Ethical Obligations and Decision-Making in Accounting 2nd Edition by Steven Mintz, Roselyn Morris

Exercise 14

In the Bernie Madoff case, some investors who lost money are concerned about the potential for “clawback” suits that might be brought by the trustee in charge of liquidating Madoff’s firm. Such suits would seek to reclaim funds that some investors were able to pull out from their Madoff investments and redistribute them to other investors not so lucky. The potential for clawbacks is prompting some investors to protect their remaining assets by transferring them to irrevocable trusts, homes, annuities or life-insurance policies. The trustee intends to distribute clawed-back funds to investors who were wiped out. Under the bankruptcy code, those who will be most susceptible to a clawback are investors who withdrew any money in the 90 days before Madoff’s arrest on December 11, 2008. Do you think it is ethical for the trustee to go after the funds of investors in Madoff’s enterprises simply because they were withdrawn in the 90 days before Madoff’s arrest? Use ethical reasoning to answer this question.

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Ethics:

Ethics is the set of some moral values and principal that differentiate right and wrong morally.