S NO ONE TO ACTUALLY TAKE POSSESSION OF IT. AND IT'S A LEGAL FICTION THAT ENABLES THE GOVERNMENT TO OBTAIN PROPERTY FROM THIRD PARTIES-- FROM THE DEFENDANT OR FROM THIRD PARTIES THAT A DEFENDANT WOULD TRANSFER THE PROPERTY TO. THE FORFEITURE STATUTES WEREN'T WRITTEN IN RECOGNITION OR WEREN'T WRITTEN IN CONJUNCTION WITH THE BANKRUPTCY LAWS. SO THAT IS OFTEN A CIRCUMSTANCE WHERE THEY ACTUALLY RUN HEAD INTO EACH OTHER. AND THE POSITION THAT MOST COURTS HAVE COME TO IS THAT PROPERTY ISN'T PROPERTY OF THE BANKRUPTCY ESTATE, BUT THAT THE... YOU KNOW, THERE ARE OTHER PROPERTIES OF THE DEFENDANT OR HYBRID PROPERTIES THAT, YOU KNOW, THAT ARE POTENTIALLY PROPERTY OF THE ESTATE. - MR. PICARD, HOW DOES THAT PLAY OUT FROM THE POINT OF VIEW OF A TRUSTEE OR RECEIVER? - TWO WAYS. THE FIRST WAY IS THE ONE WHERE ALL THE PROPERTY HAS BEEN SEIZED BY THE GOVERNMENT, OR FORFEITED, AND THEN YOU'RE THE TRUSTEE OF, IN EFFECT, A NO-ASSET ESTATE. BUT THERE ARE OTHER CASES, AS SHARON REFERRED TO, WHERE THERE ARE OTHER PROPERTIES. IN THE MADOFF CASE, FOR EXAMPLE, WE WORKED OUT AN ARRANGEMENT WITH HER OFFICE THAT... THEY TOOK PERSONAL ASSETS, WHERE WE KEPT WHAT WE CALL THE BUSINESS ASSETS. AND OUR CASE IS A LIQUIDATION. IT'S NOT AN OPERATING BUSINESS. BUT WE WENT ON, AND WE WERE ABLE TO LIQUIDATE THE... THE BUSINESS ASSETS. THERE WAS A LEGITIMATE PART OF THE BUSINESS, WHICH WE SOLD AFTER AN AUCTION. AND SO WE WERE ABLE TO DO THAT. AND THERE ARE OTHER ASSETS IN THE BUSINESS THAT WE HAVE BEEN SELLING AND WILL CONTINUE TO SELL. AND WE HAVE WORKED OUT VERY COOPERATIVELY WITH HER OFFICE IN SORT OF DETERMINING WHAT BELONGS IN WHICH CATEGORY. THERE WAS A PERSONAL ASSET, FOR EXAMPLE, THAT WAS AN AIRPLANE, BUT IT WAS IN A... IN A CORPORATE ENTITY. AND WE HAD MADE SOME WORK-- DONE SOME WORK ON TRYING TO SELL THE PLANE. AND WE WENT, AND WE EXPLAINED WHAT WAS GOING ON, AND THEY SAID, "WELL, YOU'RE ALREADY AHEAD OF THE GAME "WITH WHAT YOU'RE DOING, SO WHY DON'T YOU CONTINUE THE JOB?" WE ALSO SOLD AN AUTOMOBILE, A JAMES BOND KIND OF AUTOMOBILE, AN ASTON MARTIN, AND A NUMBER OF OTHER ASSETS LIKE THAT, WHERE WE JUST SAT DOWN AND SAID, "THIS IS WHAT WE'RE DOING," AND IN OTHER CASES, THEY WERE AHEAD OF US IN DOING IT, AND WE JUST SAID, "WELL, THEN YOU FINISH." SO IT... WHAT IT REALLY TAKES, AND I THINK YOU'LL HEAR MORE ON THIS, IS COMMUNICATION AND TALKING AMONG THE PARTIES-- THE U.S. ATTORNEY'S OFFICE, THE TRUSTEE, THE RECEIVER, AND IN SOME CASES, OF COURSE, YOU NEED THE BANKRUPTCY JUDGE OR THE DISTRICT JUDGE TO ENCOURAGE THAT. - LET'S STICK WITH THAT FOR A SECOND. MS. LEVIN, I ASSUME THAT WHEN THE GOVERNMENT FORFEITS PROPERTY, COLLECTS THIS PROPERTY, AND THEN THERE'S AT SOME POINT A FORFEITURE, THAT THAT-- DOES THAT GO TO THE BENEFIT OF THE GOVERNMENT, OR DOES IT GO TO THE BENEFIT OF VICTIMS, OR WHO GETS THE PROCEEDS? - TECHNICALLY, WHEN PROPERTY IS FORFEITED, IT GOES TO THE GOVERNMENT AND THE UNITED STATES MARSHALS SERVICE. TITLE IS TRANSFERRED TO THE UNITED STATES, AND THE UNITED STATES MARSHALS SERVICE, IN MOST... IN MOST CASES, WILL LIQUIDATE THE PROPERTY. THEY'LL SELL IT. THEY HAVE WEBSITES WHERE THEY DO IT. THEY HIRE THIRD PARTIES TO SELL IT. THEY SELL IT. THEY TURN IT INTO CASH. AND THEN IF THERE ARE VICTIMS IN THE CASE, THE PRIORITY IS VICTIMS COME FIRST. IF THERE ARE VICTIMS, THEN THE MONEY IS GIVEN OUT TO VICTIMS IN ONE OF TWO METHODS. ONE, IF IT'S PART OF A CRIMINAL CASE AND THE DISTRICT COURT JUDGE ENTERS A RESTITUTION ORDER, WHICH LISTS THE VICTIMS AND THEIR LOSS AMOUNTS, THE MONEY IS TRANSFERRED TO THE CLERK OF THE COURT, WHERE THE CLERK OF THE COURT WILL DISTRIBUTE THE MONEY TO THE VICTIM, THE FORFEITED FUNDS TO THE VICTIMS UNDER THE TERMS OF THE COURT'S RESTITUTION ORDER. IF THERE ISN'T A RESTITUTION ORDER ENTERED IN A CRIMINAL CASE, EITHER BECAUSE FOR SOME REASON, THERE...THERE ISN'T A CRIMINAL CASE OR BECAUSE IN SOME CASES, LIKE THE MADOFF CASE OR ANOTHER CASE, THE ADELPHIA CASE, THERE'S BEEN A FINDING BY THE COURT THAT ENTERING A RESTITUTION ORDER WOULD BE TOO COMPLICATED AND WOULD UNDULY DELAY SENTENCING, THEN IT COULD BE DONE THROUGH ANOTHER PROCEDURE BY THE DEPARTMENT OF JUSTICE, THE PETITION FOR A MISSION PROCESS. BUT AGAIN THE MONEY IS GIVEN OUT TO THE VICTIMS ESSENTIALLY BASED UPON THEIR LOSS AMOUNTS. THERE'S ALWAYS ISSUES IN HOW THAT'S CALCULATED, BUT BASED UPON THEIR LOSS AMOUNTS, AND IF THERE'S NOT ENOUGH MONEY, ON A PRO RATA BASIS TO ALL THE VICTIMS. - MR. PICARD, IF THE MONEY IS GOING TO GO TO THE VICTIMS ANYWAY, WHAT DIFFERENCE DOES IT MAKE WHETHER THE TRUSTEE OR RECEIVER COLLECTS THE MONEY AND DISTRIBUTES THE PROCEEDS OR THE GOVERNMENT COLLECTS THE MONEY AND DISTRIBUTES THE PROCEEDS? - WELL, YOU'RE REALLY TALKING ABOUT THE REMISSION PROCESS. IT IS WHERE THAT REALLY COMES...COMES OUT. I THINK IT DEPENDS. IN...IN A BANKRUPTCY CASE, IF THE TRUSTEE HAS HAD A CLAIMS PROCESS AND AS IN MY CASE, WE'VE BEEN ABLE TO MAKE INTERIM DISTRIBUTIONS BECAUSE OUR STATUTE PROVIDES FOR THAT. UM...YOU KNOW, SOMETIMES WE... THE TRUSTEE IN THIS KIND OF CASE WOULD HAVE ALL THE INFORMATION THAT'S NECESSARY. AND IT PROBABLY... EFFICIENCY WOULD PROBABLY SUGGEST THAT THE TRUSTEE SHOULD DO IT. ON THE OTHER HAND, SOMETIMES THERE ARE ISSUES. FOR EXAMPLE, IN THE BANKRUPTCY CASE, THE FUNDS MAY BE DISTRIBUTED TO ALL GENERAL CREDITORS AND NOT ALL GENERAL CREDITORS MAY BE DEEMED VICTIMS BY THE DEPARTMENT OF JUSTICE. SO THEREFORE, THEIR DISTRIBUTION SYSTEM WOULD BE A LITTLE DIFFERENT. AND THAT, OF COURSE, COULD RAISE A PROBLEM FOR A TRUSTEE WHO'S A FIDUCIARY. IF YOU'RE WEARING TWO HATS AND WITH ONE HAT YOU'RE DOING IT ONE WAY AND ONE HAT YOU'RE DOING IT ANOTHER WAY, THERE'S A TENSION AND A PROBLEM. SO, FOR EXAMPLE, IN THE MADOFF CASE, WE HAD SOME LONG DISCUSSIONS ABOUT WHETHER I COULD DISPERSE THE MONEY. IT TURNED OUT, FOR...FOR CONFLICT AND ETHICS ISSUES, I FELT I COULDN'T DO IT. BUT WE ARE WORKING VERY CLOSELY WITH THEIR... WITH THE PERSON WHO IS APPOINTED TO DISPERSE THE FORFEITURE FUNDS. IN THE MADOFF CASE, WE MADE ALL OUR CLAIMS MATERIAL AND ALL THE BACKUP AND EVERYTHING AVAILABLE TO TRY TO ASSIST IN MAKING THE... THE DISTRIBUTION ASPECT OF IT MOVE SMOOTHLY. - WE'VE HEARD FROM MS. LEVIN AND MR. PICARD THAT THEY ARE TALKING TO EACH OTHER, THAT THERE'S SOME DEGREE OF COOPERATION. IS THE COURT INVOLVED IN THAT, JUDGE MONTGOMERY? - WELL, I THINK THE COURT MUST BE AND HAS TO ENCOURAGE IT FROM THE VERY BEGINNING. YOU KNOW, IT BECAME VERY CLEAR TO ME, WITH THE BREADTH OF THE PETTERS FRAUD AND THE NUMBER OF VICTIMS, THAT WE WERE IN KIND OF A KATRINA-LIKE MENTALITY IN A FINANCIAL WORLD, THAT THERE WERE PEOPLE OUT THERE THAT HAD BEEN VICTIMIZED, WIDOWS AND ORPHANS AS WELL AS HEDGE FUNDS, BUT PEOPLE HAD VARIOUS RIGHTS AND VERY STRONG FEELINGS. I TRIED TO KEEP MY EYE ON THE BALL, AND FOR ME THAT MEANT TRYING TO MAKE CERTAIN THAT ALL THE PEOPLE THAT HAD BEEN HURT BY THIS AND ALL THE JOBS THAT WERE AT STAKE AS WELL AS FINANCIAL REPERCUSSIONS... THAT WE WOULDN'T DO ANY HARM. WE TRIED TO FREEZE EVERYTHING, BUT I DIDN'T WANT THE PROCESS TO BE A SECOND VICTIMIZATION OF THE VICTIMS. SO I WANTED TO MAKE SURE THAT WE WERE EFFICIENT. I THOUGHT WE NEEDED TOP-QUALITY LEGAL HELP IN THE APPOINTMENTS OF RECEIVERS AND TRUSTEES AND SUCH. BUT THAT IT WAS IMPORTANT THAT THERE NOT BE NEEDLESS WASTE OF ENERGIES. I WANTED TWO THINGS-- TO MAXIMIZE THE RECOVERY TO THE VICTIMS BY NOT HAVING THE PROCESS OVERLAPPING AND DUPLICATING EACH OTHER'S, AND IT ALSO SEEMED TO ME THAT THERE NEEDED TO BE REAL PUBLIC TRANSPARENCY TO EVERYTHING THAT WAS HAPPENING, AND THAT'S WHY ALL HEARINGS IN MY COURT, EVEN WITH THE APPROVAL OF FEES OF THE RECEIVERSHIP AND SUCH, HAVE BEEN PUBLICLY HELD, AND ANYONE IS THERE TO ATTEND, BECAUSE I THINK WE SHOULD KEEP-- AS JUDGES, WE NEED TO KEEP OUR EYE ON THE PUBLIC PERCEPTION OF THE HANDLING OF THESE MATTERS AS WELL. - JUDGE GLENN, ARE YOU AWARE OF WHAT'S GOING ON BETWEEN THE TRUSTEE AND THE GOVERNMENT, AND ARE YOU INVOLVED IN ANY OF THAT? - JUDGE BERNSTEIN HAS BEEN MOST DIRECTLY INVOLVED IN IT. I HAD THE FORFEITURE ISSUES THAT AROSE, ACTUALLY DEFENSIVELY, IN THE ADVERSARY PROCEEDINGS, WHERE THE DEFENDANTS, IN TRYING TO DEFEND AGAINST THE ADVERSARY PROCEEDINGS BY THE CHAPTER 11 TRUSTEE, ARGUED THAT THIS WAS NOT PROPERTY OF THE ESTATE BECAUSE IT HAD ALREADY BEEN FORFEITED. BUT ONE OF THE THINGS THAT YOU SEE, AND I THINK IT WAS A COMPLICATION IN DREIER, AND IT IS IN MANY OF THE CASES. I MEAN, DREIER LLP WAS A LEGITIMATE LAW FIRM. IT HAD CLIENTS, AND IT HAD OVER 200 LAWYERS. SO MUCH OF THE MONEY THAT HAD RUN THROUGH THE LAW FIRM WERE LEGITIMATE PROCEEDS OF THE ONGOING BUSINESS. SEPARATING OUT WHAT WERE PROCEEDS DERIVED FROM THE CRIME VERSUS PROCEEDS OF LEGITIMATE BUSINESS ARE A COMPLICATION. SO UNDERSTANDING WHAT ARE ASSETS THAT ARE FORFEITABLE, WHAT ARE ASSETS THAT ARE PART OF THE BANKRUPTCY ESTATE REALLY DOES REQUIRE SOME COOPERATION BETWEEN THE COURTS. SO THAT WAS AN ISSUE THAT'S ALWAYS BEEN FRONT AND CENTER. THE ISSUE THAT SHARON TALKED ABOUT AND THAT IRVING TALKED ABOUT-- THERE ARE THESE POTENTIAL DIFFERENCES BETWEEN VICTIMS OF THE CRIME, WHO ARE ENTITLED TO RESTITUTION UNDER PROVISIONS IN THE CRIMINAL CODE, AND THAT MAY BE DIFFERENT, A DIFFERENT GROUP THAN CREDITORS, WHO ARE ENTITLED TO RECOVER IN THE BANKRUPTCY... IN THE BANKRUPTCY CASE. THE DISTRIBUTION RULES CAN DIFFER. OFTENTIMES, THERE'S SUBSTANTIAL OVERLAP THAT MAY MAKE IT EASIER TO HANDLE DISTRIBUTIONS THROUGH THE BANKRUPTCY PROCEEDING, FOR EXAMPLE. OTHER TIMES, THERE ARE DIFFERENT GROUPS, AND IT MAKES IT MORE COMPLICATED BECAUSE DIFFERENT... DIFFERENT VICTIMS MAY HAVE... OR CREDITORS MAY HAVE A PRIORITY OVER OTHERS. SO SORTING OUT THOSE RULES INVOLVES BOTH THE CRIMINAL PROCEEDING AND THE BANKRUPTCY PROCEEDING. AND SO, ON AN ONGOING BASIS, THE U.S. ATTORNEY'S OFFICE HAS BEEN INVOLVED THROUGHOUT. THEY CERTAINLY FILED A BRIEF WHEN I WAS DEALING WITH THE ADVERSARY PROCEEDINGS ABOUT WHAT THEIR VIEW ABOUT...ABOUT FORFEITURE. - DO YOU HAVE ANY DIRECT CONTACT WITH THE DISTRICT JUDGE WHO'S HANDLING THE CRIMINAL CASE? - YES, AND IT'S JUDGE RAKOFF. CERTAINLY WHEN I HAD TO DECIDE THE MOTIONS TO DISMISS IN THE ADVERSARY PROCEEDINGS, BECAUSE IT NECESSARILY INVOLVED AN INTERPRETATION OF THE FORFEITURE ORDERS THAT JUDGE RAKOFF HAD ENTERED, I WANTED TO BE SURE THAT HE WAS AWARE OF WHAT THE ISSUES WERE THAT WERE PENDING BEFORE ME. AND SO HE AND I SPOKE ABOUT IT, AND I WENT AHEAD AND DECIDED THE MOTIONS AS I DID IN A FAIRLY LENGTHY WRITTEN OPINION THAT DEALT NOT ONLY WITH THE FORFEITURE ISSUES, BUT FRAUDULENT CONVEYANCE ISSUES. SO HE WAS CERTAINLY AWARE OF THAT. BEFORE I GOT INVOLVED IN THE CASE, JUDGE RAKOFF, WHO HAD THE CRIMINAL CASE, JUDGE CEDARBAUM, WHO HAD AN SEC ENFORCEMENT PROCEEDING, AND JUDGE BERNSTEIN, WHO HAD BOTH THE CHAPTER 11 CASE AND THE CHAPTER 7 CASE OF MARC DREIER, HAD A JOINT HEARING, AND THEY HAD COMMUNICATIONS THROUGHOUT. - JOINT HEARINGS. TELL ME ABOUT JOINT HEARINGS. WHAT'S A JOINT HEARING? - EARLY ON IN THE CASE-- AND I THINK SHARON MAY BE ABLE TO SHED MORE LIGHT ON IT-- BUT THERE WAS A JOINT HEARING EARLY ON AFTER THE CHAPTER 11 CASE AND THE CHAPTER 7 CASE STARTED WITH THE VARIOUS PARTIES, AND I'LL LET-- MAYBE I'LL LET SHARON, BECAUSE SHE WAS INVOLVED AT THAT STAGE OF THE CASE. - YES. WHAT HAD HAPPENED IN THE CASE WAS WE DID HAVE-- WE ESSENTIALLY HAD 4 DIFFERENT GROUPS HERE. WE HAD AN SEC ACTION, WE HAD THE CRIMINAL CASE, WHICH INCLUDED THE FORFEITURE, AND THEN WE HAD TWO BANKRUPTCY PROCEEDINGS. AND IT WASN'T SO MUCH THAT THE INDIVIDUALS COULDN'T AGREE ON THINGS, BUT IT'S MORE THAT THE NATURE OF... OF, YOU KNOW, HOW THESE THINGS WORK OUT, THAT THERE WAS JUST A LOT OF UNCERTAINTY. FOR EXAMPLE, VICTIMS ARE ACTUALLY... JUST AS IN A BANKRUPTCY, THE CREDITORS ARE REALLY A PARTY, TOO. THE...IN OUR CASE, THE VICTIMS ALSO WERE A PARTY. THEY...OR SOMEWHAT OF A PARTY. HERE THE VICTIMS ARE ALL REPRESENTED BY COUNSEL AND HAD AN OPPORTUNITY TO BE HEARD ON THINGS, AND FROM A PROSECUTOR'S PERSPECTIVE, THE CRIME VICTIMS' RIGHTS ACT IMPOSES OBLIGATIONS ON THE DEPARTMENT OF JUSTICE TO PROVIDE MEANINGFUL RESTITUTION TO VICTIMS. AND UNDER THAT AUTHORITY, VICTIMS HAVE A RIGHT TO CONSULT WITH THE DEPARTMENT OF JUSTICE. SO A LOT OF ISSUES CAME UP IN TERMS OF WHAT WAS GOING TO HAPPEN BETWEEN THE FORFEITURE AND THE BANKRUPTCY AND WHO WAS GOING TO DEAL WITH ASSETS, BECAUSE HOW THE VICTIMS WERE GOING TO BE TREATED VERSUS HOW THE CREDITORS OR CLAIMANTS WERE GOING TO BE TREATED IN THE BANKRUPTCY WERE GOING TO BE TWO DIFFERENT THINGS. AND IT BECAME VERY PUBLIC. THERE WAS ACTUALLY A LOT OF PUBLIC INFORMATION ABOUT IT, AND I THINK IT WAS QUITE WELCOME THAT JUDGE RAKOFF SET A THREE-JUDGE PANEL HEARING SO THAT...ESSENTIALLY PUBLICLY EACH SIDE COULD TALK ABOUT SORT OF WHAT THEIR POSITION WAS AND EXPLAIN WHAT THEY COULD AND COULDN'T DO, AND WE ACTUALLY BRIEFED WHAT OUR AUTHORITIES WERE. SO IT PUT EVERYBODY ON THE SAME PAGE, WITH THE DISTRICT COURT JUDGE HEARING IT, THE BANKRUPTCY JUDGE HEARING IT, AND THE JUDGE WHO PRESIDED OVER THE SEC ACTION HEARING IT. AND SO THERE WAS SOME REAL CLARITY IN WHAT PEOPLE'S POSITIONS WERE. AND ALL THREE JUDGES URGED THE PARTIES TO TRY AND WORK TOGETHER TO SEE IF WE COULD COME UP WITH A WAY OF SETTING FORTH. WE ENDED UP ENTERING INTO A FORMAL WRITTEN COORDINATION AGREEMENT. BUT EVEN IF WE HADN'T PUT IT IN WRITING, A FORMAL PLAN GOING FORWARD TO PROVIDE SOME CERTAINTY IN TERMS OF WHAT ASSETS WERE GOING TO BE IN THE FORFEITURE CASE, WHAT ASSETS WERE GOING TO BE IN THE BANKRUPTCY, WHAT CLAIMS THE GOVERNMENT WAS GOING TO PURSUE, WHAT CLAIMS THE BANKRUPTCY TRUSTEE WAS GOING TO PURSUE. - IF I COULD JUST ADD SOMETHING BECAUSE-- AND THIS IS FAIRLY COMMON IN PONZI-SCHEME CASES-- SOME OF THE VICTIMS OF DREIER'S FRAUD WERE ALSO LIKELY TO BE DEFENDANTS IN ADVERSARY PROCEEDINGS, FRAUDULENT CONVEYANCE ADVERSARY PROCEEDINGS BROUGHT BY THE TRUSTEE, AND THAT'S EXACTLY WHAT HAPPENED. AND I THINK THESE WERE VERY SOPHISTICATED HEDGE FUNDS WITH VERY GOOD COUNSEL, AND I THINK THEY WERE QUITE AWARE RIGHT FROM THE START THAT THEY MIGHT HAVE CONFLICTING INTERESTS THEMSELVES. THEY WANTED RESTITUTION FROM THE GOVERNMENT, BUT THEY ALSO RECOGNIZED THEY MIGHT WELL BE DEFENDANTS, AND THAT WAS BECAUSE DREIER SOLD BOGUS PROMISSORY NOTES OF A CLIENT OF HIS LAW FIRM, SOLD ABOUT $700 MILLION OF THESE, AND IN A TYPICAL PONZI SCHEME, THE EARLY INVESTORS WERE REPAID INTEREST AND IN SOME CASES PRINCIPAL WITH PROCEEDS RECEIVED FROM LATER INVESTORS, AND IN FACT, THE CHAPTER 11 TRUSTEE BROUGHT FRAUDULENT TRANSFER ADVERSARY PROCEEDINGS TO RECOVER AT A MINIMUM THE AMOUNTS IN EXCESS OF PRINCIPAL THAT THESE HEDGE FUNDS WERE REPAID. SO THEY WERE BOTH SEEKING RECOVERY FROM THE GOVERNMENT, AND I THINK THEY KNEW THEY WERE GOING TO BE DEFENDANTS IN FRAUDULENT TRANSFER CASES. - JUDGE KISHEL OF OUR BANKRUPTCY COURT AND MYSELF ALSO HELD A COMBINED HEARING. WE APPROVED THE COORDINATION AGREEMENT BETWEEN THE GOVERNMENT AND THE OTHER PARTIES AND THE TRUSTEES IN A COMBINED SESSION. I THINK IT WAS AN IMPORTANT, SYMBOLIC MESSAGE, BUT ALSO A VERY REAL MESSAGE THAT THE RIGHT HAND WAS KNOWING WHAT THE LEFT HAND WAS DOING AND THAT THIS WAS A COORDINATED EFFORT WITHIN THE COURTS. - NOW, WHO WAS INVITED TO THAT HEARING? - ANYBODY THAT WANTED TO COME. JUDGE KISHEL AND I... I MADE ROOM FOR HIM ON MY BENCH IN THE DISTRICT COURT, AND WE SAT THERE TOGETHER AND HEARD IT. HE ASKED HIS SET OF QUESTIONS, AND I ASKED MINE, AND WE SEPARATELY APPROVED IT. BUT EVERYONE THAT WISHED TO ATTEND COULD ATTEND. - WHAT WAS THE...WHAT WAS THE OUTPUT FROM THOSE HEARINGS? WERE ORDERS ENTERED? - ORDERS WERE ENTERED, PARTICULARLY THE COORDINATION AGREEMENT AS TO WHO WAS GOING TO PROCEED WITH THE FORFEITURE OF WHICH ASSETS, WHICH WAS PART OF THE BANKRUPTCY ESTATE, WHICH WOULD BE PART OF THE RECEIVERSHIP ESTATE, WHO WAS GOING TO BRING VARIOUS THIRD-PARTY ACTIONS. - WERE THERE ALSO JOINT HEARINGS IN THE MADOFF CASE? - NO, THERE WEREN'T, BECAUSE WE HAD... OUR AGREEMENT IS REALLY INFORMAL. AND I THINK... THERE IS ONE THING WHERE I THINK MAYBE THE INFORMAL AGREEMENT COULD WORK A LITTLE BETTER, IS THAT AS YOU GO ALONG AND GET INTO AND LOOKING AT THE ASSETS AND HOW YOU DEAL WITH THE ASSETS AND MAYBE DECIDE THAT SOMETHING WHICH WAS IN THIS POT WOULD WORK BETTER IN THE OTHER POT. WITH THE INFORMAL AGREEMENT, I THINK IT'S EASIER TO MAKE THAT SHIFT. IF YOU HAVE IT WRITTEN IN A FORMAL AGREEMENT, YOU MAY HAVE TO GO BACK TO COURT AND ASK THE JUDGE, "IS IT OK IF WE MAKE THIS CHANGE?" - WE PUT A SAFETY VALVE IN OURS-- "UNLESS OTHERWISE AGREED"-- TO GET AWAY FROM THAT, BUT YEAH. - BUT I THINK THAT... AND I THINK IN OUR CASE, AS I MENTIONED EARLIER, WE HAD AN AIRPLANE. WE HAD AN AUTOMOBILE. THERE WERE ISSUES ABOUT SOME YACHTS AND A FEW OTHER ITEMS. AND IT SORT OF WAS THAT, AS WE CAME UPON THE ISSUE, WE JUST SAT DOWN AND SAID, "WHERE ARE YOU? WHERE ARE WE?" AND WORKED THAT OUT. - LET ME GO BACK AND REVIEW THE BIDDING FOR JUST A SECOND. SO SOME VICTIMS IN THE CRIMINAL CASE WILL BE CREDITORS IN A BANKRUPTCY CASE. SOME OR ALL THE VICTIMS IN THE CRIMINAL CASE WILL BE CREDITORS IN A BANKRUPTCY CASE. BUT NOT ALL CREDITORS IN A BANKRUPTCY CASE WILL BE VICTIMS. - THAT'S CORRECT. - ABSOLUTELY. - SO THIS DECISION AS TO WHAT ASSETS WOULD BE SUBJECT TO FORFEITURE HAS AN IMPACT ON WHO WILL RECEIVE THE PROCEEDS OF THOSE ASSETS. - YES. - NOW, WITH THAT AS SORT OF A PREFACE, WHEN DO YOU...WHEN DO THESE COORDINATION AGREEMENTS TAKE PLACE? HOW EARLY IN A CASE DO THEY TAKE PLACE? - I THINK THE EARLIER, THE BETTER. - I THINK THAT THE EARLIER THE DISCUSSION, THE BETTER OFF WE ARE. I MEAN, A LOT OF TIMES, YOU MAY NOT KNOW. I MEAN, OFTENTIMES-- I THINK, IN THESE CASES, NUMBER ONE IN TERMS OF SORT OF WHO TAKES THE LEAD, IS OFTEN BASED ON TIMING. IF THERE IS A CASE WHERE THE CRIMINAL CASE ARISES AFTER A BANKRUPTCY IS CLOSE TO BEING COMPLETED, IT'S NOT IN ANYBODY'S INTEREST FOR THE GOVERNMENT TO STEP IN, SAY, "ALL OF THESE ASSETS THAT HAVE BEEN...THAT ARE... "THAT ARE ABOUT TO BE DISTRIBUTED "AS PART OF THE BANKRUPTCY, "WE'RE GONNA GRAB THEM ALL UP FOR OUR FORFEITURE CASE, AND WE'RE GONNA REDISTRIBUTE THEM IN A DIFFERENT METHOD." THAT, I THINK, IS SOMETHING THAT AT LEAST MY OFFICE WOULD NOT DO AND NOT SOMETHING THE DEPARTMENT OF JUSTICE WOULD RECOMMEND. SIMILARLY, IF THERE'S A CASE WHERE THE CRIMINAL CASE HAS PRECEDED AND WE'RE ABOUT TO ALSO DISTRIBUTE MONEY-- SOMEBODY HAS BEEN CONVICTED, ET CETERA-- THEN, YOU KNOW, IT MAY BE THAT THE FORFEITURE SHOULD, YOU KNOW, TAKE PRECEDENCE, AND THERE WON'T BE MANY ASSETS IN THE BANKRUPTCY. BUT MOST CASES, IT'S A COMBINATION BETWEEN THE TWO. AND I THINK THAT THE EARLIER YOU CAN TALK AND START TO DIVIDE IT UP-- THE GOVERNMENT HAS A BETTER CLAIM TO THE BANKRUPTCY, OR AN EASIER CLAIM ON DIRECTLY TRACEABLE PROCEEDS, MONEY THAT CAME DIRECTLY FROM THE FRAUD, AND IN THOSE CIRCUMSTANCES, IT MAY BE BETTER FOR THE GOVERNMENT TO PURSUE THEM. THE GOVERNMENT DOESN'T HAVE THE SAME ABILITY TO BRING CLAWBACKS ACTION AS A BANKRUPTCY, AND THOSE ARE THINGS THAT SHOULD BE LEFT WITHIN THE BANKRUPTCY. BUT SOMETIMES THERE ARE THINGS THAT ARE HYBRIDS. A CLAWBACK THAT CAN BE BROUGHT-- A CLAWBACK ACTION THAT CAN BE BROUGHT IN THE BANKRUPTCY COULD BE A THIRD-PARTY TRANSFER TO A NON-INNOCENT OWNER IN A FORFEITURE CASE, AND THE GOVERNMENT HAS A DIFFERENT BURDEN OF PROOF. BUT I WORKED ON A CASE WHERE WE DID HAVE A CLAIM WHERE $3.5 MILLION WENT TO THE THIRD PARTY. THERE WAS A GOOD CLAIM IN THE BANKRUPTCY AGAINST THAT THIRD PARTY FOR $10 MILLION. IT WAS THAT $10 MILLION HAD GONE, THEN WE LOCATED $3.5 MILLION. AND SO WHAT WE DECIDED TO DO WAS TO TEAM UP TOGETHER AND BRING BOTH OF OUR ACTIONS, AND THE DISTRICT COURT JUDGE WITHDREW THE REFERENCE TO THE BANKRUPTCY FOR THAT ISSUE, AND THE DISTRICT COURT JUDGE DECIDED THE BANKRUPTCY CLAWBACK CLAIM, OR FRAUDULENT CONVEYANCE CLAIM, AND THE FORFEITURE CLAIM AGAINST THE THIRD PARTY, AND IT WAS DECIDED AS A JOINT PROCEEDING. SO I THINK THAT THERE'S A LOT OF FLEXIBILITY, BUT THESE ARE THINGS THAT ONLY COME OUT IF COMMUNICATION BETWEEN THE TRUSTEE AND THE GOVERNMENT AND TALKING... YOU KNOW, TALKING ABOUT WHAT THE CLAIM IS. WE WOULDN'T HAVE KNOWN AT THE BEGINNING-- AS IRVING SAID, WE WOULDN'T HAVE KNOWN AT THE BEGINNING ABOUT THIS. THIS IS SOMETHING, BECAUSE WE WERE COMMUNICATING ON A WEEKLY BASIS, THAT THIS THING CAME UP AND WE COULD FIGURE OUT HOW TO DO IT TOGETHER. - ONE OF THE THINGS THAT'S VERY IMPORTANT, THOUGH-- FORFEITURE DOESN'T TAKE PLACE UNTIL THERE'S A FINAL CRIMINAL CONVICTION. SO JUDGE MONTGOMERY TALKED ABOUT THIS. IT WAS TRUE IN DREIER THAT SHARON TALKED ABOUT. THERE WAS INITIALLY A TEMPORARY RESTRAINING ORDER THAT SEIZED THE ASSETS, BUT NOTHING CAN BE DONE ABOUT IT UNTIL THERE'S A CONVICTION. IN DREIER, HE PLED GUILTY TO ALL COUNTS OF A SUPERSEDING INDICTMENT THAT INCLUDED THE FORFEITURE ALLEGATIONS. IN ADELPHIA, THE RIGASES DID NOT PLEAD GUILTY. THEY WENT TO TRIAL AND WERE CONVICTED, BUT IT WAS SEVERAL YEARS AFTER-- 4 YEARS AFTER THE CASES WERE STARTED. SO THE U.S. ATTORNEY REALLY ISN'T ABLE, OTHER THAN THE ASSET FREEZE, ISN'T ABLE TO DISPOSE OF ASSETS, WHEREAS THE BANKRUPTCY COURT, IF THE ASSETS ARE PART OF A BANKRUPTCY ESTATE, THEY MAY BE ABLE TO BE DEALT WITH MUCH MORE RAPIDLY, AND THAT'S QUITE IMPORTANT. - ONE OTHER THING THAT WE'VE HAD IN MADOFF IS EVEN AS WE'VE GONE ALONG, WE'VE IDENTIFIED NEW ASSETS, BOTH OF US, AND WE TALK ABOUT THEM. FOR EXAMPLE, WE DISCOVERED LLC's, AND WE DISCOVERED ALL SORTS OF OTHER... NOW, THE LLC's WERE PERSONAL. THE MEMBERSHIP INTERESTS WERE PERSONAL ASSETS OF MADOFF AND SOME OF THE OTHER MALEFACTORS. AND SO THOSE WERE PERSONAL ASSETS THAT THE DEPARTMENT... WE HAD AGREED WERE IN THE POT FOR THE DEPARTMENT. BUT ALONG THE WAY, THERE WERE ISSUES ABOUT WHO'S THE MANAGING MEMBER. IT GETS...IT CAN GET REALLY DIFFICULT. BUT I THINK THE COMMUNICATION IS JUST REALLY... EVERY STEP OF THE WAY, THE MOST IMPORTANT THING THAT YOU CAN HAVE. - AND THIS IS COMMUNICATION BETWEEN WHOM? - BETWEEN THE PEOPLE AT THE U.S. ATTORNEY'S OFFICE AND THE TRUSTEE OR THE RECEIVER. - NOW, I'M INTERESTED IN A PROCEDURE THAT YOU DESCRIBED IN MADOFF AS OPPOSED TO WHAT HAPPENED... WHAT JUDGE MONTGOMERY DESCRIBED AND WHICH JUDGE GLENN DESCRIBED IN DREIER, WHERE THERE WAS A JOINT HEARING, AND THIS AGREEMENT WAS THE PRODUCT OF THIS JOINT HEARING. YOURS WAS AN INFORMAL PROCEDURE. WERE THE CREDITORS/VICTIMS INVOLVED IN...IN NEGOTIATING THAT AGREEMENT AT ALL? - NO. THERE ISN'T ANY WHAT YOU WOULD CALL AGREEMENT. THERE'S NOTHING FORMAL. THERE'S NOTHING WRITTEN. THIS WAS... THE MOMENT I WAS APPOINTED, THE FIRST STOP I MADE WAS AT THE U.S. TRUSTEE-- I MEAN THE U.S. ATTORNEY'S OFFICE, AND I MET WITH A GROUP OF THE PEOPLE WHO WERE INVOLVED IN THE CRIMINAL CASE. AND ALMOST FROM THE GET-GO, WE WERE HAVING THESE MEETINGS ON A PRETTY REGULAR BASIS-- CONFERENCE CALLS, FACE-TO-FACE MEETINGS. AND IT JUST WENT FROM THERE. IT WAS JUST NATURAL THAT WE WERE CONTINUING TO TALK. - THEREIN LIES A TIP FOR DISTRICT COURT JUDGES WHO ARE FACED WITH ONE OF THESE SITUATIONS. SELECT A RECEIVER THAT YOU SEE AS A GOOD COMMUNICATOR AND COORDINATOR AND NOT SOMEBODY THAT YOU PERCEIVE IS GOING TO BE A LONE EAGLE. YOU WANT SOMEBODY THAT REALLY IS GOING TO BE COLLABORATIVE IN THEIR STYLE. - I HAD A... I HAD A PRIOR LIQUIDATION WHERE THEY... IT WAS A RESTITUTION. AND AGAIN, WITH THE U.S. ATTORNEY'S OFFICE, WE HAD A LOT OF COMMUNICATION IN TERMS OF HOW MUCH WE DISTRIBUTED, HOW MUCH THEY DISTRIBUTED, BECAUSE NOBODY SHOULD GET MORE THAN 100%. THAT WAS AT THE END OF THE CASE, OF COURSE. BUT IT...JUST COMMUNICATION ALL ALONG THE WAY HELPS RESOLVE LOTS AND LOTS OF PROBLEMS. - IN DREIER, THE FIRST JOINT HEARING, THE THREE JUDGES, WAS IN JANUARY 2009. IT WASN'T UNTIL DECEMBER 2009 THAT THE WRITTEN COORDINATION AGREEMENT WAS SIGNED OFF. SO THERE WAS A LOT OF BACK AND FORTH DURING THAT PERIOD, BUT IT DIDN'T HAPPEN INSTANTLY. BUT I THINK WHAT THE JUDGES DID WERE TO GET PEOPLE TALKING. - WAS...I KNOW THAT YOU SAID THAT THERE WAS AN ATTEMPT TO REACH AGREEMENT FROM ALL OF THESE VARIOUS PARTIES. WAS THERE UNANIMITY IN THE COORDINATION AGREEMENT? DID EVERYBODY AGREE ON WHAT THE TERMS OF THE COORDINATION AGREEMENTS WERE? - YES. I MEAN, THE ISSUE WAS... I MEAN, THE ISSUE IN MOST OF THESE CASES COMES DOWN TO SOME THINGS, YOU KNOW, ARE CLEAR. SOMETIMES THE ISSUE IS IN TERMS OF THOSE THIRD-PARTY ACTIONS, WHO CAN BRING THOSE THIRD-PARTY ACTIONS. AND YOU KNOW, THERE ARE OTHER INTERESTED PARTIES. BUT IT WAS... YOU KNOW, WE WERE ULTIMATELY ABLE TO. WE HAD TO WORK THROUGH A LOT OF DIFFERENT THINGS. AND PART OF THE DELAY WAS ALSO JUST DUE TO THE NATURE OF THE CASE. THE BANKRUPTCY TRUSTEE WAS APPOINTED AFTER THE CRIMINAL CASE HAD GONE FORWARD. SO THE BANKRUPTCY TRUSTEE ALSO NEEDED SOME TIME TO GET UP TO SPEED AND TO UNDERSTAND, BECAUSE IT WASN'T FAIR FOR US TO EXPECT HER TO COME UP WITH AN AGREEMENT, WRITTEN OR EVEN INFORMAL, TO DEFINE WHAT'S GOING ON WITHOUT HER UNDERSTANDING EXACTLY WHAT WAS IN HER ESTATE. SO, YOU KNOW, THERE WAS SOME TIME WHERE SHE NEEDED TO EVALUATE WHAT HER CLAIMS ARE AND TO DEAL WITH HER ISSUES IN TERMS OF THE BANKRUPTCY. SO IT TOOK A WHILE, AND WE ULTIMATELY WERE ALL VERY, VERY HAPPY WITH THE AGREEMENT AND FELT LIKE, YOU KNOW, IT WAS A GOOD RESULT AND WE COULD GO FORWARD. BUT EVEN BEFORE WE HAD THE WRITTEN AGREEMENT, WE ABSOLUTELY HAD AN INFORMAL AGREEMENT ON OTHER, YOU KNOW, KEY ASPECTS IN TERMS OF THAT. AND THERE WERE A LOT OF DIFFERENT ISSUES IN TERMS OF OTHER THINGS COME INTO PLAY, LIKE WHAT ABOUT THE RECORDS FROM THE OFFICE? WHAT ABOUT THINGS THAT THE U.S. ATTORNEY'S OFFICE HAS? SO WE WERE TALKING ALL THE TIME. IT WASN'T LIKE ONCE WE HAD A WRITTEN AGREEMENT, YOU KNOW, THEN WE COULD TALK. ALL THROUGH THE TIME WE WERE DEALING WITH AND TRYING TO WORK COOPERATIVELY ON THOSE THINGS. - JUDGE GLENN DESCRIBED A SITUATION WHERE, ESPECIALLY WITH SOPHISTICATED PARTIES OR PARTIES WITH SOPHISTICATED ATTORNEYS, THEY PERCEIVE AN ADVANTAGE OR DISADVANTAGE FROM PROCEEDING EITHER IN THE CRIMINAL FORFEITURE PROCESS OR IN THE BANKRUPTCY PROCESS. IN...IN MADOFF, DID YOU GET-- BECAUSE THIS WAS AN INFORMAL ARRANGEMENT THAT CAME OUT OF-- THAT DIDN'T COME OUT OF A PROCESS WHERE PEOPLE HAD A FORMAL PRESENCE, DID YOU GET ANY RESISTANCE FROM PEOPLE ABOUT, YOU KNOW, THE ALLOCATION OF...OF RESPONSIBILITIES? - NO. - OK. - WE DID NOT. - WHAT HAPPENS IN SOME OF THESE CASES ARE THE ISSUE OF... THE GOVERNMENT DOESN'T HAVE A PER SE IN A FORFEITURE. IT'S A PER SE RIGHT TO CLAW BACK MONEY. WHAT IT CAN DO IS IF THERE WAS-- OR BRING A FRAUDULENT CONVEYANCE ACTION. RATHER, IF CRIME PROCEEDS WERE TRANSFERRED TO A THIRD PARTY AND THE THIRD PARTY STILL HAS THOSE CRIME PROCEEDS, THEN THAT'S GOING TO BE FORFEITABLE PROPERTY. AND THE THIRD PARTY WILL HAVE DEFENSES TO THAT, ESSENTIALLY THAT THEY WERE A BONAFIDE PURCHASER FOR VALUE WITHOUT REASON TO KNOW THE PROPERTY WAS SUBJECT TO FORFEITURE. IN A LOT OF THESE PONZI-SCHEME TYPE CASES, PROPERTY MAY HAVE BEEN TRANSFERRED TO A THIRD PARTY, AND IT'S GONE NOW. SO THE GOVERNMENT WOULD HAVE NO MECHANISM TO GO AFTER IT. SO IN THAT CIRCUMSTANCE, SOMEBODY THAT HAD GOTTEN... YOU KNOW, THAT HAD BEEN A NET WINNER IN A PONZI SCHEME AND HAD THEIR MONEY PLUS THEIR INTEREST OR WHATEVER AND DIDN'T KNOW ABOUT WHAT WAS GOING ON, YOU KNOW, THAT WE COULD ARGUE WAS A BONAFIDE PURCHASER-- THEY COULD ARGUE WAS A BONAFIDE PURCHASER FOR VALUE WITHOUT REASON TO KNOW, THE GOVERNMENT WOULD HAVE NO ABILITY TO RECOVER THE MONEY BECAUSE WE COULD ONLY TRACE THE ACTUAL CRIME PROCEEDS. WE'D HAVE TO FIND IT IN THEIR BANK ACCOUNT. OBVIOUSLY, IT'S MUCH DIFFERENT IN THE BANKRUPTCY. SO FOR SOME VICTIMS, THEY WOULD VERY MUCH LIKE EVERYTHING TO BE RESOLVED IN THE CONTEXT OF THE CRIMINAL CASE BECAUSE THEY WOULDN'T NECESSARILY, YOU KNOW... THERE WOULDN'T BE THE MEANS TO GO AFTER THEM. AND THAT HAPPENS. WE SEE THAT SORT OF, OVER AND-- YOU KNOW, OVER AND OVER AGAIN IN OTHER CASES. AND THE GOVERNMENT IS SENSITIVE TO-- CONGRESS DIDN'T GIVE US THE AUTHORITY TO DO THAT. WE CAN'T DO THAT. BUT THEY DID GIVE BANKRUPTCY COURTS, THE BANKRUPTCY TRUSTEES THE AUTHORITY TO DO IT, AND WE TRY AND CARVE THAT OUT AND DON'T DO ANYTHING TO DIMINISH THEIR ABILITY TO DO THAT. - SO BY STATUTE, YOU'VE BEEN GIVEN THE AUTHORITY TO COMPROMISE CLAIMS. - ABSOLUTELY. - AND I KNOW IN DREIER, YOU EARLY ON WERE FACED WITH A SITUATION WHERE THE GOVERNMENT SOUGHT TO FORFEIT ASSETS BY ONE OF THE BOGUS-NOTE PURCHASERS, AND YOU NEGOTIATED A SETTLEMENT WHICH REDUCED THE AMOUNT THAT THEY WERE GOING TO HAVE TO BE PAID, AND YOU GOT OBJECTIONS FROM SOME OF THE OTHER VICTIMS, WHO FELT THEY DIDN'T WANT IT COMPROMISED. THEY DIDN'T WANT MONEY GOING TO THE ESTATE, WHERE THERE MAY BE A DIFFERENT SET OF DISTRIBUTION RULES. SO IT ISN'T ALL SWEETNESS AND HARMONY ONCE A COORDINATION AGREEMENT IS REACHED. - IN OUR... IN THE MADOFF CASE, WE...WE MADE A NUMBER OF SIGNIFICANT SETTLEMENTS, AND WE'VE HAD LAWYERS COME IN AND OBJECT TO OUR SETTLEMENTS, UM...A COUPLE OF THE SETTLEMENTS THAT WERE COMPANION FORFEITURES WITH THEM. THEY NEVER OBJECTED IN ANY WAY TO THE FORFEITURE. NOT SURE THEY COULD. BUT THEY DID COME IN AND IN ONE CASE SAID WE DIDN'T GET ENOUGH MONEY AND IN ANOTHER CASE SAID WE WERE GETTING TOO MUCH MONEY. SO YOU... AND THEN THE OTHER PIECE, GOING BACK TO SOMETHING THAT SHARON ALLUDED TO, IS IN OUR CASE, WE HAD A NUMBER OF CREDITORS WHO DIDN'T FILE CLAIMS. WHY DIDN'T THEY FILE CLAIMS? THEY MADE A BUSINESS DECISION THAT THEY DIDN'T WANT TO SUBJECT THEMSELVES TO THE SUMMARY JURISDICTION OF THE BANKRUPTCY COURT BY FILING A CLAIM WHEN I HAD A SIGNIFICANT PREFERENCE ACTION AGAINST THEM. AND EARLY IN THE CASE, NOBODY ASSUMED THAT I WOULD BE AS SUCCESSFUL AS I HAVE BEEN. SO THEY DIDN'T FILE A CLAIM IN OUR CASE. THEY WILL BE ABLE TO FILE A CLAIM IN THE FORFEITURE CASE, WHICH WILL MAKE FOR INTERESTING... AS A SIDE SHOW, BECAUSE WE WOULD LIKE THEM NOT TO GET PAID OUT OF THE FORFEITURE CASE WHILE WE'RE LITIGATING THE PREFERENCE. WE DON'T WANT THEIR COFFERS TO BE FILLED SO THEY HAVE MORE MONEY TO LITIGATE WITH US. SO YOU DO GET INTO SOME OF THOSE KINDS OF THINGS, BUT I THINK THEY'RE FEW AND FAR BETWEEN, AND A LOT OF THEM, AGAIN, CAN GET RESOLVED THROUGH COMMUNICATION. MAYBE THERE'S A WAY OF SLOWING DOWN THE PROCESS A LITTLE BIT IN THE FORFEITURE, BECAUSE YOU GO THROUGH A PLAN AND THINGS. BUT, AGAIN, THESE ARE THINGS THAT WE HAVE DISCUSSED WITH THE U.S. ATTORNEY'S OFFICE. WE MAKE THEM AWARE OF THESE ISSUES, AND IN MANY CASES, THEY MAKE US AWARE OF THEIR ISSUES AS BEST THEY CAN, GIVEN THE CRIMINAL CASES. SO IT'S...IT'S... IN SOME RESPECTS, IT'S A ONE-WAY STREET, BUT IN OTHER ASPECTS, IT'S A TWO-WAY STREET, AND THAT'S THE WAY IT SHOULD BE. - LET ME ASK JUST A GENERAL QUESTION. WE'VE TALKED ABOUT THE COORDINATION AGREEMENTS PROVIDING FOR, IN GENERAL TERMS, WHICH ASSETS WOULD BE SUBJECT TO FORFEITURE AND WHICH ASSETS WOULD BE SUBJECT TO BANKRUPTCY ADMINISTRATION. UH... WE'RE GOING TO PROVIDE OR MAKE AVAILABLE COPIES TO THE JUDGES REVIEWING THIS OF SAMPLE COORDINATION AGREEMENTS. BUT IN GENERAL TERMS, WHAT ELSE WOULD BE IN A COORDINATION AGREEMENT? - I THINK THAT WHAT YOU WANT TO DO-- THE KEY THING IS, IN TERMS OF DIVIDING UP THE ASSETS, AND THERE'S A COUPLE OF DIFFERENT CATEGORIES OF ASSETS. THERE'S...FROM THE GOVERNMENT'S PERSPECTIVE, IT'S ASSETS THAT ARE DIRECTLY TRACEABLE TO THE CRIME, AND EVEN THOSE FALL INTO TWO CATEGORIES-- SO THE ONES THAT WE KNOW OF NOW AND THE ONES THAT WE'RE GONNA LEARN ABOUT LATER. I THINK THE ONES THAT WE KNOW ABOUT NOW ARE EASY TO RESOLVE, BUT AS IRVING WAS MENTIONING, THINGS HAVE COME UP IN MADOFF THAT THEY'VE IDENTIFIED LATER THAT WE WOULDN'T KNOW WHEN WE DREW UP THE AGREEMENT. SO, YOU KNOW, WE SORT OF NEED TO FIGURE OUT BETWEEN THAT. BUT THAT'S SOMETHING THAT HAS TO BE ADDRESSED BECAUSE IF THERE'S A DECISION THAT ALL TRACEABLE PROCEEDS ARE GOING TO COME INTO THE FORFEITURE AND THE BANKRUPTCY TRUSTEE IS GOING TO FIND THESE THINGS, THEN SHOULD THAT BE IN THE BANKRUPTCY? THE GOVERNMENT CAN FORFEIT OTHER ASSETS, AND THE GOVERNMENT, IN A FORFEITURE CASE, IS GOING TO GET A MONEY JUDGMENT FOR THE AMOUNT OF THE CRIME. IN THE DREIER CASE, IT WAS $770 MILLION, THE AMOUNT OF THE PROCEEDS THAT THE DEFENDANT OBTAINED. WE CAN SATISFY THAT FORFEITURE MONEY JUDGMENT OUT OF ANY OTHER ASSETS OF THE DEFENDANT. SO THERE'S GOING TO BE OTHER THIRD-PARTY PROPERTY. WHAT ABOUT THOSE? THAT'S SOMETHING THAT SHOULD BE ADDRESSED IN THERE. THEN IT'S GOING TO BE ACTIONS AGAINST THIRD PARTIES, EITHER SEIZURE OF, YOU KNOW, THIRD-PARTY ASSETS OR THE CLAWBACK ACTIONS. THAT SHOULD PROBABLY BE ADDRESSED. AND THEN ALSO, THE... YOU KNOW, THE BOOKS AND RECORDS, TRYING TO COME UP WITH SOME WAY TO WORK TOGETHER ON THAT, BECAUSE SOMETIMES THE GOVERNMENT COMES IN, EXECUTES A SEARCH WARRANT, AND TAKES ALL THE RECORDS. SO, YOU KNOW, OFTENTIMES THAT COMES UP, THAT WE NEED TO TRY AND COORDINATE THAT, AND ANOTHER ISSUE THAT CAME UP IN ONE OF OUR CASES WAS WHO WAS A VICTIM IN OUR CASE WAS BASED UPON SORT OF A STATIC MOMENT IN TIME WHEN THE COURT ENTERED THE RESTITUTION ORDER. WHO HAD LOST, SUFFERED A PECUNIARY LOSS AS A RESULT OF THE CRIME AT THE TIME THAT THE COURT ENTERED THE RESTITUTION ORDER? SO WE KNEW WHO ALL THE VICTIMS WERE, BUT SOME OF THEM WERE NET WINNERS. THEY HADN'T LOST ANYTHING, BUT AS A RESULT OF WHAT HAPPENS IN THE BANKRUPTCY, THEY MAY ACTUALLY BECOME LOSERS. WHAT HAPPENS WITH THAT RESTITUTION ORDER? IF THE BULK OF THE ASSETS ARE REALLY GOING TO BE DISTRIBUTED IN THE FORFEITURE, THOSE PEOPLE THAT HAVE TO PAY BACK THE MONEY IN THE BANKRUPTCY COULD END UP IN A WORSE POSITION, BUT THEY WOULDN'T HAVE A RIGHT TO FILE A CLAIM OR, YOU KNOW, FILE A VICTIM IMPACT STATEMENT IN THE CRIMINAL CASE AND BE ENTITLED TO RESTITUTION. AND I DID HAVE ONE CASE WHERE THE JUDGE WAS VERY CONSCIOUS OF THAT, AND WHAT SHE PROVIDED WAS SHE KEPT THE RESTITUTION ORDER, ALLOWED PEOPLE WHO RESOLVED ACTIONS IN THE BANKRUPTCY AND ULTIMATELY GAVE BACK MONEY-- AND I THINK IT WAS AN INCENTIVE FOR PEOPLE TO SETTLE WITH THE BANKRUPTCY TRUSTEE, TOO-- TO SETTLE IN THE BANKRUPTCY, TO BE ALLOWED TO FILE AN AMENDED RESTITUTION CLAIM, AND SHE REQUIRED THE GOVERNMENT TO HOLD BACK AND RESERVE A PORTION OF THAT MONEY SO THAT IT WOULD BE AVAILABLE SO THAT THEY COULD GET A PRO RATA DISTRIBUTION. BUT ONE OF THE OTHER THINGS I THINK IS IMPORTANT TO HAVE IF YOU'RE GOING TO HAVE A WRITTEN COORDINATION AGREEMENT OR JUST PRACTICALLY IS COORDINATION ON WHEN FUNDS ARE DISTRIBUTED, WHO'S GETTING WHAT. SO WE DON'T END UP WITH AN UNBELIEVABLE UNFAIRNESS WHERE SOMEONE IS RECOVERING... YOU KNOW, LIKE IS GETTING 100% RECOVERY BECAUSE THEY RECOVERED IT IN THE FORFEITURE, BUT, UM...YOU KNOW, BUT, YOU KNOW, AND THEN OTHERS WHO ARE RECOVERING IN THE BANKRUPTCY ARE GETTING A TINY, YOU KNOW, FRACTION OF THE MONEY, TO TRY AND MAKE SOME KIND OF EFFORT TO SORT OF EVEN IT UP SO IN THE END THE TWO PROCEDURES TOGETHER CAN PROVIDE FOR SOME KIND OF EQUITABLE RESOLUTION. - SHARON USED THE TERM "NET WINNERS" AND "NET LOSERS," AND THAT'S IMPORTANT IN THE BANKRUPTCY. IT'S CERTAINLY IMPORTANT WITH RESPECT TO FRAUDULENT CONVEYANCE ACTIONS. A NET WINNER IS SOMEONE WHO RECEIVED BACK MORE THAN THEY HAD INVESTED. IT MAY HAVE BEEN DENOMINATED AS INTEREST OR RETURN OF PRINCIPAL, BUT THEY RECEIVE BACK MORE THAN THEY PAID IN. IF THEY PAID $100 MILLION FOR BOGUS NOTES, THEY RECEIVE BACK OVER TIME $120 MILLION. IT MAY HAVE BEEN DENOMINATED AS INTEREST OR RETURN OF PRINCIPAL OR SOME OF BOTH, BUT THEY RECEIVED MORE BACK. A NET LOSER IS SOMEONE WHO'S RECEIVED BACK LESS THAN WHAT THEY INVESTED. AND IT GETS TREATED SOMEWHAT DIFFERENTLY. - I THINK THE KEY THING TO REMEMBER IS THAT A NET WINNER GENERALLY IN A PONZI SCHEME HAS GOTTEN OTHER PEOPLE'S MONEY, AND THAT IS THE MONEY OF THE NET LOSER. - AND GOT IN EARLY. - GOT IN EARLY. BUT I THINK, JUST GOING BACK TO YOUR QUESTION ABOUT THE COORDINATION AGREEMENT, I THINK JUDGE MONTGOMERY EARLIER MENTIONED THAT IN THE AGREEMENT IN PETTERS THEY HAD A CATCH-ALL, A SAFETY-VALVE PROVISION, AND I THINK THAT'S PROBABLY A GOOD WAY TO HAVE SOMETHING IN THERE THAT, EVEN IF YOU DO HAVE THE FORMAL WRITTEN AGREEMENT-- ALONG THE WAY YOU FIND THINGS OR YOU COME UP WITH SOMETHING THAT NEEDS TO BE DEALT WITH, YOU CAN DEAL WITH IT ON A SIMPLER BASIS THAN HAVING TO MAKE A NEW MOTION OR SOMETHING. - AND THESE CASES DO STAY DYNAMIC. I MEAN, IT'S... THEY NEVER FREEZE IN TIME. THERE'S ALWAYS NEW THINGS DISCOVERED AS YOU PROCEED ALONG. - EVERY DAY IS GROUNDHOG DAY. - ONE OF THE THINGS THAT'S EXPRESSLY COVERED IN THE PETTERS COORDINATION AGREEMENT THAT ISN'T IN WRITING IN THE DREIER AGREEMENT RELATES TO FEES AND ON WHAT ASSETS WOULD A BANKRUPTCY TRUSTEE BE ENTITLED TO RECOVER. AND I KNOW YOU'VE COVERED THAT QUITE SPECIFICALLY IN THE PETTERS AGREEMENT. - I DID, AND THE PARTIES AGREED TO THAT. I FROZE FEES AT $500 AN HOUR, WHICH IN MINNEAPOLIS, THE MARKET BEING AS IT IS, STILL ALLOWED FOR QUALITY LEGAL TALENT. I ALSO...IN THE PROVISION, IT WAS AGREED THAT THERE WOULD BE NO RAISING OF FEES DURING THE COURSE OF THE RECEIVERSHIP AS IT WENT FORWARD. WE'RE NOW IN YEAR 2013. THIS STARTED IN '08. SO WE'RE 5 YEARS INTO THIS. AND THAT TIME WOULD NOT BE BILLED FOR THE PREPARING OF THE LAWYERS' OWN BILLS WITH REGARD TO THE THING. AND THAT, THROUGH CAREFULLY LOOKING AT BILLS, WE'VE BEEN ABLE TO SAVE I THINK $1.4 MILLION IN BILLED FEES FOR THE ULTIMATE BENEFIT OF THE TRUE VICTIMS. - YOU HAD THE SAME PERSON AS BOTH THE BANKRUPTCY TRUSTEE AND THE RECEIVER. - TRUE. SO THERE WERE SOME REAL ECONOMIES THERE. - LET'S TALK ABOUT FEES FOR A SECOND, BECAUSE YOU FREQUENTLY HEAR THE...THE ARGUMENT PUT FORTH THAT BANKRUPTCY IS TOO EXPENSIVE, THAT THE...WHAT THE TRUSTEE AND THE TRUSTEE'S PROFESSIONALS GET WILL COME OUT OF THE POCKET OF THE CREDITORS. SO LET'S JUST TALK ABOUT THAT, BECAUSE I SUSPECT A LOT OF THE DISTRICT JUDGES WON'T BE PARTICULARLY AWARE OF HOW TRUSTEES ARE COMPENSATED IN BANKRUPTCY. SO, MR. PICARD, MAYBE YOU CAN TELL US ABOUT IT. - IN THE TYPICAL BANKRUPTCY CASE, A TRUSTEE WOULD BE COMPENSATED IN ACCORDANCE WITH THE SCHEDULE SET IN SECTION 326(a) OF THE BANKRUPTCY CODE. YOU GET 25% OF THE FIRST $5,000, AND IT'S A SLIDING SCALE, AND THEN YOU GET A REASONABLE FEE AT MAXIMUM OF 3% OVER A MILLION DOLLARS. SO, UH... AND THERE ARE ARGUMENTS WHETHER THAT'S A CAP OR WHETHER THE JUDGE HAS SOME DISCRETION IN GIVING YOU THE 3% OR WHATEVER THE PERCENTAGE WOULD BE. IN A RECEIVERSHIP, YOU DON'T HAVE THAT, AND IN A SIPA LIQUIDATION, YOU DON'T--YOU DON'T HAVE THAT COMMISSION SCHEDULE. AND THERE YOU DEAL WITH HOURLY RATES. JUDGE MONTGOMERY, YOU ALLUDED TO WHAT YOU DID WITH THE RECEIVER IN THE PETTERS CASE. IN NEW YORK AND A LOT OF THE COURTS THAT I'VE BEEN INVOLVED IN, RECEIVERS AND TRUSTEES IN A SIPA CASE GIVE WHAT I REFER TO AS A PUBLIC-INTEREST DISCOUNT SO THAT EVEN THOUGH THE RATES IN THE METROPOLITAN AREA MAY BE HIGH, IT'S A WAY TO GET A REDUCTION. ALSO, WE'VE... IN THE MADOFF CASE, THE SIPA EXAMINERS REVIEW OUR MONTHLY BILLS REGULARLY. WE TAKE HAIRCUTS BEFORE WE EVEN SUBMIT THE BILL. AND TYPICALLY AFTER SOME NEGOTIATION, WE HAIRCUT IT MORE BEFORE WE HAVE A FINAL NUMBER. AND THAT'S TYPICALLY THE WAY IT GOES. - MS. LEVIN, WHEN YOU'RE NEGOTIATING WITH A TRUSTEE, IS THE COST OF THE BANKRUPTCY A FACTOR IN YOUR NEGOTIATIONS? - I DON'T THINK IT'S A SPECIFIC FACTOR. I MEAN, BUT WE TRY AND LOOK AT IT PRACTICALLY BECAUSE OUR GOAL IS TO PROVIDE AS MUCH COMPENSATION AS POSSIBLE TO VICTIMS. AND THERE ARE GOING TO BE THINGS THAT, IF IT'S FORFEITED, THE MARSHALS SERVICE SELLS OUR ASSETS, AND THERE'S NO FEES ASSOCIATED WITH IT. AND FOR EXAMPLE, MY TIME OR THE ASSISTANT U.S. ATTORNEYS IN MY UNIT, OBVIOUSLY THAT'S PAID FOR BY THE GOVERNMENT, BY THE TAXPAYER, AND THAT'S NOT GOING TO COME OUT OF WHAT THE VICTIM IS GOING TO RECOVER. SO WE TRY AND BE--IN TERMS OF LOOKING AT IT PRACTICALLY, IF THERE ARE ASSETS THAT WE CAN EASILY AND IN A TIMELY MANNER FORFEIT AND LIQUIDATE AND PROVIDE TO THE VICTIMS, WE'RE GOING TO TRY AND DO THAT THROUGH... THROUGH THE FORFEITURE PROCESS. IN TERMS OF THERE ARE CERTAINLY THINGS THAT THE BANKRUPTCY TRUSTEE CAN DO, AND OF COURSE, IF THE GOVERNMENT WERE GOING TO CONTRACT OUT TO SOMEBODY ELSE TO DO IT, THERE WOULD OF COURSE BE FEES INVOLVED. WE'RE MORE COMFORTABLE-- OR WE'RE COMFORTABLE OFTEN IN TERMS OF ALLOWING A BANKRUPTCY TRUSTEE TO DO THINGS BECAUSE THEIR FEES ARE EITHER DONE PURSUANT TO A SCHEDULE OR THERE'S A JUDGE, THERE'S A BANKRUPTCY JUDGE THAT'S OVERSEEING THE PROCESS AND APPROVING IT, SO IT'S NOT AS THOUGH WE'RE JUST AGREEING TO PAY-- YOU KNOW, WE'RE AGREEING THAT ANYBODY CAN BE PAID ANY PRICE. BUT THERE HAVE BEEN CIRCUMSTANCES WHERE, EVEN THOUGH THERE WOULD BE FEES COMING OUT OF SOMETHING TO ALLOW A BANKRUPTCY TRUSTEE TO SELL THE PROPERTY IS GOING TO MAXIMIZE THE VALUE AND CAN BE DONE IMMEDIATELY, WE'RE ABSOLUTELY GOING TO TURN THAT OVER. SO WE LOOK AT IT, BUT IT'S NOT A HARD AND FAST RULE. - ANOTHER AREA OF FEES-- WE'VE TALKED ABOUT LEGAL FEES. WHAT THE DISTRICT JUDGES SHOULD BE AWARE OF IS THE FORENSIC ACCOUNTING FEES. AND WE'VE HAD TO PAY, IN THE PETTERS RECEIVERSHIP, MILLIONS OF DOLLARS TO PRICE WATERHOUSE, BUT I THINK WE'VE GOTTEN TREMENDOUS WORK PRODUCT THAT'S BEEN ABLE TO BE USED AND SHARED-- AND THAT'S ANOTHER THING TO BE COVERED, I THINK, IN THE COORDINATION AGREEMENT, IS THE SHARED USE OF THE FORENSIC ACCOUNTING SERVICES AND BACKGROUND, AND THAT'S A SIGNIFICANT... AREA OF COORDINATION AS WELL. - WE'VE DONE THAT. WE DID THAT THROUGHOUT THE CLAIMS PROCESS IN SHARING INFORMATION WITH THE FBI IN CONNECTION WITH THE WORK THAT THEY HAD TO DO. AND YOU KNOW, IN MANY OF THESE CASES, THE TRUSTEE OR THE RECEIVER REALLY COMES IN AND STARTS WITH A BLANK SLATE AND...AND HAS TO DO THE DIGGING AND HAS TO PUT THE CASE TOGETHER. MADOFF MAY BE A LITTLE DIFFERENT, BUT IT'S...BECAUSE OF ITS COMPLEXITY AND BREADTH, BUT IF YOU HAVE TO COME IN AND DEVELOP THE CASE FROM THE... FROM THE START SO THAT YOU'RE IN A POSITION TO BRING A PREFERENCE ACTION, A FRAUDULENT TRANSFER ACTION, OR WHATEVER, UM...IT...IT TAKES TIME, AND IT TAKES A LOT OF EFFORT, AND IT TAKES A LOT OF GOOD WORK FROM FORENSIC ACCOUNTANTS TO HELP YOU GET THERE. AND I THINK ONE OF THE THINGS, IN ANSWER TO YOUR QUESTION, THAT I WOULD SAY IS OFTEN YOU SHOULD, WHEN YOU LOOK AT THE COST, YOU ALSO SHOULD BE LOOKING AT WHAT THE RESULTS ARE. SO IF SOMEONE HAS... YOU MAY SAY, "OOH. $500 MILLION. THAT'S A LOT OF MONEY." BUT IF THEY'VE RECOVERED $5 BILLION, I MEAN, THAT'S A PRETTY GOOD INVESTMENT. AND SO THERE'S...THERE'S... AND ON FEES IN ANY EVENT, THERE'S ALWAYS GOING TO BE A TENSION. EVEN IN A TYPICAL BANKRUPTCY CASE, THERE'S A TENSION ON FEES, BECAUSE GENERALLY IT'S COMING OUT OF THE FUNDS THAT WOULD BE RETURNED TO CREDITORS. - LET ME ASK THE JUDGES A QUESTION. WE'VE ALREADY DESCRIBED A LEVEL OF COOPERATION BETWEEN THE GOVERNMENT AND TRUSTEES AND RECEIVERS THAT IS...NEW. I DON'T THINK I'VE EVER SEEN THAT. I DON'T THINK ANYBODY'S EVER SEEN THAT AT THIS LEVEL IN CASES BEFORE. AFTER YOU'VE STARTED THE BALL ROLLING WITH THESE INITIAL JOINT HEARINGS AND THE EFFORTS TOWARD THE COORDINATION AGREEMENTS, TO WHAT EXTENT DO JUDGES COORDINATE BEYOND THAT? - WELL, I THINK TO WHATEVER LEVEL THEY'RE COMFORTABLE. LOTS OF DISTRICT JUDGES WHO HAVE HANDLED MDL, MULTI-DISTRICT LITIGATION, ARE GOING TO BE FAMILIAR WITH TRYING TO BE CREATIVE AND TO BE INTERACTIVE WITH OTHER JUDGES IN RESOLVING DISPUTES SUCH AS THE MDL DISPUTES. THERE ARE JURISDICTIONAL BOUNDARIES THAT WE NEED TO BE SENSITIVE OF AND UNDERSTAND. I MEAN, FOR YEARS, I HAD BEEN LABORING UNDER THE ILLUSION THAT ALL I NEEDED AS A DISTRICT JUDGE TO UNDERSTAND ABOUT BANKRUPTCY WAS THE AUTOMATIC STAY PROVISION AND IF I KNEW THAT AND UNDERSTOOD IT, I WAS GOING TO BE OK THROUGHOUT MY CAREER, AND THEN PETTERS HAPPENED, AND I HAD TO BROADEN MY HORIZONS. BUT, UM...SO, YOU KNOW, I HAVE ALWAYS APPROACHED JUDGE KISHEL AND JUDGE KRESSEL AS WE'VE WORKED ON VARIOUS ASPECTS OF PETTERS-- "TELL ME WHEN I'M STEPPING OVER THE BOUNDARIES. "WHAT'S YOUR JURISDICTION? "WHAT ARE YOU COMFORTABLE COORDINATING, AND WHAT ARE YOU COMFORTABLE NOT COORDINATING?" CLEARLY THERE ARE THINGS THAT MAKE TREMENDOUS LOGICAL SENSE TO...TO COORDINATE-- IF NOTHING ELSE, SCHEDULING. WE WANT THE SAME LAWYERS IN COURT ON DIFFERENT TIMES. LET'S TRY TO FIGURE OUT WHAT SCHEDULES OF DISCOVERY WORK SO THAT WE HAVE THE LAWYERS, YOU KNOW, WORKING EFFICIENTLY AS WELL AND NOT DUPLICATING EFFORT AND ULTIMATELY FEES FOR US. SO I THINK IT JUST REQUIRES SOME CLEAR COMMUNICATION. WE STARTED ON A GOOD TONE. FROM TIME TO TIME, WE'D PICK UP THE PHONE, BUT MONTHS GO BY WITHOUT IT. A LOT OF DIRECT COMMUNICATION. BUT I THINK WE SET THE TONE FOR THE LAWYERS AND EVERYONE ELSE INVOLVED THAT WE WERE COORDINATING AND THAT WE KNEW WHAT EACH OTHER WAS DOING SO THAT THEY SHOULD DO SO AS WELL. - IS COMMUNICATION A TWO-WAY STREET? DO BANKRUPTCY JUDGES CALL YOU? - ABSOLUTELY. IT'S A TWO-WAY STREET. - JUDGE GLENN. - I WOULDN'T HESITATE TO PICK UP THE PHONE, AS I'VE DONE AND CALLED JUDGE RAKOFF WHEN THE ISSUE WAS THE INTERPRETATION OF THE FORFEITURE ORDER. I THINK, FOR THE MOST PART, IF THE CASE GETS OFF TO A GOOD START, IF THE JUDGES HAVE COORDINATED AT THE OUTSET, MOST OF WHAT HAPPENS AFTER THAT REALLY CAN PRETTY MUCH PROCEED BY ITSELF. THE LAWYERS NEED TO KNOW THAT THEY NEED TO KEEP THE COURT ADVISED OF ANYTHING THAT'S GOING ON IN ONE OF THE PARALLEL PROCEEDINGS THAT MAY AFFECT WHAT'S GOING ON IN YOUR COURT. ONCE--IF THE LAWYERS UNDERSTAND THAT THE JUDGES ARE PREPARED TO TALK TO EACH OTHER, THEY'RE MUCH MORE INCLINED TO MAKE SURE THEY'RE TELLING THE JUDGES WHAT'S HAPPENING SO THAT JUDGES CAN COORDINATE IF THAT NEEDS TO HAPPEN. - I WAS ABOUT TO ASK JUDGE MONTGOMERY ABOUT THE ABILITY OF THE... THE TRUSTEE IN BANKRUPTCY TO COME INTO THE CRIMINAL PROCEEDING AND RAISE ISSUES, BUT YOU'VE GOT THE SAME PERSON. YOU'D HAVE TO ASK THEM WHAT HAT THEY WERE WEARING WHEN THEY CAME IN. - THERE YOU GO. THERE YOU GO. - JUDGE GLENN, DO YOU HAVE ANY VIEWS ON THAT? - NO. I THINK THE CRIMINAL CONVICTION IN THE DREIER CASE HAPPENED REALLY AT THE OUTSET. AND I'VE HAD THREE OTHER CHAPTER 11 CASES WHERE THE PRINCIPAL OF THE DEBTOR WAS INDICTED AFTER THE BANKRUPTCY STARTED. I THINK THEY KNEW THEY WERE BEING INVESTIGATED. THEY SOMEHOW HOPED THAT STARTING A CHAPTER 11 WOULD APPEAR THEY'RE COOPERATING. THEY REALLY DIDN'T INTEND TO STEAL ALL THAT MONEY FROM...FROM CREDITORS. IT DIDN'T WORK OUT THAT WAY. BUT IN THOSE CASES REALLY, I'VE HAD REPRESENTATIVES FROM THE U.S. ATTORNEY'S OFFICE APPEAR. THEY'VE PRETTY MUCH LET THAT PROCEEDING, THE BANKRUPTCY MOVE ALONG. THERE HADN'T BEEN A CONVICTION YET. THEY JUST WANTED TO BE SURE, IF THERE WERE ANY EXCESS PROCEEDS THAT CAME OUT, THEY WEREN'T GOING BACK TO AN INDICTED DEFENDANT, AND THOSE ARRANGEMENTS WERE WORKED OUT. SO THINGS TEND TO MOVE ALONG PRETTY MUCH IN THE NORMAL FASHION IF A GOOD FOUNDATION IS SET AT THE OUTSET. - DID YOU-- HAVE YOU MADE ANY-- DID YOU MAKE ANY APPEARANCES IN THE CRIMINAL PROSECUTION? - WE HAD TO SUBMIT A LETTER TO THE JUDGE AT SENTENCING TO CORRECT SOMETHING THAT HAD BEEN SAID BY THE DEFENDANT. BUT OTHERWISE NO. IN OTHER CASES WHERE I'VE HAD A CRIMINAL DEFENDANT WHO HAS SAT DOWN WITH US AND TALKED TO US AND SORT OF BARED HIS SOUL OR HER SOUL, I HAVE WRITTEN A LETTER TO THE SENTENCING JUDGE TO INDICATE THAT THE PERSON HAD COOPERATED AND BEEN HELPFUL, BECAUSE IF THE PERSON DOES TALK TO YOU AS THE TRUSTEE, IT HELPS YOU FIND ASSETS QUICKER. AND...AND IF THE PERSON HAS DONE THAT, I DON'T MIND TELLING THE JUDGE THAT. BUT OTHERWISE IS... THERE WOULDN'T BE ANY OTHER KIND OF REASON. YOU KNOW, THE VICTIMS HAVE THE OPPORTUNITY TO MAKE STATEMENTS AT THE... AT THE SENTENCING. UM...BUT I'M... I'M NOT IN... I DON'T HAVE THAT KIND OF STAMINA. - MS. LEVIN, WE'VE MADE REFERENCE TO THIS...THIS FORFEITURE NOT HAPPENING UNTIL THE END. SO WE'VE GOT EITHER A GUILTY PLEA OR A...OR A CONVICTION. AND THERE IS, AT THAT POINT, A PRELIMINARY ORDER OF FORFEITURE. WHAT HAPPENS AFTER THAT? - WELL, AFTER THE PRELIMINARY ORDER OF FORFEITURE, THE GOVERNMENT HAS FORFEITED THE DEFENDANT'S INTEREST IN THE PROPERTY, AND WE'RE REQUIRED TO SEND NOTICE TO THIRD PARTIES WHO MAY HAVE AN INTEREST IN THE PROPERTY, AND THEN THEY HAVE AN OPPORTUNITY TO FILE A CLAIM, AND THEY'RE ENTITLED TO HAVE A HEARING BEFORE THE DISTRICT COURT JUDGE WHERE THEY HAVE THE BURDEN OF PROVING, BY A PREPONDERANCE OF THE EVIDENCE, THAT THEY ARE--EITHER HAVE A SUPERIOR RIGHT, TITLE, AND INTEREST IN THE PROPERTY OR A BONAFIDE PURCHASER FOR VALUE WITHOUT REASON TO KNOW THE PROPERTY WAS SUBJECT TO FORFEITURE TO DEFEAT IT. SO THAT'S WHEN THE THIRD-PARTY CLAIMS ARE RESOLVED AS TO THE PROPERTY, AND THEN THE COURT WILL ULTIMATELY ENTER THE FINAL ORDER OF FORFEITURE. IF WE HAVE A GUILTY PLEA AND THE DEFENDANT CONSENTS, THEN WE CAN SELL THE PROPERTY, AND WE CAN LIQUIDATE EVERYTHING. BUT AT SENTENCING IS WHEN THE COURT ENTERS THE RESTITUTION ORDER, AND SO WE CAN'T USE THAT PROCEDURE THAT I SPOKE ABOUT EARLIER, THAT RESTORATION PROCEDURE WHERE THE GOVERNMENT CAN TRANSFER FORFEITED ASSETS TO BE PAID TO A RESTITUTION ORDER. WE DON'T HAVE THE RESTITUTION ORDER UNTIL SENTENCING. SO NOTHING...NOTHING CAN HAPPEN IN THAT CONTEXT UNTIL THEN. - I THINK WE HAVE DESCRIBED WHAT IS, IN MY EXPERIENCE, A VERY UNIQUE PROCESS, WHERE, UH... OUTSIDE OF THE COURTROOM, THERE IS THIS LEVEL OF... THIS TREMENDOUS LEVEL OF COOPERATION. I THINK WE'VE HEARD THAT THE JUDGES NEED TO BE INVOLVED AT THE OUTSET, AND THEY NEED TO MAKE SURE THAT THIS THING IS OFF AND RUNNING. IS THERE...IS THERE ANYTHING ELSE THAT THE JUDGES NEED TO KNOW ABOUT THE PROCESS? - I THINK ANOTHER GOOD IDEA IS TO ASK YOUR RECEIVER OR WHOEVER YOU APPOINT, TRUSTEE IN A BANKRUPTCY SETTING MORE, FOR QUARTERLY REPORTS. I THINK--I FOUND IT VERY REASSURING AS A JUDGE TO KIND OF KNOW THAT THE CASE WAS PROGRESSING. AND THEY COULD BE FAIRLY SHORT, OF JUST A FEW PAGES. BUT I WANTED TO BE UPDATED PERIODICALLY ON EXACTLY WHAT WAS GOING ON. - UNDER THE BANKRUPTCY CODE, A TRUSTEE, ESPECIALLY IN A...IN A CASE THAT TAKES A LONG TIME, SHOULD REGULARLY BE FILING REPORTS. I FILE REPORTS EVERY FIVE OR SIX MONTHS, WHERE I GIVE THE STATUS OF THE LAST SIX MONTHS, BUT ALSO INDICATE HOW IT TIES IN TO THINGS THAT HAPPENED IN EARLIER PERIODS. SO...AND THEY'RE... THEY'RE ON THE DOCKET. AND ANYBODY CAN ACCESS THEM. PLUS I HAVE A WEBSITE WHERE MOST OF OUR PLEADINGS ARE POSTED, AND PEOPLE DON'T HAVE TO PAY THE ECF FEES, WHICH IS GOOD OBVIOUSLY FOR VICTIMS. - LET ME ASK YOU A QUESTION ABOUT THAT. A TRUSTEE HAS AN OBLIGATION TO PROVIDE INFORMATION TO CREDITORS ON REQUEST. NOW, IF THERE IS A CRIMINAL INVESTIGATION, A CRIMINAL PROSECUTION GOING ON AT THE SAME TIME, IS THERE EVER A PROBLEM WITH THE TRUSTEE HAVING INFORMATION THAT THE GOVERNMENT DOESN'T WANT THE CREDITORS TO FIND OUT ABOUT? - WE ARE VERY CAREFUL. I MEAN, PROBABLY THE... WE ARE VERY CAREFUL. ALL...ALL WE REPORT IS WHAT'S "PUBLIC." IN OTHER WORDS, WE MIGHT SAY THAT DURING THE PERIOD WE SETTLED WITH SOMEBODY-- A MATTER OF PUBLIC RECORD IN MOST CASES-- AND...OR WE REFER TO A PENDING CASE, AND WE GIVE A DOCKET NUMBER. WE MIGHT NOTE THAT THERE'S A CRIMINAL CASE PENDING AND GIVE THE DOCKET NUMBER FOR THAT. BUT WE CERTAINLY WOULDN'T PROVIDE ANY INFORMATION ABOUT THE CRIMINAL CASE. AND WHERE THINGS THAT HAVE COME TO US IN CONNECTION WITH OUR COMMUNICATION WITH THE U.S. ATTORNEY'S OFFICE WE WOULDN'T SHARE WITH THE PUBLIC. - FOR EXAMPLE, YOU HAVE A FORENSIC ACCOUNTANT INVOLVED IN A CASE, AND THEY ARE REPORTING INFORMATION TO YOU. THAT INFORMATION MIGHT BE USEFUL TO THE GOVERNMENT. IT MAY BE THE SAME TYPE OF INFORMATION THAT THE GOVERNMENT... - WE SHARE IT. WE'VE SHARED THAT. - SHARED IT WITH WHOM? - WITH THE GOVERNMENT. - WHAT ABOUT WITH THE OTHER CREDITOR? - UM...IN...IN...WELL, IF WE'RE IN LITIGATION WITH THE OTHER CREDITORS, THERE ARE DISCOVERY RULES, AND WE'VE TAKEN THE POSITION THAT YOU'VE GOT TO COMPLY WITH THE DISCOVERY RULES. WE HAVE...WE HAVE... OF COURSE, IN A CASE LIKE THIS, WE HAVE NUMEROUS CONFIDENTIALLY... CONFIDENTIALITY ORDERS, AND WE HAVE CASE MANAGEMENT ORDERS, AND WE HAVE EVERYTHING THAT YOU WOULD HAVE IN A TYPICAL LITIGATION. AND WE HAVE OBJECTED TO CERTAIN EFFORTS AS BEING PREMATURE BECAUSE THEY DON'T FIT WITHIN THE CASE MANAGEMENT ORDER OR DISCOVERY SCHEDULE THAT'S ALREADY BEEN FIXED. - MS. LEVIN, SEPARATE AND APART FROM WHAT YOU'RE COMMUNICATING TO THE TRUSTEE IN THESE DISCUSSIONS THAT YOU'RE HAVING, DOES THE GOVERNMENT HAVE CONCERNS ABOUT THE TRUSTEE OBTAINING INFORMATION THROUGH THE NORMAL INVESTIGATIVE-- ITS NORMAL INVESTIGATIVE PROCESSES AND MAKING THAT AVAILABLE GENERALLY? - WELL, THAT'S WHY THE COORDINATION IS SO IMPORTANT. IF WE CAN TALK CANDIDLY ABOUT SORT OF WHAT... YOU KNOW, WHAT WE THINK ARE OFF-LIMITS OR WHAT... THIS COULD BE A NEW... YOU KNOW, AN OFFSHOOT OF THE INVESTIGATION AND MAKE THAT CLEAR, THEN MY EXPERIENCE WITH THAT IS TRUSTEES KNOW THAT'S GOING TO BE A LATTER PART OF THEIR CASE OR THINGS LIKE THAT. - IN OUR CASE, ON THE SECOND DAY, THE...THE FBI CAME IN WITH A WARRANT AND TOOK OVER THE PREMISES AS A CRIME SCENE. I SIGNED. IT'S PROBABLY ONE OF THE FEW TIMES THAT MY LAWYER TOLD ME, "SIGN IT AND DON'T FIGHT IT." BUT WE SIGNED IT, AND THE YELLOW TAPE WENT UP IN VARIOUS PARTS OF THE OFFICE. AND WE...WE REACHED AN UNDERSTANDING VERY QUICKLY WITH THE FBI FELLAS AND WOMEN THAT WERE THERE THAT WE UNDERSTOOD THEY WERE IN CHARGE OF THE... BUT WE WORKED OUT SO THAT WE WOULD HAVE ACCESS TO THE BOOKS AND RECORDS. WE WERE SENSITIVE ENOUGH, WHEN WE WANTED TO TALK TO PEOPLE WHO WE THOUGHT THEY WOULD BE VERY INTERESTED IN TALKING TO, WE WOULD TELL THEM, "WE WANT TO TALK TO SO-AND-SO. WOULD YOU HAVE A PROBLEM?" AND THEY ASKED US TO HOLD OFF TALKING TO THEM UNTIL AFTER THEY HAD, OR IN SOME CASES HAVE EVEN SAID TO US, "WE DON'T WANT YOU TALKING TO THEM AT ALL." AND WE'VE HONORED THAT. BUT AGAIN, IT'S GETTING BACK TO THE COMMUNICATIONS ASPECT. YOU SIT DOWN WITH THEM. THEY CAN BE REASONABLE. WE CAN HAVE DISAGREEMENTS. BUT I THINK IF YOU TALK IT THROUGH AND YOU GET TO UNDERSTAND THEIR POSITION, IT WORKS. WE FOUND OURSELVES WITH A WAREHOUSE WITH 7,000 BOXES OF RECORDS. IN MY EXPERIENCE, PONZI-SCHEMERS KEEP ALL THE PAPER. BUT THEN IT'S A FUNCTION OF PUTTING IT TOGETHER. THAT'S WHERE THE FORENSICS COME IN. BUT ONE OF THE THINGS THAT WE DID, BECAUSE WE HAD SO MUCH PAPER, IS WE PUT THE, UM... WE DIGITIZED EVERYTHING, AND WE GAVE THE GOVERNMENT THE WHOLE SET OF THE DIGITIZED MATERIAL. YOU KNOW, IT... WE JUST WORK COOPERATIVELY, AND THAT'S REALLY THE KEY, THAT CERTAIN... CERTAIN THINGS, AS I SAID, YOU'RE NOT GOING TO AGREE. BUT THE KEY THING HERE IS EVERYBODY'S LOOKING FOR THE SAME RESULT-- THE BEST BANG FOR THE BUCK, RECOVER AS MUCH AS YOU CAN FOR THE VICTIMS-- AND YOU KNOW, YOU WANT TO MAKE SURE THAT THERE ARE AS VERY FEW GLITCHES, HOPEFULLY NONE, AS POSSIBLE. - YEAH, BUT SOME OF THE ISSUES YOU'VE RAISED DON'T NORMALLY ARISE WHERE ASSET FORFEITURE IS AN ISSUE. SO ANY TIME WE HAVE A BANKRUPTCY CASE-- I HAVE CASES PENDING BEFORE ME-- WHERE THERE'S A CRIMINAL INVESTIGATION UNDERWAY, YOU GET THE ISSUE ABOUT THE U.S. ATTORNEY NOT WANTING WITNESSES EXAMINED UNTIL THEY'VE HAD THEIR OPPORTUNITY. SO IN ONE OF THE CASES THAT I HAVE BEFORE ME WHERE THERE HAVE BEEN EXTENSIVE CRIMINAL INVESTIGATIONS, SEVERAL OF THE CREDITORS FILED MOTIONS FOR RULE 2004, EXAMINATIONS. IT'S THE OPPORTUNITY UNDER THE BANKRUPTCY CODE TO TAKE TESTIMONY RELATING TO THE ASSETS OR PROPERTY OF A DEBTOR. IT'S CONSIDERED TO BE A VERY FAR-REACHING EXAMINATION. AND THIS WAS WHILE THE CRIMINAL INVESTIGATIONS WERE GOING ON, AND I WROTE A SHORT OPINION. I DENIED THE 2004 EXAMINATION. I SAID THERE MAY BE A TIME IN THE CASE WHERE IT'S APPROPRIATE. NOW IS NOT THE TIME. A SIPA TRUSTEE SUCH AS IRVING-- AND I HAVE IN ANOTHER CASE A SIPA TRUSTEE IN FRONT OF ME-- THE SIPA STATUTE ITSELF SPECIFICALLY DIRECTS THE SIPA TRUSTEE TO CONDUCT AN INVESTIGATION AND DETERMINE ANY POTENTIAL CLAIMS. SO IN THE SIPA CASE THAT I HAVE, THE TRUSTEE HAS FILED SEVERAL VERY LENGTHY INVESTIGATION REPORTS. IT WAS AFTER THE JUSTICE DEPARTMENT WAS PRETTY FAR ALONG IN WHATEVER IT WAS GOING TO DO, IF IT WAS GOING TO DO ANYTHING. SO...BUT IT IS A SENSITIVE ISSUE. UM...THE...THE TRUSTEES-- AND I HAVE BOTH THE PARALLEL CHAPTER 11 CASE AND A SIPA CASE-- THE TRUSTEES HAVE BEEN VERY SENSITIVE TO WHAT THE JUSTICE DEPARTMENT IS DOING. IT'S NOT ONLY IN ASSET FORFEITURE THAT WE SEE THIS ISSUE OF WHAT HAPPENS IN THE PARALLEL CRIMINAL INVESTIGATION. WHAT SHOULD A TRUSTEE OR CREDITORS, FOR THAT MATTER, BE PERMITTED TO DO WHILE THE CRIMINAL INVESTIGATION IS UNDERWAY? - THAT ISSUE DOESN'T ONLY COME UP IN THE CRIMINAL CONTEXT. THERE COULD BE AN SEC ENFORCEMENT ACTION THAT'S PARALLEL. THERE...OR ANY OTHER FEDERAL AGENCY. SO IT... TRUSTEES PRETTY MUCH ARE SENSITIVE TO THAT ISSUE. THEY'VE DEALT WITH IT, WHETHER IT'S CIVIL OR CRIMINAL. YOU KNOW, THE AGENCY WOULDN'T WANT YOU TO SPRING SOMETHING IN PUBLIC THAT... THAT THEY'RE NOT READY QUITE YET TO BRING FORWARD IN THEIR CASE. AND SO YOU...AGAIN, IT'S AN ISSUE OF COMMUNICATION. - THE U.S. ATTORNEY'S OFFICE IN MOST DISTRICTS ASSIGNS SOMEBODY TO-- IN SOME SMALLER DISTRICTS, EVERY BANKRUPTCY CASE, THERE'S SOMEONE TYPICALLY FROM THE CIVIL DIVISION OF THE OFFICE THAT'S ASSIGNED TO MONITOR THAT CASE, AND IN MY OFFICE, THE SEVENTH DISTRICT OF NEW YORK, IT'S THE LARGER, MORE COMPLICATED BANKRUPTCIES, BUT THERE'S AUTOMATICALLY AN ASSISTANT U.S. ATTORNEY WITH BANKRUPTCY EXPERIENCE ASSIGNED TO ESSENTIALLY MONITOR THAT CASE OR TO REPRESENT THE REGULATORY OR FEDERAL AGENCIES THAT HAVE CLAIMS IN THE BANKRUPTCY. SO WE...WE ARE PRETTY MUCH FOLLOWING WHAT GOES ON IN THE BANKRUPTCY TO MAKE SURE THAT THERE AREN'T THESE TYPE OF ISSUES AND YOU KNOW, ARE AVAILABLE TO WORK AND YOU KNOW, TO DEAL WITH THEM. - IN THE MADOFF CASE, WE'VE DEALT WITH BOTH THE CRIMINAL SIDE AND THE CIVIL SIDE. I REACHED A SIGNIFICANT SETTLEMENT WITH THE INTERNAL REVENUE SERVICE, AND I DEALT WITH LAWYERS ON THE CIVIL SIDE WHO REPRESENTED THE IRS. AND IT'S, UM... AND WE...WE HAD, IN THE BEGINNING OF THE CASE, THE ASSISTANT U.S. ATTORNEY WHO WAS HANDLING THE BANKRUPTCY CIVIL MATTERS, NOW A BANKRUPTCY JUDGE. BUT...BEING ABLE TO TALK TO SOMEONE LIKE THAT IS VERY, VERY HELPFUL BECAUSE THAT PERSON CAN BE THE TRUSTEE OR THE RECEIVER'S HELP INTERNALLY BECAUSE THAT PERSON CAN GO AND EXPLAIN TO THE CRIMINAL SIDE WHAT IT IS WE'RE TRYING TO DO, WHY WE HAVE TO DO IT, WHAT THE RULES ARE, WHAT THE LAW IS. YOU KNOW, GIVING NOTICE. WHAT KIND OF NOTICE DO YOU GIVE? THAT WAS AN ISSUE, YOU KNOW. WHAT...WHAT...WHAT KIND OF SERVICE LIST DO YOU FILE? HOW MUCH INFORMATION DO YOU GIVE? THESE WERE ALL ISSUES THAT IN THE FIRST 6 WEEKS OF THE CASE, WE WERE HAVING CONSTANT DISCUSSIONS, AND THE...THE ASSISTANT THAT HANDLED THE CIVIL SIDE IN THE BANKRUPTCY WORK WAS...WAS HELPFUL IN...IN HELPING BOTH OF US. - THAT'S OFTEN A KEY, IS IN SOME WAYS, YOU KNOW, FORFEITURE OR CRIMINAL CASES AND BANKRUPTCY WERE SPEAKING DIFFERENT LANGUAGES, AND FOR A LONG TIME, WE, YOU KNOW-- I THINK THERE WAS SOME EYEING OF EACH OTHER SUSPICIOUSLY. AND FOR US, AT LEAST IN MY OFFICE, THE BRIDGE WAS THE ASSISTANT FROM THE CIVIL DIVISION THAT WOULD GO INTO BANKRUPTCY COURT, AND OFTENTIMES THEY WERE ABLE TO GO IN AND ADVISE THE BANKRUPTCY JUDGE WHAT WAS GOING ON, YOU KNOW, WITH RESPECT TO AT LEAST THE ASSET FORFEITURE INVESTIGATION AND HOW IT WAS GOING TO BE LIMITED AND ALSO TO, QUITE FRANKLY, TELL ME, "YOU ARE STEPPING ON THE TOES OF THE BANKRUPTCY COURT. BACK OFF. YOU DON'T NEED THIS." SO IT'S AN EXCELLENT RESOURCE. AND BECAUSE IN MOST DISTRICTS THAT ASSISTANT U.S. ATTORNEY IS ASSIGNED TO THAT CASE, THAT CAN ALSO BE A LIAISON FOR BANKRUPTCY JUDGES TO REACH OUT TO THAT ASSISTANT AND ASK THAT ASSISTANT TO PROVIDE BRIEFING ON AN ISSUE OR TO COMMUNICATE WITH THE CRIMINAL DIVISION. - I STARTED OUT BY... TALKING ABOUT WORLDS COLLIDING. IT LOOKS LIKE WHAT WE'RE REALLY TALKING ABOUT IS WORLDS INTERSECTING NOW, AND AS WE CLOSE, LET ME ASK EACH OF YOU-- IS THERE... BASED ON YOUR EXPERIENCE, IS THERE ANYTHING THAT YOU WOULD LIKE TO TELL BOTH DISTRICT JUDGES AND BANKRUPTCY JUDGES ABOUT THE PROCESS THAT YOU THINK THEY MIGHT NOT KNOW? MS. LEVIN. - WELL, I THINK THAT... YOU'RE SAYING "WORLDS INTERSECTING," AND I THINK THAT'S VERY, VERY TRUE. I ALSO THINK THAT EVEN THOUGH THEY WEREN'T INTENDED TO BE WRITTEN THAT WAY-- THE BANKRUPTCY SCHEME AND THE FORFEITURE SCHEME-- THEY ACTUALLY ARE NOT ALWAYS SO AT ODDS, BUT THEY'RE ACTUALLY COMPLEMENTARY IN SOME WAYS, THAT IF...IF A CRIMINAL COURT AND A BANKRUPTCY COURT CAN, YOU KNOW, ENCOURAGE ALL THE PARTIES TO WORK TOGETHER, I THINK THAT IN THE END AN IMPORTANT PART OF ANY CRIMINAL CASE IS GOING TO BE VICTIM COMPENSATION. I THINK THAT THAT CAN BE BEST REALIZED THROUGH BOTH THE BANKRUPTCY AND THE FORFEITURE ACTIONS. - MR. GLENN. - I THINK FOR ME, DREIER WAS MY FIRST FORAY INTO CRIMINAL FORFEITURE, AND AS A BANKRUPTCY JUDGE, IT REALLY TOOK ME OUT OF MY COMFORT ZONE. IT WAS A DIFFERENT LANGUAGE THAT'S SPOKEN, A DIFFERENT STATUTE OUTSIDE THE BANKRUPTCY CODE, MY FIRST FORAY INTO THE FEDERAL RULES OF CRIMINAL PROCEDURE. AND BECAUSE I WAS FACED WITH A CHALLENGE TO FORFEITURE, WHETHER IT HAD ALREADY OCCURRED AS TO ASSETS THE TRUSTEE WAS TRYING TO RECOVER, I HAD TO DELVE IN, AND THE ISSUE IS FINDING THE RESOURCES THAT CAN GET A JUDGE UP TO SPEED ON AN AREA THAT'S...YOU KNOW, THEY HAVEN'T EXPERIENCED BEFORE. AND SO THAT WAS A BIT OF A CHALLENGE. THE FEDERAL JUDICIARY CENTER, IN THE BANKRUPTCY BEST PRACTICES FORUM, HAS IN THE RESOURCES SECTION... HAS A SECTION ON CRIMINAL ASSET FORFEITURE, AND IT HAS MATERIALS POSTED THERE. IT DOES TAKE YOU OUT OF YOUR COMFORT ZONE, AND THERE IS A LEARNING CURVE TO BE ABLE TO UNDERSTAND THE MATERIALS. I THINK THAT WAS VERY IMPORTANT FOR ME TO GET UP TO SPEED. I WROTE A LENGTHY OPINION THAT DEALT WITH CRIMINAL FORFEITURE AMONG OTHER ISSUES. - JUDGE MONTGOMERY. - I GUESS MY ADVICE FOR DISTRICT JUDGES CONFRONTED WITH A SIMILAR SITUATION IS DON'T PANIC. THERE ARE LOTS OF HELPFUL RESOURCES AND PEOPLE OUT THERE, THOUGH IT'S STILL KIND OF AN EMERGING, CUTTING-EDGE AREA OF THE LAW. THERE ARE NEW THINGS BEING DEVELOPED ALL OF THE TIME, AND PEOPLE, I THINK, ARE WILLING TO SHARE WHAT THEY'VE LEARNED. I THINK IT TOOK ME A WHILE TO REALIZE THAT EVERYBODY INVOLVED IN THE WHOLE MESS FROM THE LAWYER END WAS REALLY TRYING TO ACHIEVE THE SAME GOAL, AND THAT WAS FOCUSING ON MAXIMIZING RECOVERY TO THE VICTIMS. I THINK YOU HAVE TO KEEP THAT IN MIND ALL OF THE TIME. - MR. PICARD. - I AGREE WITH JUDGE MONTGOMERY THAT THIS IS REALLY AN EMERGING AREA, BUT IN A SENSE, IT'S NOT. IT'S BEEN AROUND A LONG TIME. I THINK THE REASON THAT WE'RE NOW FOCUSING ON IT AND SEEING MORE OF IT IS BECAUSE OF THE SIZE OF THE CASES. AND I THINK THE OTHER THING THAT I WOULD SAY IS THAT EACH CASE IS DIFFERENT, AND YOU KNOW, WE TALKED ABOUT COORDINATION AGREEMENTS, AND I THINK WE TALKED ABOUT A LOT OF THE NUANCES, AND I THINK IT GOES TO SHOW THAT THEY'RE NOT BOILERPLATE. AND I THINK THAT'S REALLY SOMETHING THAT'S REALLY IMPORTANT TO KEEP IN MIND. YOU'VE GOT TO... EACH SIDE HAS TO GET TO KNOW THE FACTS OF THE CASE AND HAVE TO BE ABLE TO CONVEY IT TO THE JUDGE-- BANKRUPTCY JUDGE, DISTRICT JUDGE-- SO THAT WHEN THEY'RE REVIEWING WHATEVER THE COORDINATION AGREEMENT THAT'S PUT BEFORE THEM IS, THEY WILL UNDERSTAND WHY IT LOOKS DIFFERENT FROM WHAT THEY MIGHT HAVE SEEN ON A WEBSITE OF THE FEDERAL JUDICIAL CENTER OR SOME OTHER PLACE, BECAUSE, AS I SAID, EACH CASE IS DIFFERENT, AND YOU HAVE TO TAKE THE FACTS INTO ACCOUNT. - HOPEFULLY WE'VE BEEN ABLE TO PROVIDE SOME USEFUL INFORMATION TO THOSE OF YOU WHO WILL HAVE TO DEAL WITH THESE CASES IN THE FUTURE. I'D LIKE TO THANK EACH OF THE PANELISTS. JUDGE MONTGOMERY, JUDGE GLENN, MS. LEVIN, MR. PICARD, THANK YOU ALL VERY MUCH.