Something in the refrigerator went bad. Way bad. It smells awful. I thought it was the milk. When rancid, milk is quite possibly the most foul and vile substance on the planet.

Not the problem.

I checked the broccoli. That vegetable emits ripe and fearsome odors when it spoils.

Not the problem.

There in the back. Behind the butter. Next to the barbecue sauce. There’s the problem, a stainless steel pot chockablock with something festering since December 11, 2008. Mold is bursting out the lid. But there’s not a failed science experiment inside.

It’s leftover Spaghetti alla Madoff.

Today, The New York Times reported a dispute between Madoff victims and the trustee. The issue is who’s eligible for SIPC payments. The article illustrated the complexity of Madoff’s tangled mess. Hence, the spaghetti metaphor. The article also described the lack of agreement and, I think, a fair solution. Hence, the references to refrigerator rot. Let’s break down the story.

NYT: “The trustee, Irving H. Picard, is calculating investor losses as the difference between the total amount a customer paid into the scheme and the total amount withdrawn before it collapsed.”

Acrimoney: Keep going. We’re listening.

NYT: “Thousands of long-term investors, including elderly people who lived for decades on withdrawals from their Madoff accounts, do not qualify for SIPC payments because they withdrew considerably more over time than they originally entrusted to Mr. Madoff, Barry Lax, a lawyer for the plaintiffs, said.”

Acrimoney: We understand both sides. We question whether the trustee’s methodology is fair. Here’s why. Assume a woman invested $500,000 with Madoff. She earned 12 percent in fake profits or $60,000 annually, which she took out every year. Over a six year period, earnings and withdrawals totaled $360,000—less than the hard capital invested.

In fact, it takes 8.3 years for our hypothetical woman to earn $500,000. If she invested late in the year 2000, pulled out $500,000 over 8.3 years, and received a November 2008 statement from Madoff showing an account value of $500,000—she is not entitled to a $500,000 payment from SIPC. That’s the trustee’s recipe.

But clawbacks (in New York) only reach back six years, right? Isn’t the trustee’s position, in effect, a clawback that extends beyond the statutory period by 2.3 years?

Hmm. Maybe it’s the clawback casserole that stinks.

NYT: “To complicate the question of calculating losses, the trustee has asserted in litigation that Mr. Madoff gave some investors credit for higher rates of return than other investors received — meaning they could withdraw more money from the scheme than others.

The account balances that Mr. Lax’s clients want to use as the basis for their losses also reflect Mr. Madoff’s sleight of hand, because the value of the stocks or Treasury securitiesshown on them increased according to his whim. A customer who was favored with a higher rate of return wound up with a larger fictional balance than a customer who put in and took out the same amount of cash but was not favored.To complicate the question of calculating losses, the trustee has asserted in litigation that Mr. Madoff gave some investors credit for higher rates of return than other investors received — meaning they could withdraw more money from the scheme than others.”

Acrimoney: We understand the trustee’s reasoning. Isn’t it easy enough to assign one rate of income, say 12 percent, to everyone? The trustee and his team can build a spreadsheet that puts all investors on equal footing. The process may take time. But we’re looking for a fair and equitable way to process 8,800 claims—not a quick fix.

NYT: “In a recent interview, Mr. Picard argued that recognizing these fraudulent transactions as the basis for actual cash losses would be to ‘allow the thief to pick the winners and losers.’ ”

Acrimoney: Wrong. The SEC’s nightmarish bungling allowed the thief to pick winners and losers. Harry Markopolis alerted the SEC about Madoff in 1999. He gift-wrapped a case for them in 2005. The SEC investigated, but they did not prosecute.

Madoff victims don’t need a cook. They need Solomon to sort through these complicated issues of law and fairness and the shuffling of responsibility from one bureaucracy to another: SEC, SIPC, federal courts.

And Solomon is nowhere in sight.