I totally agree that the SEC was asleep at the wheel with the whole Madoff thing. But I don’t see this lawsuit succeeding.
After the relentless pounding the Securities and Exchange Commission has received for failing to expose Bernard Madoff's fraud, it was probably only a matter of time before the agency was sued for negligence.
That time came Wednesday, when attorneys at Herrick Feinstein filed a complaint against the government (pdf) in Manhattan federal district court. Herrick represents two of Madoff's victims -- disabled retiree Phyllis Molchatsky and Dr. Steven Schneider -- who lost more than $2.4 million between them.
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What will be harder is overcoming the defense of sovereign immunity that the government will no doubt raise. Elisofon admitted it would be a "formidable impediment" to the suit, but said he will argue that this case fits within the exception to that doctrine.
Source: Law.com - Alleging Negligence, Madoff Victims Sue SEC for $2.4 Million
My prediction is that the decision throwing the case out will include the words “floodgates of litigation.” As in, “If we allow this suit, we’ll open the floodgates of litigation against the government.” Floodgates. Just you wait.