“Why Palestinian High Tech Entrepreneurs Hate Richard Behar’s Forbes Cover Story”

Written on September 1, 2013 – 4:27 pm | by ibkent

My friend, Richard Behar is an accomplished and successful magazine writer  (one of a handful if not THE ONLY author to be sued by the Church of Scientology and win).  He recently wrote a cover story for Forbes Magazine about cooperation between Palestinian and Israeli high tech entrepreneurs. The story, “Peace through Profits? Inside the Secret Tech Ventures that Are Reshaping the Israeli-Arab-Palestinian World” appeared in the August 12, 2013 issue.

Rather than being lauded, this article has been roundly condemned by the very Palestinian entrepreneurs written about, for deigning to “suggest an optimistic perspective on Israeli-Palestinian relationships.”  In fact, Behar was asked to immediately retract the article. (Never mind that the NY Times regularly posts blatantly anti-Israel articles and articles that either leave out poignant facts or containing blatant untruths.)

What is attached is another article written by Richard titled “Why so Many Palestinian High-Tech Entrepreneurs Hate My FORBES Cover Story”

So sad that Richard seems to be punished for actually posting facts — and more sad that the Palestinian entrepreneurs now fear for their lives – and businesses for seeming to be “cooperating” with Israel. <Kinda sounds like Tea Party who look at “compromise” and “reconciliation” as dirty words.>


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No, I will not be watching the Madoff TV Movies

Written on February 1, 2016 – 1:11 am | by ibkent

Find your  investment statement … I’ll wait — now look at that nice little SIPC logo at the bottom of the statement… it should look like this:


You feel comforted, right? that SIPC’s “got your back.”  Those invested with Madoff thought the  very same thing

In the days and weeks following the discovery of the financial crime of the century, Madoff investors were gratified and comforted to hear from both Mr. Stephen Harbeck, President of SIPC, and Ms. Josephine Wang, SIPC’s General Counsel that as long as you had your final statement in hand, then you were entitled to SIPC insurance of up to $500K per account.

Without any discussion of how Bernie L. Madoff got away with what he got away with for so long, without any discussion of how SIPC failed its mission to protect investors, any TV movie or series is just not worth my time.   No, I will not be watching either of the upcoming Madoff movies.  Maybe I’m being judgmental, or maybe I’m just being practical.  We’ve heard it all before; can’t fix stupid – “Madoff was a charming delightful guy, and the victims should have known better, boy are they dumb.”

If we don’t see this as a cautionary tale, then we will have learned nothing from history. My friend, Ronnie Sue Ambrosino put it best in a post on her Facebook page:

 ” …  be aware that your investments are at risk-not from the market fluctuations, but from the promise of protection of the SIPC to protect your savings from a fraudulent broker. Unfortunately, the opposite is true. SIPC protects the broker and enriches the attorneys who have been hired (Trustee Irving Picard and his firm) to “distribute” the funds. Picard and his firm (Baker & Hostetler ) have earned $1Billion while trying to “unravel” the fraud and further victimize the innocent investors (again-too long to go into here).”

I am reminded of the poem by Martin Niemüller who spent the last seven years of Hitler’s reign in concentration camps:

First they came for the Socialists, and I did not speak out—
Because I was not a Socialist.

Then they came for the Trade Unionists, and I did not speak out—
Because I was not a Trade Unionist.

Then they came for the Jews, and I did not speak out—
Because I was not a Jew.

Then they came for me—and there was no one left to speak for me.


A reporter friend of mine (financial reporter cum movie critic) had early access to the Richard Dreyfuss show and his review in today’s New York Times is here But for a few snippets of a few cameos of small investors unlucky enough to have trusted Madoff there is virtually no mention of the devastation that has been left in the wake of what is probably the greatest government failure in history.

Most of Madoff’s victims were not super wealthy, contrary to the myth perpetuated in the media.  No, they did not receive 15% per annum whether the markets were up or down.   Yes, many are Jewish; this was, after all an “affinity crime,” a crime that is perpetrated upon members of a particular ethnic group. I suppose if Madoff had been Greek, he’d have gone to the Greek community, if he had been Italian the Italian community and so on.   They worked long and they worked hard. They were immigrants or children of immigrants living the American Dream, that is, until the world came crashing down on December 11, 2008.  Legacies lost. Dreams extinguished.

If you truly want to understand why Madoff victims are angry, and some of the gory details of this massive $65 billion government failure,  how Madoff investors continue to be victims of laws that were intended to protect them, and how THIS COULD HAPPEN TO YOU read on. Otherwise, go ahead and continue to blame the victims of this heinous crime and refuse to even consider this as a cautionary tale.

In 1970, Congress created the Securities Investment Protection Corporation. SIPC was an outgrowth of the Securities Investor Protection Act, (SIPA) enacted in 1970 and amended in 1978, a law put in place to restore confidence in Wall Street following some high profile broker failures and disastrous backroom troubles. There were several key elements of that bill:

  • First and foremost, Wall Street would no longer be required to keep customers’ physical securities nor would they be required to hold stocks and bonds in the customers’ name – they could be kept in Wall Street’s – or “Street Name.”
  • Second, investors’ reasonable expectations of the value of their investments are to be amounts shown on the statements and confirmations they receive from their brokers.
  • Third, to fund this new non-profit, tax exempt corporation known as SIPC, Wall Street would be assessed fees to run the corporation; in other words, SIPC – the organization empowered to protect investors — would not require one tax payer dollar, not one.Wall Street has earned billions as a result of this law.

In other words,  customers would no longer receive paper copies (stock certificates ) when they invested. Instead , SIPC would “guarantee” their investments based on their account balances of their broker statements.

OK, so now you have at least a brief understanding of the law and the quasi governmental organization it created to assure victims of securities fraud.

Now imagine this triple tsunami  experienced by thousands of Madoff victims–

a.   You wake up, discover you’ve become a victim of a crime, and your money is gone.  Ok, I have my SIPC insurance; that should do.

b.  You wake up the next day and discover that, due to an arbitrary decision by a bankruptcy trustee, you get nothing.  Well, ok, I guess I have what I have and I’ll move forward.

c. Day three – Tables have turned YOU become the criminal and the SIPC, rather than figuring out how to pay your claim, sues you for any money you took out.

Truth be told, the SIPC does not exist to protect investors. Rather, they have a long and storied history of protecting themselves and their funders – Wall Street. Over 15 years ago, Gretchen Morgenson, a Pulitzer Prize winning New York Times reporter wrote “Investor Beware: Many Holes Weaken Safety Net for Victims of Failed Brokerages.” In that New York Times article, Ms. Morgenson wrote

“the organization requires investors to run a gauntlet of legal technicalities that would challenge even those knowledgeable about securities law.”

She further noted that

“the Trustees in these cases have received far more [money] from representing the corporation than the corporation itself has paid to investors. Their critics say that trustees wanting repeat business from the corporation have an incentive to minimize payouts to investors. One trustee is the former president of the corporation.”

And it remains the same today.

In the Madoff case, the Trustee is a man named Irving Picard. Mr. Picard, in anticipation of his appointment as Trustee by the Federal Bankruptcy Court — after being recommended by   SIPC (who also pays his fees) joined the white shoe New York law firm of Baker & Hostetler. It should come as no surprise that Mr. Picard has been the Trustee in six other SIPC liquidations prior to the Madoff matter.  He makes quite a good living as a career bankruptcy trustee.  He says that customers’ statements are worthless. He and his firm has billed the SIPC at a rate of $1 million per week  – and as of this writing has reached well over a billion dollars – that is money that comes from the general SIPC fund, the same fund that Mary Schapiro, the then-SEC Chairman said was not solvent enough to pay all claims.


When the SIPA was first passed, its members (Wall Street brokers) were assessed a percentage of sales.  Let me take this opportunity to remind you that there is not ONE tax dollar used to fund SIPC. Not a dime. Somewhere along the line, SIPC acquiesced to its membership and began billing each SEC registered firm $150 per year, yes PER YEAR.  And this went on for 18 years – each broker paid $150 per year, not per account, net per $100,000 in sales, not per month, for the right to use the SIPC logo and assure their investors that they will be covered in the case of broker failure or broker fraud. I wish I paid $150 per year for any of MY insurance.   Obviously, their funds dwindled.  As recapped in this quite detailed overview of the Madoff fraud  , “SIPC and its Accountability to the American Investor,” there were multiple warnings by the GAO and Congress that it would be unlikely that SIPC could manage a “catastrophic broker failure.” and guess what … it happened and they couldn’t. .(After the fraudster went to jail, that amount was increased again to a percentage of sales.)


When the dust had settled it appeared that Madoff had 4904 active accounts on December 11, 2008 – the date he turned himself into the FBI.  Helen Chaitman, Esq, a victim and legal advocate for other victims of this legal disaster testified at a hearing in front of the House Financial Services Committee’s Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises on December 9, 2009 nearly a year to the day that the fraudster went to jail.  According to her the full exposure for SIPC would have been approximately $2.5 billion.  However, SIPC only had assets of $1.7 billion.  With no Congressional or GAO effort to put teeth into their warnings, what they had predicted would happen, did.  (Keep in mind that SIPC had at its disposal a line of credit of $2.5 billion which they opted not to use.)

All of a sudden, since this was a PONZI SCHEME, Mr. Picard claimed, profits didn’t matter and your statement meant nothing.  He, quite brilliantly, created the concept of “net investment” — money in less money out — thereby created fissures amongst investors – the good guys (net losers who never took any money out) and of course those awful bad guy (net winners).  The securities lawyers were astounded.  Never before in SIPC’s history had they EVER determined “even if a customer’s statements reflected the purchase of real securities, SIPC only insured the “net investment” of each customer.”  By this calculation there were 2,569 account holders left without the protection to which they were entitled.  Picard  further tried to claim that SIPC was never intended to be “insurance,” nor was it to be considered the FDIC of the investment industry.  That’s odd, because even SIPC’s own website – since scrubbed – talked about it as being insurance.  President Nixon, when he signed the bill into law proclaimed it was about time that investor had “insurance,”  as did this FINRA alert in 2010, and even the SEC’s own 1971 Annual Report just one year after SIPA was passed.

And if you took out more than you put in — you were sued for the difference. SUED FOR THE DIFFERENCE using bankruptcy law.  And who gets hurt the most? Older investors who’d been with Madoff for years, many of whom were “clawed back” for federally mandated withdrawals from their IRAs.  Or World War II and Korea War veterans who, following their military service worked long and hard to achieve their American dream and once having done so, investing the profits from sales of their businesses or professional practices, or their teacher pensions with Madoff in the early 90s.  These were generous and philanthropic people, many dealing with cancer and other life threatening diseases. What else were they going to live on?

The SIPA was passed in 1970.  Charles Ponzi made a name for himself in the early 20’s.  If Congress wanted to exempt Ponzi schemes from coverage, they well could have added it to the law. So common sense would dictate that there should be no exceptions.

One of the key factors in the creation of SIPA was Congress’s intent to protect a customer’s “legitimate expectations,” based on his broker states and to replace securities even if the broker stole the customer’s money and never purchased the securities.  In fact, one of the key 1978 amendments to the law was just that – to ensure that customers could rely on their account statements as representative of their worth.

The Bankruptcy Trustee is covering up a flawed system.  This has become, as Ms. Chaitman wrote, a classic struggle between Wall Street, represented by SIPC, and Main Street, represented by the destitute investor.  She further writes that the most unfortunately of all, the SEC and SIPC and both protected the interests of Wall Street over innocent investors.

Bottom line, my friends, SIPC is a scam, –the greatest insurance scam in history. The Network for Investor Action and Protection (NIAP) www.investoraction.org has teamed with the victims of the Stanford fraud to implore Congress to force SIPC to enact the law that is written.  They are NOT asking to be made whole (and remember, there is not one dime of taxpayer dollar at risk, although failure to pay allows victims to take carryforward losses on their tax returns) they are simple asking for SIPC to live up to its promises.  Cong. Scott Garrett (R-NJ) has introduced “Restoring Main Street Investor Protection and Confidence Act” – HR 1982 … This has been the third Congress where this has been introduced.  A summary of the bill is here.   It is unfortunate that our elected members of Congress will not do something as simple as passing a bill that would implore a quasi-governmental organization to do. its. job.

A book by Ms. Chaitman talking about the cozy relationship between Madoff and JP Morgan Chase is due out soon. you can read a little bit about it in a Forbes blog by Dr. Laurence Kotlikoff, a frequent contributor to Forbes and economics professor at Boston University.   Her website is www.jpmadoff.com

You can also read more by Dr. Kotlikoff and his suggestion that we all close our broker accounts here.

And finally, for a complete timeline of the Madoff financial disaster, I highly recommend this presentation, “SIPC and its Accountability to the American Investor.” 

Maybe next time we’ll talk more about how the SEC, despite multiple warnings by one Harry Markopolos, and reputable media sources, they did nothing to mitigate the damage caused by Bernie Madoff.

Stay tuned.



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Seven Years and Counting – Madoff Victims still wait

Written on December 11, 2015 – 8:37 pm | by ibkent


No, it is NOT a Merry Christmas – not for thousands of Madoff Investors.

Today is December 11.  The date doesn’t mean much to most people.  On this date 7 years ago, the lives of tens of thousands of people were disrupted as that creep Bernard L. Madoff confessed to the FBI that he head been running a massive ponzi scheme — the longest in history. Dreams were smashed, legacies disappeared, charities were forced to close. Money that many WW2 and Korean War vets had worked so hard to earn – gone in an instant. There was not a region of the country that was uneffected.

In the weeks that followed, hopes were raised and dashed as the President of SIPC – the Securities Investor Protection Corporation as well as the SIPC’s General Counsel, Josephine Wang first publicly announced that if a Madoff investor could show a valid statement then said investor would receive the coverage promised under the Securities Investor Protection Act — up to $500,000 in cash.  In testimony before Congress, SIPC’s President, Stephen Harbeck testified before a House Financial Services Committee Hearing on January 5, 2009, that “SIPC was indeed investor protection (except for market risk)” and agreed it performed an insurance like function.” If so, it is the largest insurance fraud in the history of mankind.

SIPC is the Securities Investor Protection Corporation, created by the Securities Investor Protection Act of 1970 – a law that was enacted at Wall Street’s behest to help minimize they’re growing expenses in managing stock certificates.  In return for an investor not receiving actual certificates, their accounts were to be insured by this new quasi-governmental organization — to be funded 100% by Wall Street.  There is not one tax dollar at risk. Every Wall Street/broker firm is required to contribute. For the 18 years prior to the largest investor fraud in US history each Wall Street firm contributed $150 per year. That’s right. One Hundred Fifty Dollars.  Not per investor, not per account, not per month — PER YEAR.  Not surprisingly, SIPC was grossly underfunded and did nothing for years as Congress and the General Accounting Office implored them to increase the assessment. (Within months of the discover of the Madoff crime it was raised to a percentage of assets, as the original law intended.

Enter Federal Bankruptcy Court Judge Burton Lifland (since deceased) who appoints  career Bankruptcy Trustee, Irving Picard (for whom this was the 7th) to manage the Madoff fraud. At this point Picard has joined the law firm of Baker & Hostetler whose managing director was David Sheehan (who has since left the firm).  Together, this “mighty duo” engaged in what had long been a SIPC practice – to figure out ways their client, the SIPC – whose purpose is to protect investors – could minimize its payouts.  Gretchen Morgenson wrote an article, in the New York Times 15 years ago, and it’s as true today as it was then.   Realizing that there was not enough money to make the payouts required, they engaged in a campaign to make make victims turn on one another. There were the “net winners’ – people like my 90 year old parents who used the many as many did, to live in.  With no value given for interest, they, over the course of nearly 20 years, took out more than they put it.  (They were sued by the Trustee for the excess money under bankruptcy clawback regulations).  That put them at odds with so-called “net losers,” those who never took anything out and whine about net winners wanting insurance payouts.  Finally, there are the indirect investors – they number in the tens of thousands and  many did not even know they had money with Madoff through mutual funds, funds of funds, pensions, etc.

Despite the headline making press releases – it’s more like Bah! Humbug for thousands of Madoff victims rather than Merry Christmas or Happy Hannukkah.  The trustee had engaged in a rather successful campaign to segment investors — the net “winners” – those who had the audacity to live on what they thought was interest on the accounts such that over the span of 20+ years, they’d taken out more than they invested. (Remember, these are senior citizens who, BY LAW, were REQUIRED to take out funds from their Madoff-invested IRAs) These people have and likely will not receive a dime; in fact, many have been sued for the difference; the net “losers” – those who were wealthy enough to leave the money where it was. These people will have a very Merry Christmas. And finally, the indirect investors – those who invested in mutual funds, pension plans, funds of funds — they will not get a penny.

The Bankruptcy Trustee has continually ignored the law that requires a) net equity be determined by your final account balance (SIPA – Section 16 #11) and b) the trustee make payouts in a timely fashion. Neither of which has occurred.  The Trustee has taken it upon himself to rewrite the law and the Courts have allowed it.   If Congress had intended exemptions, they likely would have written them in.

The so-called net winners have no problem with these payouts – they simply want the law to be enacted as written and as intended by SIPC.  (BTW, SIPC has changed its website as a result of the Madoff fraud to say there are “instances” where there will not be payout – but the law is the law.) One final thought – for purposes of defying decades of precedent – the trustee did not allow the profits to count towards net equity. Meanwhile — the IRS was taxing – and kept — these gains. You figure it ou.

Baker and Hostetler has earned over $1.1 billion paid for by SIPC.  Imagine if they had just used that money to fulfill their statutory obligations.

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A Lost Opportunity – How Andrew Madoff Disappointed, Even in Death

Written on September 12, 2014 – 7:42 pm | by ibkent

I never rejoice someone’s death and was sorry to hear about the passing of Andrew Madoff just as I am sorry when anyone dies. Now that both of the Madoff boys are gone we will never really know what they really knew and when they knew it.  I believe that Mark Madoff – often described as the “sweet” and “kind” child – was truly despondent over what he is father did which is why he took his own life on the second anniversary of Papa Madoff’s arrest.  He likely knew he played a role in the financial ruin of so many hardworking Americans.  At the very least, I believe he realized he should have known.

Andrew Madoff, the older brother, rarely showed any contrition.  The Feds never quite got enough evidence to prosecute him but seemed to have been working on a case when he died earlier this week. Sure, he’d express “remorse” every now and again. And he told People Magazine  that “the stress of the last few years at least partially opened the door for his cancer.” Who knows. I’m not a doctor.  

At this point, whether he actually know the intricacies of this fraud we’ll never really know.  Shortly following Madoff’s arrest, I made acquaintance with a respected financial writer, and one who tried to blow the whistle on Madoff even before Harry Markopolos first attempt to alert the SEC. Of the two sons, he said “If they did not know, they were either the most naive and the dumbest boys on Wall Street.”  You decide.

Mastermind Bernie Madoff and his two sons,  Mark, who took his own life on 12/11/2010 and Andrew, who died earlier this week from cancer.

Mastermind Bernie Madoff and his two sons, Mark, who took his own life on 12/11/2010 and Andrew, who died earlier this week from cancer.

BUT what we do know is that Andrew Madff died with quite a hefty bank account  and portfolio – $11 million in personal property and another $4.5 million in real estate.  According to news reports, he left his “tangible property” (whatever that is) to his two daughters, a third of his estate to his estranged wife (wow, what a great guy) and $50K per month for life to his girlfriend. Cha-Ching!  Don’t feel bad for Mama Madoff – I’m sure she’s still doing just fine, thanks to the Dept of Justice that allowed her to keep $2.1 million in return for turning over the rest of the assets.

Meanwhile, as you might guess, there are 15.5 million reasons why former Madoff investors are none too thrilled.  What he ignored in life, Andrew Madoff could have acknowledged in death.  Why not bequest a percentage of his ill gotten gains to an Investor Fraud Victims’ group, or even leave something to some of those whose stories were well-publicized – like the 85 year old retired New York City school teacher, living in FL and existing only on Social Security -after thinking her retirement money was safe. Or maybe the 82 year old World War Two purple heart recipient who built his business, sold it, investing the funds with Madoff, and now forced to live with his adult children.  The stories are endless – but you’d never know it with the media’s obsession with criminals.

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Military Divorce And How We Fail our Veterans

Written on August 12, 2014 – 10:37 pm | by ibkent


HEADLINE: Retired US Army Colonel Brigade Commander with 27 years of exemplary service and a 70% VA disability forced to live under bridge.

Sounds ludicrous, right? Can’t be real. You’re right – not yet, but with the confluence of archaic divorce laws here in Georgia and a little known bill federal law, it is a real possibility.

Politicians and civilians alike fall all over themselves to thank our troops and our veterans for their service. “Support the Troops,” “We Support the Veterans” rah-rah-rah. So, how is it that politicians have failed to take steps to at least modify a 30 year old law that probably has done more to bankrupt our veterans than any other. And it’s only getting worse as divorce rates in this country skyrocket, especially among older Americans.

We as a nation have been confronted of late with the awful realities facing many of our veterans. But let me tell you about one more reality that receives no attention but is devastating in its effects.

I am pretty sure that only a handful of Americans are even aware of the Uniformed Services Former Spouses Protection Act (USFSPA) (10USC1408) , a bill passed without much to-do — nor debate —  in 1982 as a rider to the Defense Appropriations Bill. And those who have heard of it are all probably active or retired military, which is a tiny number given that less than 1% of our nation serves in uniform. And of that 1%, I’d bet only those who’ve seen the horrors of this law up close and personal even know it exists. Soldiers who entered the military prior to the bill’s passage never even knew of its existence. And I’d bet that new recruits – commissioned and non-commissioned alike – still have no idea. The balance is likely composed of members of the legal profession for whom this law has become its own cottage industry over the years.

In a nutshell, this law says that a veteran’s retired pay may (emphasis added) be considered community property when dividing assets in a divorce proceeding.

The bill was well intentioned. Congress heard heartbreaking stories from divorced – mostly female – spouses, some of whom served along with their military spouses for decades, moving around the globe, sacrificing their own careers to raise children.

I am not unsympathetic to the plight of a military spouse who rarely has the opportunity to build a career, or to put in sufficient time at any one company to earn a pension or build a meaningful retirement fund. Further, I concur that it would be grossly unfair — and wrong — to allow any serviceman or veteran to just walk away from a spouse after 10, 20, 30 years of marriage, but this bill which treats a veteran’s retired pay as community property is also grossly unfair, misapplied – and egregiously abused.

So much has changed since the bill’s passage. When the bill was written, there were few male military spouses since few women had the opportunity for a military career, (the percentage of those serving who are women has nearly doubled since 1970)  but in the 40 years since the bill was passed great strides have been made for women in the military – and women who deploy with their spouses. According to a Rand Study, in 1970 only 35% of women over age 16 were employed or seeking employment outside the home. By 1980, that number increased to 50% and is now just under 60%. With the opportunities for online education, even up to a Doctorate degree, as well as online employment opportunities and the opportunity to consult from a home base, there are many more opportunities for women to receive an education and to be employed from anywhere they might be deployed with their husbands.  I think we can all agree that opportunities for women have improved significantly through the years.

The disabled vet’s disability pay, while untouchable according to the USFSPA is counted as income for purposes of alimony payments so it is essentially a target for distribution in a divorce.

There are two key restrictions set forth in the Bill: a) the spouse may be awarded no more than 50% of the veteran’s net retirement pay b) that retirement pay is to be split only if the couple was married at least 10 years while one party was in the military. Other than that, there are no guidelines. The law is even silent as to a formula for the proper allocation, yet the frequent interpretation in many jurisdictions is that the “spouse will receive 50%,” and it’s for life – even if the spouse remarries. So think about that – the law says the court MAY consider retired pay community property  but then leaves it up in the air as to the percentage.   Add to that alimony, and a military retiree must forfeit, in essence, his entire retirement pay.

Why is the breadwinner – the retiree, male or female — forced to give up such a significant portion of their well-earned retirement pay for the rest of their life, regardless of whether or not the spouse remarries? This places an undue burden on the veteran, who has already devoted his body and soul to a career that, in many cases, results in physical disabilities, to live a lifestyle far and apart from what he was promised when signing the contract to join the Armed Services, especially those who joined the military prior to the law’s passage.

As with most laws, no matter how airtight the authors of the legislation may try to make it, there is plenty of room for abuse. The biggest misconception of the bill – and the source of the most angst — is that it does not require the division in the event of a divorce, rather it simply allows it. There is a huge difference between the words “may” and “must” and I would guess that even most divorce lawyers and judges do not understand this nuance– or don’t care. Even in Muscogee County some retirees are required to share the retired pay 50% and for others the number is lower.  How can a federal law be open to such different interpretations by state or even by county within a given state?

Divorce is ugly. It gets even uglier when the military veteran is forced to turn over up to 50% of his retired pay to the spouse, regardless of the spouse’s behavior during the marriage, simply because the law is often misapplied. Keep in mind, this is retirement that the veteran has earned and for the infantry soldier this means road marches in the bitter cold and sweltering heat, dozens if not hundreds of parachute jumps, dangerous deployments, nights spent in tents or on the ground.   Why should the spouse receive the same retirement benefit as the soldier especially since there is significant precedent that the retirement is “reduced current pay” for continued service in the armed forces at a reduced level.



On June 26, 1981, the Supreme Court of the United States overruled a lower court ruling in the case of McCarty v. McCarty. The lower court had allowed for a military retiree’s retirement pay to be divisible in a divorce proceeding. In his SCOTUS majority opinion (6-3), Justice Harry A. Blackman ruled in favor of the petitioner that “the military retirement system confers no entitlement to retirement pay upon the retired member’s spouse, and does not embody even limited ‘community property’ concept. In fact, retired pay is not a vested property right and “determining otherwise poses significant threats to the special nature of this ‘entitlement’ and its function in national defense.

  1. The military retirement pay is a statutory personal entitlement of the retiree.
  2. The application of community property principles not only threatens harm to federal interests, but also has the potential to frustrate the congressional objective of providing for the retired service member. It is important to remember that the military retirement system serves as an inducement for enlistment and reenlistment.
  3. “… it is clear that Congress intended that military retirement pay ‘actually reach the beneficiary.’ (Hisquierdo, 439US @584). Retirement pay cannot be attached to satisy a property settlement incident to the dissolution of a marriage.”


Boom, there you have it.   Seems pretty straightforward, right? Not so fast.


Despite the ruling on behalf of Col. McCarty, the Court opened the door for Congressional action to provide for “equitable distribution” of this pay. The USFSPA was enacted without debate as an almost unnoticed component of a larger Defense Appropriations bill. But here is the great rub:

The bill (found at 10 USC §§1408 et seq)effective date February 1, 1983) was backdated and retroactive to June 25, 1981, the day before the McCarty ruling, essentially circumventing the Supreme Court, and dismissive of the Court’s concerns regarding military retention, enlistment, and the economic needs of older veterans as noted in the SCOTUS holding! The bill’s proponents claim the law simply “recognizes that both spouses contribute equally to the service member’s ability to earn a wage and receive a pension.”

The fact remains it’s a bill that was written in a time when opportunities for military spouses to pursue an education and become independent were nominal. It’s no surprise that nearly every veterans’ organization has at one time or another requested that Congress review this outdated law. The American Legion has repeatedly called for its repeal.

Here are but a few reasons why this law is not only patently unfair, but counter to legal precedent:


Military retirees have no property rights to retirement pay, so how is it that a former spouse gains a property asset right? There is sufficient legal precedent [Buchanan v. Alexander (45 US 20 1846)] to support the claim that a court – especially a state court – could not tell a federal disbursing office what to do with money Congress had appropriated. [emphasis added] Wouldn’t that defeat the purpose of congressional appropriations? And how can it be considered “property” if it can be taken away?

According to the 1982 law, the Court can require DFAS to send money to the spouse without it first going to the military member.  Subsequent to the Buchanan ruling noted above, the Court noted in 1882 [United States v. Tyler (105 US 244, 1882] that such pay is “compensation… which continued at a reduced pay.” So if it is current compensation vs. property (as per United States v. Tyler (105 US 244, 1882) its division becomes alimony for life!


For starters, the word “pension” never even appears in the USFSPA. It is referred to as retired pay and intended to be a continuation of active pay on a reduced basis. What civilian pension has that same qualification? It is not, like civilian pensions, deferred compensation. You either qualify for retirement by honorably serving a minimum of 20 years or you do not. There is no “vesting” in the military retirement system. There are no special retirement accounts, no matching funds provision, and a soldier who leaves the service even one day short of 20 years receives nothing. I don’t know of any other form of retirement pay that requires that the recipient of that pay be prepared to be recalled back to employment under penalty of law.

The Iraq and Afghanistan Wars stretched the military’s resources and call-ups included nearly 6,000 members of the Army’s Individual Ready Reserve (IRR) – soldiers who thought they were out of the Army and receiving “retainer pay.” Over 20,000 were called up earlier for Operation Desert Storm.

In other words, Retirees can be recalled at any time – up to age 60 for Generals, age 62 for Warrant Officers and age 60 for all others. Are spouses involuntarily recalled?

And if it is considered “property,” why is it taxed as income?


Military retirees are subject to Military Code of Justice – even when retired. Hmmm, why is that? Because the retiree is on reserve status. And because he is on this “reserve status,” his share can be taken away for any Code violations.

If a retiree is jailed, for instance, the pay stops. If the spouse is jailed, the pay continues. If a retiree, for whatever reason, changes his citizenship, he loses the retirement pay. Yet, there are millions of dollars currently being paid to foreign nationals as part of this law who’ve even returned to their home countries, and still receive this compensation! In a perfect example of the absurdity of this law, a Seabee met her spouse while serving together in the Navy. The spouse was booted from the Navy for violating the MCOJ. Fast forward and the couple divorces. The same guy who was less than honorably discharged now receives 50% of the spouse’s retired pay. How on earth is this fair, and how could this have been what the law intended? So, how can it be treated as “compensation” (and therefore divisible) when it can be taken away from the veteran? Are former military spouses subject to the MCOJ?


The law was enacted to compensate spouses for their “equal contribution.” Do spouses make a contribution? Of course they do, but how can one say with a straight face that the spouse of an airborne infantry soldier makes an “equal contribution.” Or the spouse of a Navy sailor who spends their time on a ship in cramped quarters for weeks or months at a time? Did the spouse jump out of aircraft in the middle of the night? Did the spouse get shot at in combat? Did the spouse go on 15 mile ruck marches in the dead of winter and the heat of summer? To call the contributions “equal” is intellectually dishonest.

Why are there no standards be met for a spouse to quality for the distribution other than be in a marriage with the veteran while the vet was still active duty for at least 10 years. I mentioned earlier that this was to compensate for a spouse who, through frequent PCSs, (Permanent Change of Stations) were never able to build a career and ultimately a retirement income. Or to assist a spouse with limited education or job skills.

Why should the spouse not have to prove they’ve searched for employment or worked to improve job skills – or — that the veteran had requested that the spouse not work outside the home, perhaps to raise the children or maybe a child with special needs to be eligible for these benefits? But what happens when the spouse refuses to work, is abusive, a drunk, and ultimately not supportive of the spouse’s military career? Just as we know that not all soldiers are heroes, certainly not all spouses are either.

In those states that still allow alimony – such as Georgia – alimony is tacked on – virtually depriving the soldier of his entire retirement! So how is it that the lifestyle of the spouse remains unchanged – while that of the retiree suffers. Certainly, this is not what was envisioned by this law.

Many military men and women stay married for many reasons a) it’s quite costly to divorce, especially if the veteran is required to turn over half of his or her well-earned retirement pay or b) perhaps the soldier is a parent and concerned that status of being a member of a highly deployable unit could jeopardize custody, or worse, would have the child be raised by another person. So in essence a soldier is further punished for wanting to be a good parent.

As noted earlier, The law does not say that the veteran must give over a specific percentage. It does make clear however, that local jurisdictions MAY consider the military pay when dividing marital assets. Some lawyers will tell you there is a formula, which takes into account the number of years the couple was married, and the number of years the service member served. But, at least here in Muscogee County, that formula is rarely used.

I’ve only raised a few of the problem spots in this misapplied law, but here are some real things that could be done with just a few amendments:

Case by Case   This should not be an all or nothing, across the board acceptable law. Even if a spouse has a career, makes more than the veteran– or vice versa – the law still allows the non-military spouse to collect half of the military spouse’s pay. This should never happen. Ever. These issues should be dealt on a case by case basis. If the military spouse makes less money than the non military spouse, if the non military spouse has a career, an income, etc. he/she should not receive a dime of the military spouse’s retirement pay.

Remarriage: Alimony ends after remarriage. Why does the retirement allocation not end? If it is truly distributable as part of the marital assets why is it not treated the same way as alimony? The ex-spouse’s share terminates only upon death of either party (and it is not transferrable). Cong. Pat Schroeder, one of the early architects of the bill, even recommended that this payment end upon the remarriage of the spouse. Why this did not wind up in the final bill is anybody’s guess. There are veterans whose lives have been literally upended by this law. One veteran, after retiring as a full Colonel, divorced his wife of 25 years. It was a no-fault divorce. She worked and was granted the 50% “required” by law. She remarried and still has a well-paying professional position. The veteran’s military contract was terminated, and he was forced to subsist on unemployment and his 50% share of the retirement while the spouse continues her comfortable lifestyle. Sounds more like a punishment than “equitable distribution.”

[Note:   Retirement division concludes upon remarriage for the Foreign Service, the CIA, Social Security Benefits … so the military member must pay for life, but the Government? Nope, they stop paying upon remarriage.]

Employment History: If the purpose of the bill is to compensate a spouse for foregoing long term career possibilities, shouldn’t there be a requirement for the spouse to show she had at least searched for employment? That she had contributed to the household? Otherwise, where is the incentive for a spouse to ever work? In many jurisdictions, including Muscogee County, GA – home to Ft. Benning – a judge will require alimony in addition to the 50% of the retirement simply because the veteran provided a good lifestyle for the spouse. There’s something wrong with that kind of thinking.

Support for Career: Many – probably most – military spouses support the soldier’s career. And that spouse is deserving of a piece of the veterans’s retirement. Now, what about the spouse who refuses a PCS assignment so that the soldier can be either promotable or, in one real instance, serve out his final 3 years in a position he enjoys?

Behavior during the Marriage: Just as behavior during the marriage is a component during a civilian divorce, how is it that this criterion is not evaluated – at all – before turning over half of the veteran’s future income? Not all soldiers are heroes, and lord knows, not all spouses are either. A spouse could be a drunk – or abusive – could even be acting contrary to the spouse’s best interest, but that 50% will still roll her way.

A statute of limitations: Veterans who retire from the military years after the divorce are also forced to turn over nearly half of their retirement to the former spouse. As it stands, a spouse can show up years later, demanding a percentage of the retired spouse’s current pay grade. So, if they divorced while the soldier was a Staff Sergeant (E-6), s/he could demand a portion of the retired Sergeant Major’s E-9 pay. Fair? I think not.

USFSPA REFORM: The USFSPA has been modified 23 TIMES since its initial enactment 30 years ago. 18 of those 23 reforms – that’s nearly 80% -have solely favored the former spouse. Four favored both the veteran and the spouse and only ONE (1) – that’s 1/23 has benefited solely the retiree. Do you really believe our Government “supports the troops?”

Keep in mind – there would be no tax dollars at risk – these funds are already allocated. It would be solely a redistribution so that the primary beneficiary of retired military pay would be the one to whom it was intended – the Veteran.

It’s time we put up or shut up and take the steps necessary to protect our veterans in their later years.






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Five years on – Madoff Investors still in the Cold

Written on December 11, 2013 – 2:18 am | by ibkent

Five years ago today, the world became aware of the fraudster of the century, Bernard L. Madoff. It’s been 5 years and thousands of Madoff investors are still waiting for the organization sworn to protect investors – the Securities Investor Protection Corporation – to live up to its promise to pay investors up to $500K per account in a failed investment firm.

Through all sorts of shenanigans the SIPC has continued its policies of paying more to lawyers to fight claims than actually paying the claims. But for SIPC’s refusal to charge its members reasonable assessments (more than $150 per year that they were charging each Wall Street firm for SIPC insurance for 18 years), Madoff investors would be satisfied.

Madoff investors are not asking for a bailout … just for the SIPC to live up to their obligations as per the Securities Investor Protection Act of 1970 which President Richard Nixon applauded as provided for investors what the FDIC provided for depositors in commercial banks. Madoff and Stanford investors are NOT asking for one dime of taxpayer dollars. SIPC is 100% supported by assessments from its members – Wall Street.

Right now folks – your investments may well not be protected. If the Bankruptcy Trustee can make his own rules in this instance, he can do so in the future. HR 3482 – the Restoring Main Street Protection Act, sponsored by Cong. Scott Garrett (R-NJ) and Cong. Carolyn Malone (D-NY0  is a step in the right direction and already enjoys bipartisan support with 33 sponsors.

Find out how you can encourage your elected representative to support this piece of legislation. Your financial future could depend on it.http://protectyourinvestments.rallycongress.com/11693/congress-insure-sipc-protections-innocent-investors/

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Madoff and Stanford Investors Push for SIPC Reform

Written on November 19, 2013 – 10:24 pm | by ibkent

Could the third time be the charm?  Victims of Allen Stanford and Bernie Madoff have been waiting literally years for Congress to act on the insufficient protection given to investors in SIPC protected securities firms.  The first hearings were held in early 2009 at which time the organization’s President, Stephen Harbeck, told Congress that all investors in the Madoff fraud would be covered by the federally mandated SIPC insurance.  Yay us.  Since then, Madoff investors have had to run a veritable gauntlet of governmental and quasi governmental agencies seeking relief despite Mr. Harbeck’s public pronouncements.   Rather than paying out the mandated payments, the SIPC-appointed bankruptcy trustee has billed SIPC nearly $1 billion to fight these claims furthering a policy that Gretchen Morgenson wrote about in her 2000 New York Times article article entitled, “Investor Beware: Many Holes Weaken Safety Net for Victims of Failed Brokerages.”

Multiple hearings have been held since 2009 and marker bills introduced: Congressmen preening for the cameras, grandstanding for constituents. But nothing.  Somehow something feels different this time.  Is it the bipartisan support? Is it the partnership between the Madoff and Stanford victims? Not sure.

HR  3482, “Restoring Main Street Investor and Protection Act”  was introduced just a few days ago by Congressman Scott Garrett R-NJ and Congresswoman Carolyn Maloney D-NY and a dozen Members of Congress from both sides of the aisle.  Make no mistake – this  is NOT a bailout. A bailout implies use of tax dollars.  SIPC is a not for profit membership organization and its funds are acquired solely through member assessments. ZERO TAX DOLLARS AT RISK.  And who are those members?  Wall Street banks and investment houses, of course. If only SIPC had assessed an appropriate amount over the years as directed multiple times by both the General Acounting Office and the US Congress, rather than $150 PER YEAR PER FIRM for the right to place the SIPC logo on their statements, then the funds would have been available.

Both Madoff and Stanford victims have been victims of a government system gone awry — and amok. Laws that were put in place to protect investors are now ironically, being used against them.  The SEC, with oversight over SIPC, directed SIPC to pay their claims. SIPC has resisted and now the SEC is suing this quasi governmental organization.

This bill will:

  • Prevent clawback of innocent investors.
  • Mandate SIPC coverage of up to $500,000 bas on final account statement.
  • Insist that future Trustees be selected from a panel of SEC approved Trustees, rather than be SIPC-appointed.
  • Make the Securities and Exchange Commission the absolute authority over SIPC
  • No longer give the trustee the sole discretion to value an account.

To quote Congressman Garrett:

“By reforming and modernizing the Securities Investor Protection Act (SIPA) of 1970, we will ensure greater equity for victims of fraud, enhance efficient functioning of U.S. securities markets for main street investors, and strengthen the oversight and accountability of the Securities Investor Protection Corporation (SIPC).  Given that physical securities are no longer individually mailed to customers, investors must be able to trust the SIPC seal of approval and have confidence in the account statements they receive.”

If you want to assist in the effort to strenghten consumer protection for your investments,  please visit www.protectyourinvestments.rallycongress.com

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Andrew Madoff and his Stage 4 Cancer

Written on August 12, 2013 – 3:38 pm | by ibkent

Do I feel badly for Andrew Madoff? Sure? Who wouldn’t feel for someone with Stage 4 cancer. But let me tell you why this really should be a nonstory and that the media really should get its priorities straight.  Earlier this year, Andrew told People magazine that he felt “horrible for the people whose lives have been destroyed by my father’s crimes.”  Well, Andrew Madoff worked for dear old Dad for 15-20 years.  No one has been able to come up with the smoking gun proving he knew definitely what happened on the infamous 19th floor, but let me tell you,  if he didn’t know, he damn well should have.  As one long time industry analyst said, “if the boys didn’t know they were either the two dumbest men on Wall Street or the most naïve.”  Too true.


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Bernie Madoff’s Lips Move – He’s Lying

Written on May 23, 2013 – 12:35 am | by ibkent

It’s a regular occurrence.  Bernie Madoff – conman extraordinaire – must have felt left out lately — what with the bombings in Boston, the explosion in TX, the crazyman in North Korea, and our elected representatives creating non-existent crises.  He contacted Aaron Smith, a correspondent at CNN Money. Aaron’s a good guy. I’ve met him and been interviewed by him on several occasions.  I like him. But he, like other journalists, such as Barbara Walters, can’t resist when when the consummate con man talks.  It still astounds me that when Bernie calls, the media jumps.

Aaron sent Bernie money so that he could call to pontificate on whatever he wanted to pontificate about. In this case, I guess — about the very sad suicide of his son.  Leave it to Bernie to try to gain an advantage of this horrific event.   I do not believe for one minute — or one instant for that matter – that Bernie is bothered by the death of his son. I know it’s cruel. Yes, he is, a “human being” in the strictest sense.  Nor do I believe that he feels badly about the thousands of people whose lives he pretty much destroyed. What kind of man steals money from Elie Wiesel one of the greatest humanitarians the world has ever seen. Not just Elie’s personal money — but his foundation’s money as well.

I might also remind anyone who cares, that Bernie, not that long ago, pretty much blamed the victims .. claiming that he “carried” many Madoff investors for many years.

When will the media learn – When Bernie Madoff is talking it’s a pretty safe bet that he’s lying.


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Gun Control Advocate, Not on a Warpath

Written on December 31, 2012 – 8:45 pm | by ibkent

UPDATE:  The letter was published in today’s Columbus Ledger-Enquirer.  There was another story posted on Facebook today — it is an interview with Noah Pozner’s mother, Veronique, with Naomi Zeveloff. Please read the article, particularly in light of the last sentence of my third paragraph.  

I am a “gun control advocate,” but can assure you I am on no “warpath” as suggested by the sub-headline on Tim Chitwood’s front page story on Sunday about the Eastman Gun Show. I am, however, hopeful that 2013 is the year we as a country begin to look at possible safeguards in light of America’s love affair with guns.

The hysteria over President Obama supposedly instituting martial law or relieving gun owners of their weapons is fabricated propoganda.  In fact, the only gun laws the President passed in his first term actually expanded the right to carry guns to include Amtrak trains and National Parks!   We gun control advocates have no interest in banning all weapons. We have no interest in taking guns away from responsible citizens who take the right to own a gun seriously.  We do, however, think we can no longer bury our heads in the sand, and are looking for common sense solutions to a growing problem in our country.

How is it unreasonable to close the gunshow loophole? How is it unreasonable to demand that high volume ammunition clips be removed from civilian use? We live in a military town with many hunters.  I have been hard pressed to find more than a handful of people who believe that there should be no restrictions on those clips and on assault weapons.  I wonder if those advocating for no restrictions at all would feel the same if the media had shown images of the bloodbath in Newtown and what multiple high velocity gunshot wounds no doubt did to those little 6 year old bodies.

I am more than familiar with the 2d Amendment to the US Constitution. I also understand that the founding fathers were talking about muskets, and about well-regulated militias.  We need to stop digging into our respective positions, hoping that it will all blow over.

While both sides mull over who is more right, I can only wonder where – and when – the next bloodbath will take place.

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