Lenox, William From: Becker, David M. Sent: Monday, May 04, 2009 4:48 PM To: Lenox, William Subject: Re: Recusal question ‘Thanks. From: Lenox, William To: Becker, David M. Sent: Mon May 04 16:40:42 2009 Subject: i The small size of the distribution, or the way in which you obtained a portion, are not relevant to whether you may participate (similar to the other matter we discussed last week). The question is whether the matter in which you are asked to participate will have a direct and predictable effect on your financial interest, however small. In this case you are being asked to participate in a question about a specific interpretation of SIPA. As you note, this is a legal question distinct from any decision of the trustee to decide from whom to seek to “claw back." There is no direct and predictable effect between the resolution of the meaning of "securities positions” and the trustee's claw back decision. For this reason, you do not have a financial conflict of interest and you may participate. From: Becker, David M. Sent: Monday, May 04, 2009 4:15 PM To? Lenox, William Subject: Recusal question I just received a letter from a number of law firms asking that the Commission instruct the Madoff Trustee to change his interpretation of SIPA as it relates to the meaning of “securities positions” as to which customers may file a claim. The Trustee has taken the position that “securities positions” means, for Madoff customers, the net amount of cash deposited with Madoff less amounts distributed by Madoff. These law firms are asserting that the term should mean the entire market value of the fictional positions on the date of the bankruptcy filing. My question is whether I can participate in this. As I mentioned to you when I first started, I inherited some money from my mother’s estate that included the proceeds of an account held with Madoff Securities. My mother died in June 2004, and her estate was liquidated in in 2006 or 2007. The Madoff account was opened by my father for my mother some time before his, death in January 2000. I don’t know how much money was invested; the amount withdrawn was somewhere in the neighborhood of $2 million. I’m told that the account was liquidated and the proceeds used to pay estate taxes. ‘The Madoff Trustee has instituted a small number of lawsuits to “claw back” sums that were distributed to by Madoff to customers. For example, press reports over the weekend state that the Trustee filed a lawsuit last week seeking $1 billion from Stanley Chais, alleging that the 1returns he and his customers received were so obviously inflated that he must have known that they could not have been achieved lawfully. In theory, the Trustee could file such a suit against everyone who received distributions from his or her Madoff account. I have no idea whether any such lawsuit could be brought against me based on distributions from my mother’s estate. I don’t know the likelihood of any such lawsuit. Among other things - ¢ The amounts involved are relatively small (when compared to the $50-65 billion size of the Madoff scheme), so that litigation might not be cost effective; ‘© The amounts involved came to me as a beneficiary of my mother’s estate and not from my own account; * Thad no involvement with the administration of any investments in my mother’s estate; To the extent my mother had a Madoff account, she almost certainly wasn’t aware of any wrongdoing (she was a social worker and an academic); and The proceeds from the account were used to pay estate taxes. The issue raised in the letter received today concerns the scope of SIPA coverage, not anything related to the liability of third parties. It strikes me, though, that it is theoretically conceivable that to the extent SIPA coverage is more broadly available than the Trustee has stated, that might make it less likely that the Trustee would bring claw back actions against persons at the margin. My instinct is that any claim against me would be much too small and of dubious merit to bring in any event, but I can’t say that I’m certain. Let me know, please, what I should do. Thanks.