Today's Stories

January 26, 2009

Deepak Tripathi
The BBC's Day of Shame

January 23 / 25, 2009

Alexander Cockburn
The Ghosts at Obama's Side

P. Sainath
The Freefalling Economy

Patrick Cockburn
In Israel, Detachment From Reality is the Norm

Saul Landau
Reasons for War?

Sasan Fayazmanesh
Our Current Economic Crisis: the Monks' Cure

Alan Farago
The Problem with the Stimulus

Christopher Brauchli
When Due Diligence is a One-Way Street

Andy Worthington
Return to Law?

Ron Jacobs
Obama's Pentagon: Bowing to the Masters of War?

Lawrence Velvel
Investing with Madoff: My Experience (Part Four)

Henry A. Giroux
The Audacity of Educated Hope

David Yearsley
The Music That Wasn't There: Chamber Music for Obama's Masses

Raymond F. Gustavson
Here We Go Again: General Shinseki and Veterans

Dave Lindorff
The Way Forward

Roberto Rodriguez
Fighting for Migrant Justice in the Desert

Dina Jadallah-Taschler
The Struggle of an Un-People

Fidel Castro
Meeting Cristina

J. Michael Cole
Can Obama's Shift on Terror Succeed?

Bob Fitrakis /
Harvey Wasserman
It's Time to Free Leonard Peltier

Ramzy Baroud
Breaking Gaza's Will

Mohammad Ali Shabani
The Aftermath of the War on Gaza

Richard Rhames
Panning for Pyrite on a Cold Day at the Mall

Stephen Martin
Voices in the Mirror

Lorenzo Wolff
Jurassic Radio

Kim Nicolini
Katrina's Endless Loop

Poets' Basement
Fleming, Henson, First, Jaramillo and Glendinning

Website of the Weekend
Cartoon Love

January 22, 2009

Paul Craig Roberts
Another Real Estate Crisis is About to Hit

Kathy Kelly
Worse Than an Earthquake

Allan Nairn
US Intel Nominee Lied About Church Murders

Lawrence Velvel
Investing with Madoff: My Experience (Part Three)

Andy Worthington
Halting the Gitmo Trials

Peter Morici
How to Fix the Banks

Joseph G. Davis
The First MBA Presidency and the Business Academy: a Damage Assessment

Adriana Kojeve
The Democrats on Israel: a Brief Oral History

Benjamin Dangl
Bolivia Poised for Historic Vote

Website of the Day
Support the Gaza Community Mental Health Program

January 21, 2009

Gabriel Kolko
Understanding Gaza

Harry Browne
Obama's Work Ethic

Michael Colby
Ready. Aim. Organize.

Lawrence R. Velvel
Investing with Madoff: My Experience

Audrey Stewart
Starting Over in Gaza

Wajahat Ali
Obama and the Muslims

Binoy Kampmark
The Marketing of Hope

David Kεr Thomson
Abolition

John Ross
In My Own Bones

Allan Nairn
Killer in Chief: Will This President Murder Civilians?

Sheldon Richman
The Peaceful Transfer of Violent Power

Website of the Day
Globistan

January 20, 2009

Chuck Spinney
Hosing Obama Israeli Style

Kathy Kelly
The Strongest Weapon of All

Raymond Deane
The EU, Gaza and the Lisbon Treaty

Ralph Nader
State Terrorism Against Gaza

Audrey Stewart
Why I am in Gaza

Jonathan Cook
Israel's Doctrine of Destruction

Harvey Wasserman
A Ten-Point Solar Agenda for Obama

Christopher Ketcham
Inauguration Ad Nauseam

Robert Jensen
A Citizen's Oath of Office

Dave Lindorff
Commie Chorus on the Mall: This Land Really is Made for You and Me

David Macaray
SAG Watches It All Slip Away

January 19, 2009

Kevin Alexander Gray
Time for an New Divestment Campaign

Uri Avnery
The Boss Has Gone Mad

Kathy Kelly
Respite in Gaza

Mike Whitney
What Obama Left Out of His Economic Recovery Plan

Lawrence R. Velvel
Investing with Bernie Madoff

Mats Svensson
For Fatima in Gaza

Harry Browne
Obama's Bard: Springsteen's Working on a Dream

Norman Solomon
The Return of Triangulation

Jeffrey Sommers
The Baltic Riots: Really Existing Thatcherism

Kenneth Libby
Manipulating MLK Day

Peter Ewart
Robbie Burns, Mackenzie and Gaza

Bob Sommer
"The Fierce Urgency of Now"

Website of the Day
Death of a Whaler

January 16-18, 2009

Alexander Cockburn
Hail to the Chief

Caoimhe Butterly
Terribly Bloodied, Still Breathing

Audrey Stewart /
Kathy Kelly
Suddenly Bombs Started Falling: Report from Gaza

Jeffrey St. Clair
High Plains Grifter: Geo. W. Bush, a Concise Biography

Ellen Cantarow
I Could Not Save a Single Child

Neve Gordon
How to Sell "Ethical" Warfare

Vijay Prashad
An African-American in Gaza

Jonathan Cook
Israeli Attack Injures 1.5 Million Gazans

Rannie Amiri
The UN in Israel's Crosshairs

Andy Worthington
Guantánamo's Forgotten Child

Joshua Frank
Forecasting Obama

Dave Lindorff
Prosecuting Bush and Cheney

Brian Cloughley
Who Runs America?

Belén Fernández
Changing the Equation

Missy Beattie
Peace and Justice Denied

Fred Gardner
Growing Pot for Research

George Ciccariello-Maher
"Oakland is Closed!"

John V. Whitbeck
Democracy Not Partition

Stephen Fleischman
Card Check

Mischa Gaus
Medicare for All! Tackling Union Opposition to Single-Payer

Saul Landau
The End of the Affair

Norm Kent
Perils of the Grow House

Alejandro López
Give Bush the Shoe! (and Send Us the Photo)

David Yearsley
The Glory That Was Dresden

James McEnteer
Doin' the Time Warp Again

Lorenzo Wolff
An Album That Lives Up to Its Cover

Kim Nicolini
Patti Smith's Dream of Life

Poets' Basement
Three Financial Poems by Brian J. Foley

Website of the Day
Lancet: Medical Conditions in Gaza

January 15, 2009

Pam Martens
Wall Street Powerhouses Invested Alongside Madoff

Karl Grossman
Obama and the Military - Industrial - Scientific Complex

M. Shahid Alam
Gaza's Shattered Mirror

Jules Rabin
Gaza Besieged, Gaza Mauled

Alan Farago
The Nail-Gun Bailout

Ron Jacobs
The State of Black America: From Oscar Grant to Barack Obama

Timothy Seidel
Just Violence in Gaza? The Calculus of Proportionality

George Ochenski
Why No Montana Wilderness?

Todd Chretien
Taking a Stand for Justice in Oakland

Bob Fitrakis /
Harvey Wasserman
Obama's Marijuana Prohibition Acid Test

Website of the Day
Uranium Watch

January 14, 2009

Henry A. Giroux
Killing Children With Impunity

Kathy Kelly
Cease Fire, Cease Siege

Franklin Lamb
A Second Front? Hezbollah Militants Chafe as Gaza Burns

Mike Whitney
The Big Contraction: Why the Stimulus Alone Won't Work

Paul Craig Roberts
The Humiliation of America

Glen Ford
Sullying Dr. King's Legacy: the Congressional Black Caucus and Israel

Aditya Chakrabortty
The End of Property Porn

Dave Lindorff
Fattening the Rats: Feeding at the Bailout Trough

Jonathan Cook
Israel Bars Arab Parties From Elections

David Swanson
Conyers Explains Why He Didn't Push Impeachment

Martha Rosenberg
Fragile: Handle with Risperdal

Website of the Day
Report of a Red Cross Worker in Gaza

January 13, 2009

Norman Finkelstein
The Facts About Hamas and the War on Gaza

Jonathan Cook
Is Israel Using Experimental Weapons in Gaza?

Michael Neumann
Hamas and Gaza: Slave Revolts and Passionate Evasions

Coleen Rowley /
William John Cox
No Victors in the War on Dissent

Robert Sandels
Cuba and the Obama Administration: Subversion Through Trade?

Saul Landau
The Changeling: an Obama Nightmare

David Swanson
What to Ask Eric Holder

Wajahat Ali
Waltzing with War Crimes

Sam Bahour
No Other Option? A View From the West Bank

Stanley Heller
Why It's Useless to Lobby Congress on Gaza

Robert Jensen
Beyond Grief and Rage

Robin Mittenthal
Eating Away at the Land That Feeds Us

Website of the Day
The 50 Most Loathsome People in America

January 12, 2009

Uri Avnery
The Blood-Stained Monster Enters Gaza

Paul Craig Roberts
Our Collapsing Economy

Mike Whitney
Israel's Moral and Political Insanity

Ewa Jasiewicz
Oh, Quiet Night: Only Six Homes Were Bombed

Bill Quigley
A Day in Gaza

Dave Lindorff
From Vietnam to Gaza

Bill and Kathleen Christison
Blowback From a Tragic Error: a Message to Barack Obama

Jonathan Cook
Israel Ponders the Third Stage

Andy Worthington
Seven Years of Guantánamo

Kara N. Tina
Oakland on Fire

Brenda Norrell
Palestinians and American Indians: Russell Means Breaks the Silence on Obama

Nour Kharma
A Plea From a Teen in Gaza: "Will I Die, Too?"

Website of the Day
The Villages Group: an Antiwar Alliance in Sderot

January 9/11, 2009

Alexander Cockburn
Israel's Onslaught on Gaza: Criminal, for Sure; But Also Stupid

Kathy Kelly
Tunnel Vision: Report from Arish, Egypt

Bill Quigley
Report From Rafah: Doctors Stopped at the Border

George Ciccariello-Maher
Oakland's Not for Burning?

Elaine C. Hagopian
Gaza: History Matters

Mike Roselle
Drowning in a Toxic River: What Can be Done to Save Appalachia?

Steve Hendricks
The Torturer-Elect?

Gary Leupp
Revisiting the Tale of Samson

Jonathan Cook
Outcry Over Israel's War Crimes

Karim Makdisi
The Ceasefire Plan: the UN Finally Acts, But Does It Mean Anything?

Rannie Amiri
Livni's Big Lie

Peter Morici
In the Jaws of a Depression

Peter Montague
Can Chemicals be Regulated?

Ralph Nader
Move Fast to Restore the Rule of Law

Andy Worthington
The Dying Days of the Guantánamo Trials

Nadia Hijab
A Music School Silenced in Gaza

Dan Bacher
Unholy Alliance: Nature Conservancy Backs Schwarzenegger's Big Ditch

Catherine Fenton
The American Peace Movement and Israel

David Macaray
Wal-Mart Caught Stealing

Valia Kaimaki
Why Greek Youths Took to the Streets

Richard Morse
Haiti's Gas Gang

David Yearsley
To Gotham City with Dexter Gordon

Charles R. Larson
The Horror, the Horror

Richard Rhames
Gaza and the Goon Squad Meet the Wizard

Stephen Martin
Meltdown Memo to Come?

Lorenzo Wolff
What They Sing About When They Sing About Love

Poets' Basement
Anderson, Beatty and Valentine

Website of the Weekend
Gaza Protest

January 8, 2009

Jean Bricmont /
Diana Johnstone
Gaza Seen From Paris

Franklin Lamb
How Dershowitz Misstates, Misrepresents and Misapplies the Law

Paul Craig Roberts
The Difficulty of Being an Informed American

Kevin Alexander Gray
Give Burris His Seat

Chris Floyd
The Enduring Priorities in Obama's Time of Change

Ewa Jasiewicz
Riding on Fire in Gaza

Steve Conn
Sanjay Gupta and Obama

Harvey Wasserman
Kill the Nuclear Stimulus!

Wayne S. Smith
An Opening to Cuba?

Linda Mamoun
Re-settling Gaza: the Real Goal of the Israeli Invasion?

Adam Turl
Unions and Young Workers

Chris Papaleonardos
Mourning Maria Dimitriadi

Website of the Day
On the Wing

January 7, 2009

Saree Makdisi
What Kind of Security Will This Barbarism Bring Israel?

Franklin Lamb
Bend Over Professor Dershowitz, It's Time for Your Check Up

William Blum
America's Other Glorious War

Belén Fernández
The Trauma Vortex: Israel's Monopoly on Psychological Suffering

Lawrence Davidson
What is New About Gaza?

Allan Nairn
Adm. Dennis Blair and the Church Killings in East Timor

Jonathan Cook
What is Israel's Objective?

Muhammad Idrees Ahmad
Watching the War on BBC

Deepak Tripathi
Bush, as He Leaves

Cal Winslow
Now is the Hour to Defend Democracy in the Labor Movement!

Manuel Garcia, Jr.
To Students Planning Careers: Be Mindful

Dr. Hannah Safran
No More Recycled Military Solutions

Website of the Day
CNN: Israel Broke the Ceasefire First

January 6, 2009

Pam Martens
It's All One Big Lie

Victoria Buch
Real Estate War in Gaza: the History and "Morals" of Ethnic Cleansing

Neve Gordon
Israel's New War Ethic

Tami Sarfatti /
Yonatan Mendel
What Silence Says: Gaza is Still Waiting on Obama

Mike Whitney
The Gaza Bloodbath

Alan Farago
After the Fall

Gary Leupp
A Hamas Coup d'Etat in 2007?

Larry Everest
Silent Partner: the US-Backed War on Gaza

Ron Jacobs
The New Iraqi Sovereignty

David Macaray
Union-Busting is Alive and Well

Stephanie Basile
Where's Anna's Money?

Stacey Warde
An Uncle's Unrest

Website of the Day
Israeli Refusenik on Gaza

January 5, 2009

Paul Craig Roberts
Will There be a Recovery?

Sousan Hammad
Phoning Home to Gaza

Wajahat Ali
Flying While Brown

Mats Svensson
Longing in Gaza

Jen Marlowe
Abeer's Baby

Muhammad Ali Khalidi
Gaza Phone Tag

Brian Cloughley
Israel is Immune From Criticism

Faheem Hussain
Gaza and India: a View From Pakistan

William Cook
Consider the Realities of Gaza

Dr. Trudy Bond
The Madness Among Us

Christopher Ketcham
The Revenge of the Blogger at the National Press Club: a Rotten Washington Interlude

Steve Early
Who Rules SEIU?

Dave Lindorff
When It Comes to Terrorism and POW Cases, Equal Justice Under Law is a Joke

Website of the Day
The Endangered Fish of the Colorado River Basin

January 2 - 4, 2009

Alexander Cockburn
Diary of 2008: an Incredible, Hope-Filled Year

Uri Avnery
Molten Lead in Gaza

Jonathan Cook
The Real Goal of the Gaza Assault

Paul Craig Roberts
Whatever Happened to Western Morality?

Brian Eno
Stealing Gaza: an Experiment in Provocation

Ralph Nader
America Must Stop Shirking Its Responsibility on Gaza

Omar Barghouti
UN Complicity in Israel's Massacre in Gaza

Graham Usher
Where Pakistan's Generals and the ISI Draw Their Lines

P. Sainath
The Economy is Worse Than It Appears

Belén Fernández
Pardon Our Dust: Israel's PR Campaign for Gaza

Deb Reich
Shiv'a in Gaza, December 2008

Gary Leupp
Defacing Mr. Jefferson's Wall: Preachers and the Inauguration

Michael Yates
Top Chef or Top Wage Thief? Tom Colicchio and the Economics of Restaurants

Joanne Mariner
How to Close Guantánamo

Seth Sandronsky
Funding the Israeli Military: the US Pipeline

Cynthia McKinney
We Lived to Tell the Story

Sonja Karkar
Israel's Dogs of War

Deepak Tripathi
Gaza in Perspective

Robert Fantina
Obama, Afghanistan and Israel

John Ross
The Year No One Can Remember

Norm Kent
The Heat on Duval Street: Why Head Shop Raids are Unfair and Unjust

Larry Portis
Syria and the Arab Barbie Doll--Before the Deluge

Richard Rhames
Is Conscience Dead?

Dee C. Lubell
We Come From the Sun: Zora Neale Hurston and Richard Wright

David Yearsley
A Gay German at the Courts of the Medici and Hanover, and of Course the BBC

Lorenzo Wolff
Joe Ely, the Fighting Rooster of Rock

Marc Catone
Looting Lennon's Legacy

Poets' Basement
Five Poems by Grzegorz Wróblewski

Website of the Weekend
Earth in High Rez

January 1, 2008

Jennifer Loewenstein
If Hamas Did Not Exist

Oren Ben-Dor
The Self-Defense of Suicide

Wajahat Ali
The U.S. Response to the Gaza Crisis: Unfair and Unbalanced

Saul Landau
In Cuba No One Man Could Steal $50 Billion From Other People

David Michael Green
What to Expect While We're Expecting

Website of the Day
Morbid Anatomy

December 31, 2008

Pam Martens
Wall Street's Collapse and the Ownership Society

Neve Gordon /
Jeff Halper
Where's the Academic Outrage Over the Bombing of a University in Gaza?

Ted Honderich
The First Casualty of Israel's War

Brian Cloughley
Five Little Girls on a Sofa: Gaza's One-Sided Images

Ron Jacobs
What is Hamas, Really?

Vijay Prashad
Hot Rod and His Sikh Warrior: Blago's Indian Connections

Franklin Lamb
Mr. Mubarak, Tear Down That Wall!

Mike Whitney
My Brilliant Career

David Macaray
What Really Killed the Auto Bailout

Richard Thieme
The Betrayal of the Commons

Mary Lynn Cramer
Who Wins What in Gaza?

Stephen Lendman
The Troubling Case of the Fort Dix Five

Worthy Group of the Day
Western Shoshone Defense Project

December 30, 2008

Paul Craig Roberts
May We No Longer Be Silent

Tariq Ali
The Gaza Ghetto and Western Cant

Robert Bryce
The $775,000-a-Year GI

Jonathan Cook
Electioneering with Bombs

Gary Leupp
The Fishbarrel War

Dave Lindorff
Tough Guys Don't Walk: Will Cheney Seek a Pardon?

Brian McKenna
Ted Downing and Troublemaker Anthropology

John Walsh
The End of the Green Party

Ramzy Baroud
Gaza and the World

Bob Sommer
The Education of David Frost

Worthy Activist of the Day
Support Marie Mason

December 29, 2008

Jennifer Loewenstein
Israel's Attempted Endgame in Gaza

Neve Gordon
What, Exactly, is Israel's Mission?

Joshua Frank
Obama and the "Special Relationship"

George Salzman /
Manuel Garcia, Jr.
The War Against Palestine: Exception From Humanity

Norman Solomon
A Hundred Eyes for an Eye

Ewa Jasiewicz
Gaza Today: "This is Just the Beginning"

Rob Larson
The Banks Laugh All the Way to the Bank

Kenneth Libby
Arne Duncan's Dark Years in Chicago

Robert Weissman
The 10 Worst Corporations of 2008

Elsa Johnson
High Noon at Black Mesa: Bush's Farewell Gift to Peabody Coal

Nicola Nasser
Resolution 1850: Bush's Parting Gift

Belén Fernández
Hanukkah Games

Worthy Group of the Day
Nuclear Information and Resource Service

December 26-28, 2008

Alexander Cockburn
The Medusa's Head

Dr Eyad Al Serraj
The Boming of Gaza: "An Earthquake on Top of Your Head"

Jeffrey St. Clair
Cancerous Air

Bradley Simpson
Obama's New Intel Chief, Dennis Blair, Ran Interference for Indonesia's Butchers

Ralph Nader
Government Without Laws

Gary Leupp
Obama and the Graveyard of Empires

Ellen Cantarow
Richard Falk, Israel and the NYT

Matt Landon
The Great Coal Ash Flood: a Report From Swan Pond Road

David Macaray
SAG's Terrible Dilemma

Patrick Bond
End of Neoliberalism? Sorry, Not Yet

Norm Kent
Invoking Bigotry: Obama and Rick Warren

Brian T. Ketcham
Fuel Efficiency is Easy--Just Don't Let Detroit Tell You How to Do It

Rannie Amiri
War Clouds Over Gaza

Larry Portis
Changing the Ethnic Vocabulary

Richard Rhames
Welcome to Soup Kitchen America

Stephen Lendman
29 Red Flags: Early Suspicions About Bernard Madoff

James L. Secor
Unheralded Coup

Ramzy Baroud
Iraq, the Plot Thickens

Harold Pinter
Art, Truth and Politics: the Nobel Lecture

Cpt. Paul Watson
Tracking the Cetacean Death Star

Howard Lisnoff
Nixon's Cambodian Shock Treatment

Michael Dee
The Bill of Rights, Killed in Action by the War on Drugs

Steve Conn
Eight Predictions for 2009

Poets' Basement
Valentine, Kaung, Moser and Graham

Worthy Group of the Weekend
United Mountain Defense

December 25, 2008

Judy Gumbo Albert
What Were Those 1960s Terrorists Thinking, Anyway?

Rev. William E. Alberts
The Sole of Christmas

Hannah Mermelstein
Caution: Settlers Ahead

Worthy Group of the Day
Citizens' Coal Council

December 24, 2008

Bill Quigley
Five Bailout Lessons From Katrina

Saul Landau
Then and Now: Venezuela and Cuba, 1960-2008

Sam Smith
Evangelism and Politics

Brian Cloughley
Torture, Slaughter and Lies

John Ross
Where's al-Zaidi's Pulitzer?

Eric Walberg
Cold War Shivers

Norm Kent
What Will Obama Do About Marijuana?

Stephen Martin
Reasons for Cheerfulness

Worthy Group of the Day
Collateral Repair Project

December 23, 2008

Michael Hudson
The Ponzi Paradigm

Michael Yates
The Tombstone Economy

Chuck Spinney
The New York Times Flames Out in Defense Dogfight

Vijay Prashad
India's Reckless Road to Washington, Through Tel Aviv

Brian Horejsi
Interior Decorating: Obama, Salazar and the Future of America's Public Lands

David Macaray
Obama's Best Pick?

Neil Watkins /
Sarah Anderson
Ecuador's Conscientious Default

David Michael Green
Hey, Reagan Democrats! Now Do You Get It?

Worthy Group of the Day
Focus on the Corporation

January 26, 2009

What Can Be Done? (Part Five)

Investing with Madoff

By LAWRENCE R. VELVEL

Click here to read Part One.

Click here to read Part Two.

Click here to read Part Three.

Click here to read Part Four.

I turn now from preliminary comments to specific courses of action. As you will see, each course of action being generally discussed in the media today will be insufficient, will be too little, too late, especially because the law is not designed to handle a disaster of this magnitude.

There is, first, the Security Investors Protection Act, commonly referred to as SIPC (pronounced Sipic). Under this Act investors can receive up to $500,000. But, if they have taken money out of Madoff, this might be subtracted from the amount they receive -- it is not yet completely clear how SIPC intends to handle this question, although one major straw in the wind could be that the head of SIPC told Congress that SIPC would reasonably quickly pay people who could show they never took money out of Madoff. However, SIPC will not cover persons who invested through a fund, rather than directly with Madoff. (One person has filed a petition requesting that this limitation be dropped.) SIPC covers only a portion of people's losses, even small people. And if SIPC subtracts from the $500,000 the amounts that a person has taken out of Madoff, it is likely that those who are most desperate will get nothing: those who were living off what they thought were their earnings from Madoff -- e.g., older people -- have been taking money out every year, and likely would get no money from SIPC.

Then there is the possibility of recovery from the Trustee in Bankruptcy, who has taken over Madoff's business and estate, is seeking hidden monies, and will divide proceeds among the investors. A problem here is that it is widely thought that the Trustee is not going to uncover much money, at least not in comparison to the amounts investors are owed. So investors will get little back from the Trustee.

Another problem here is the so-called clawback problem. The media, and lawyers whom it quotes for reflexive positions representing the conventional wisdom, say that people who took money out of Madoff during the last six years will have to give back that money -- this is the so-called clawback. This is terrifying to people, and, rightly so. Having been wiped out, or having suffered a huge loss that leaves one with only a small percentage of what one had, people now face the prospect of being obligated to give back six years of withdrawals -- often withdrawals they needed to live, as with older people, or for perfectly reasonable purposes like buying a house. However, what is given much less media play is that, as I read the leading case in the field, clawbacks, in part at least, will not apply to people who had no inkling that anything was wrong -- as true of so many of Madoff's victims. It applies only to people who took out money after learning of facts that reasonably should have put them on notice that something was wrong (and it would apply, I assume, though I haven't read anything explicit on this, only to money they took out after being put on such notice). And finally, clawbacks will not apply, I believe, to the extent that money innocently taken out, with no knowledge of possible illegality, did not exceed the principal put in.

It is, of course, in a way quite perverse to claw back money form people who took out their money after they learned that something could conceivably be wrong. For taking out their money then, as I think one pension plan actually did if I remember correctly, is exactly what one would expect and hope they would do. What else should they have done -- left their money in if they believed it was being stolen? Of course, it is possible that they should have gone to the SEC but didn't, and there are theories under which this could also make them liable to others, but leaving their money in to be stolen by Madoff hardly seems what a capitalist system expects from people.

Whether the Trustee in Bankruptcy is going to insist on clawbacks, at least from those who were not completely innocent of knowledge that something unlawful was happening, is unknown. But people remain terrified of the possibility, and as the media has said, many who innocently took out monies are considering not making claims either to SIPC or the Trustee lest their withdrawals come to these parties' attention when otherwise they might not due to the abominable condition of Madoff's records. Victims of Madoff are understandably terrified of being denuded of their few remaining assets, if any.

Then there are tax refunds. Persons who took supposed earnings (shown by their monthly statements) out of Madoff -- to live, for example, or to buy a house -- paid income taxes on that money at the rates applied to ordinary income -- roughly a bit more than one-third the supposed earnings. They can get refunds of their last three years of taxes (2005, 2006 and 2007), and of estimated taxes already paid on the supposed Madoff earnings in 2008. But this will amount to only a fraction of the total income taxes many of them paid on supposed Madoff income (called phantom income) over the years -- over 20 or 30 years of investing with Madoff.

You know, if these people had been committing tax fraud on the government for the 20 or 25 years, so that the government never got the tax it was entitled to, the government could go back and collect the taxes -- with interest -- for the full periodof 20 or 25 years. But when the government, for 20 or 25 years, got taxes it was not entitled to because the tax was paid on phantom income, and when the horrible dereliction of a government agency is heavily responsible for the people thinking they had real income and paying taxes on it to the government, the people get refunds for only three years. The government can get all 20 or 25 years, the people can get only three years. This does not seem fair, and still less so in the context of governmental dereliction. If you ask me, there should be a special law allowing Madoff victims who paid taxes on phantom income to the government -- taxes which would not have been paid but for governmental dereliction -- to recover all the taxes they paid on phantom income. This would go some way towards easing the financial problem -- the problem of how to live -- of many Madoff victims, especially those who have been economically devastated. Refunds of income tax will not, however help all investors. In particular, charities and pension plans that were crippled or wiped out are nonprofit, tax-free organizations. So they never paid income tax, and will get no refunds of tax. Neither will people whose IRA monies were in Madoff, because they too paid no taxes on supposed earnings from Madoff.

There is also another tax consequence besides refunds for people who paid income tax on phantom income. There is a theft deduction for the amount lost by fraud. The deduction can be taken against income in 2008, when the theft was discovered, can be used against (can be "carried back" against) the three prior years' income (2005, 2006, and 2007), and can be carried forward for 20 years.

But there are huge problems with the theft deduction. The exact amount of the deduction that can be taken is a matter of great dispute, involving complex tax ideas that are incomprehensible to laymen and even to attorneys who are not tax lawyers. As is proverbial in other tax areas, if you put ten tax accountants and tax lawyers in a room, you might get ten different answers as to how much can be taken as a theft deduction. And the IRS may fight to keep the theft deduction as low as possible.

Then too, while the theft deduction has to be declared by an individual in 2008, the year in which the theft was discovered, the government may not allow it to actually be used for years -- conceivably for five or ten years or even more. For it cannot be used until the exact amount of the theft loss is known with pretty fair certainty. But if one claims money from SIPC, or engages in litigation to try to recover money -- as I would bet most will -- then the IRS can claim that the amount of the theft loss is uncertain while the SIPC claim or the litigation claims hang fire, and the theft loss will be unusable until the SIPC and litigation proceedings are finished, which is likely to take years.

The theft loss deduction is also of no use to the charities or pension plans which got crippled or wiped out. For, as said, they are tax free nonprofits. They therefore pay no income taxes, have no past, present or future tax payments against which to deduct theft losses, and will obtain no benefit from any theft loss deductions. Ditto those who invested through IRAs.

This brings me to the question of lawsuits, several of which have already been filed.

Let me start with the question of suing the SEC. (One such suit has already been filed.) The "smart money," the lawyers whom the media quote, reflexively provide the conventional wisdom that this cannot be done -- the government is immune from suit, the SEC was exercising permissible discretion, etcetera, etcetera. Well, I'm not at all sure that the conventional wisdom is right in this case. In fact, I think it may be quite wrong, and that there are at least three theories on which the government could well be liable to investors for their losses. I don't intend to get into those theories or the ideas underlying them here, except to make a general comment.

To wit: we have here a situation in which the SEC acted in gross violation of the public policy that the agency has been obligated to uphold since it was created in, I think, 1933. It is obligated, it has a duty to all citizens, to prevent fraud upon them. It has no discretion -- none -- to fail to follow up, with serious investigations, when presented with knowledgeable, detailed, obviously highly competent, and in many respects easily "checkable" allegations of the most serious fraud, of a huge fraud that is fooling thousands of people, stealing billions of dollars, and causing horrible injustice. It has no discretion, none, to thwart in such manner the basic purpose of the statute, the basic policy the statute established, the will of Congress, and the SEC's own raison d'etre. The SEC's incredible willful negligence, its defacto (or, who knows, maybe even de jure?) complicity do, I think, make it liable to suit in this case under several different theories, even if it is not liable in other cases involving much different facts.

Then there is the possibility of suit against FINRA. Unlike the SEC, FINRA is not a governmental organization, but a private one. Thus arguments from conventional wisdom as to why it's not possible to sue the SEC do not even apply against FINRA, as far as I can see. FINRA and its predecessors, particularly the NASD, appear to have been as incredibly negligent as the SEC, and will be sued once people learn of the inspections and negligence in the Madoff matter of FINRA and its predecessor, the NASD (both headed by Mary Schapiro, who now will head the SEC).

A major reason FINRA will surely be sued is that, if I understand correctly -- and I think I do but would surely like to be told if I am wrong -- (i) FINRA is a membership organization whose members comprise pretty much the entire brokerage community in the United States, including, probably, at least several of the huge, now bailed out investment banking houses because they usually had brokerage arms (e.g., Merrill Lynch) or even were mainly brokerage houses, and (ii) FINRA may well have the capacity (as does the SIPC) to assess its membership for money. If these assumptions are correct, virtually the entire brokerage industry in the United States, including vast bailed-out houses, all of whom could be assessed by FINRA, could be on the hook financially due to FINRA's incredible negligence in inspecting Madoff. FINRA would thus represent a very deep pocket capable of paying all the losses of investors in Madoff. It would, of course, be only poetic justice for the losses to be paid by the brokerage/investment banking community, since that community is so fundamentally responsible in so many ways for the country's entire financial meltdown -- which, by the way, is also thought to have triggered the redemption requests made to Madoff by funds, requests that are in turn thought to have triggered Madoff's meltdown.

There also will be litigation against huge funds and banks that gave Madoff billions of dollars without doing due diligence, which they surely did have the money and knowledge to do or to have done for them, and which other large funds and banks here and abroad did do (and therefore decided not to invest in Madoff). These funds and banks had and failed in a duty of diligence owed to their investors, whose money they put in Madoff, and they will be sued by their investors. It is commonly thought that they had no duty to, and therefore cannot be sued by, persons who invested directly in Madoff rather than through a fund. I think there is a theory which such persons could use against the funds and banks, but I do not place a lot of stock in it.

(With regard to banks, there seem to be legitimate questions regarding Chase Bank. I have read that Madoff's sole account was with that bank. Chase never had reason to question transactions in the account, did it, e.g., large checks being sent to Swiss banks or to Lichtenstein or the Cayman Islands? I've also read that the wife of Frank DiPascali -- who is Madoff's number two man and must certainly have been himself involved in the fraud -- was an officer of Chase. She didn't supervise Madoff's account, did she? I have no reason to think Chase has any fault, but these questions must at least be asked, especially since these days nothing seems impossible.)

Then there is the question of suit against experts who ferreted out that something was rotten in the state of Madoff, who may even have advised clients or their companies not to put money in or deal with Madoff, and who did not bring to the SEC their suspicions and the well taken reasons for them. Can these people be liable because, if they, in what appear to be their possibly significant numbers, had informed the SEC of their suspicions, as did Markopolos, perhaps there would have been enough complaints to move the SEC off the dime? Well, I think it would be true in fact that complaints from all these people could have created a critical mass that would have had an impact, but for several reasons I would not bet my last farthing, or maybe even my first one, that suits against them would be successful.

To be continued.

Lawrence Velvel, dean of the Massachusetts School of Law, is the author of Thine Alabaster Cities Gleam and An Enemy of the People. He can be reached at: Velvel@VelvelOnNationalAffairs.com

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