Madoff Trustee Sues UBS for $2 Billion By Michael Rothfeld The Wall Street Journal November 24, 2010 The trustee recovering money for victims of Bernard Madoff's Ponzi scheme is seeking $2 billion from UBS AG through a lawsuit that accuses the giant Swiss bank of actively participating in the fraud. In a lawsuit filed in federal bankruptcy court in New York, trustee Irving Picard alleged 23 counts of financial fraud and misconduct against UBS and related entities. Mr. Picard said the bank "lent an aura of legitimacy" to several international feeder funds, including Luxalpha SICAV, by serving as their sponsor, custodian and administrator. At the same time, it avoided legal responsibility for the funds' actions through undisclosed indemnity agreements, he said. The bank had indications of fraud, but it nonetheless made Mr. Madoff the subcustodian of the feeder funds, ceding authority to him to value them, said Mr. Picard, who is overseeing the bankruptcy of Bernard L. Madoff Investment Securities. "Madoff's scheme could not have been accomplished unless UBS had agreed not only to look the other way, but also to pretend that they were truly ensuring the existence of assets and trades when in fact they were not and never did," said Mr. Picard's counsel, David Sheehan. UBS didn't immediately respond to a request for comment. Mr. Madoff pleaded guilty to running a multi-billion dollar Ponzi scheme in March 2009. He is serving a 150-year sentence in federal prison in North Carolina. The lawsuit comes as Mr. Picard faces a legal deadline next month, two years from Mr. Madoff's arrest, to go to court seeking to recover money from some of those who withdrew funds from the investment firm before its collapse. The suit against UBS was filed in redacted form because the bank has designated information related to its interactions with Mr. Madoff as confidential, said Mr. Picard. He accused UBS of "trying to shield this information from the public."

Madoff trustee sues UBS for $2bn By Brooke Masters Financial Times November 24, 2010 The trustee charged with recovering money for the victims of jailed financier Bernard Madoff has sued UBS for fraud, alleging the Swiss bank enabled the vast Ponzi scheme and should be required to return $2bn. Irving Picard, who represents investors in Mr Madoff’s failed brokerage firm, alleged in a press release that UBS, its subsidiaries and several unnamed individuals “lent an aura of legitimacy” to the fraud by sponsoring several international feeder funds, including Luxalpha SICAV and Groupement Financier Ltd. UBS served as custodian and administrator of several funds. He said he had filed a lawsuit in bankruptcy court in Manhattan alleging that even though UBS’s due diligence “revealed indicia of fraud”, the bank went ahead and allowed Mr Madoff to serve as subcustodian, keep hold of the funds’ assets and serve as the only source of valuation. Federal investigators later learnt that Mr Madoff made no trades and used new investors’ money to pay off earlier clients. Total losses may have been high as $65bn. He is currently serving a 150-year prison sentence. “Madoff’s scheme could not have been accomplished unless UBS had agreed not only to look the other way, but also to pretend that they were truly ensuring the existence of assets and trades when in fact they were not and never did,” said David J. Sheehan, a lawyer with Mr Picard’s law firm of Baker & Hostetler. “Without UBS’s serving as promoter, custodian, manager and administrator for the feeder funds, [the scheme] would have been deprived of more than a billion dollars in investments, and Madoff’s fraud would have been diminished in both scope and duration,” he added. The full suit has been filed under seal and is not available to the public. Mr Picard said in a statement: “We have battled with UBS regarding disclosure of information about the bank’s knowledge of Madoff. Unfortunately, they are still trying to shield this information from the public by designating all of their information as confidential. We intend to move to have that designation removed and the complaint made public as soon as possible.” A UBS spokesman did not immediately return a call seeking comment. The bank has repeatedly denied wrongdoing in connection with the Luxalpha fund and other feeder funds and it is currently battling the investors in those funds in a Luxembourg court. Bank officials have said they set up the Madoff funds at the behest of large investors who were looking for a vehicle through which to invest with the financier and they say investors were required to sign forms acknowledging Mr Madoff’s role. Some investors, however, say they never saw the forms.

Picard Goes Big, Sues UBS for $2 Billion in Madoff Case By Ashby Jones The Wall Street Journal – Law Blog November 24, 2010 Thought Irv Picard was winding down his attempts to recover the money lost by Bernie Madoff? Think again. Wednesday morning, Picard, the trustee recovering money for victims of Bernard Madoff’s Ponzi scheme, filed a lawsuit in New York bankruptcy court seeking $2 billion from UBS AG. The accusation: The giant Swiss bank actively participated in the fraud. Click here for the release from Picard. The WSJ’s Michael Rothfeld is on the story. In the suit, Picard alleged 23 counts of financial fraud and misconduct against UBS and related entities. Picard said the bank “lent an aura of legitimacy” to several international feeder funds, including Luxalpha SICAV, by serving as their sponsor, custodian and administrator. At the same time it avoided legal responsibility for the funds’ actions through undisclosed indemnity agreements, he said. The bank had indications of fraud, but it nonetheless made Madoff the sub-custodian of the feeder funds, ceding authority to him to value them, said Picard. “Madoff’s scheme could not have been accomplished unless UBS had agreed not only to look the other way, but also to pretend that they were truly ensuring the existence of assets and trades when in fact they were not and never did,” said Picard’s counsel, David Sheehan. UBS did not immediately respond to a request for comment. The lawsuit comes as Picard faces a legal deadline next month, two years after Madoff’s arrest, to go to court seeking to recover money from some of those who withdrew funds from the investment firm before its collapse. The suit against UBS was filed in redacted form because the bank has designated information related to its interactions with Madoff as confidential, said Picard. He accused UBS of “trying to shield this information from the public.” More on this story as it develops.

Madoff trustee sues UBS, others for $2B Associated Press November 24, 2010 NEW YORK (AP) — The trustee trying to recover money for investors cheated by jailed financier Bernard Madoff announced a lawsuit Wednesday against the Swiss bank UBS AG and related entities and individuals, alleging they collaborated in Madoff's Ponzi scheme. The lawsuit alleges 23 counts of financial fraud and misconduct, and seeks to recover at least $2 billion to be distributed to Madoff's victims, who lost billions when Madoff revealed in December 2008 that his investment company was a gigantic fraud, Trustee Irving Picard said. It was filed in U.S. Bankruptcy Court. UBS actively assisted Madoff's scheme by serving as the sponsor, custodian and administrator of various affiliated feeder funds, Picard alleged. The full complaint was filed under seal. Only a redacted version was available to the public. "We have battled with UBS regarding disclosure of information about the bank's knowledge of Madoff," Picard said. "Unfortunately, they are still trying to shield this information from the public by designating all of their information as confidential. We intend to have the designation removed and the complaint made public as soon as possible." Madoff's scheme could not succeed "unless UBS had agreed not only to look the other way, but also to pretend that they were truly ensuring the existence of assets and trades when in fact they were not and never did," said David Sheehan, counsel for the trustee. Without UBS's serving as promoter, custodian and administrator, "Madoff's fraud would have been diminished in both scope and duration," Sheehan added. Madoff is serving 150 years in federal prison for the fraud.

Madoff Trustee Sues UBS By Jeffrey Cane The New York Times – DealBook November 24, 2010 The bankruptcy trustee charged with trying to recover money for the victims of Bernard L. Madoff’s huge Ponzi scheme has sued the Swiss bank UBS and affiliates, accusing them of enabling the scheme. The lawsuit, filed in United States Bankruptcy Court in Manhattan, says that Luxalpha, Groupement Financier and other European feeder funds withdrew $796 million from Bernard L. Madoff Investment Securities in the 90 days before the firm filed for bankruptcy in December 2008. They withdrew $1.12 billion in the previous six years, the complaint contends. UBS served as custodian for Luxalpha and sponsored its formation, the complaint says. The defendants made at least $80 million from fees on raising money from investors and pooling it to invest with Mr. Madoff “The ‘fees’ they received in their various roles were nothing more than ‘fees’ for looking the other way, and lending their prestigious name to legitimize and attract money” to the Ponzi scheme, according to the complaint, filed by the trustee, Irving H. Picard. The lawsuit charges that UBS and the other defendants are liable for at least $2 billion. The complaint alleges 23 counts of fraud and breaches of fiduciary duty against the defendants. Mr. Madoff is serving a sentence of 150 years in a federal prison in North Carolina.

UBS Sued for $2 Billion in Lawsuit by Madoff Trustee Picard Claiming Fraud By Phil Milford Bloomberg November 24, 2010 UBS AG was accused of fraud by the trustee overseeing the liquidation of Bernard Madoff’s investment firm in a lawsuit that seeks to recover at least $2 billion for victims of Madoff’s Ponzi scheme. Irving H. Picard, trustee for the liquidation of Bernard L. Madoff Investment Securities LLC, said today he aims to recoup redemptions and fees related to the firm from Zurich-based UBS, as well as damages and disgorgement. “Madoff’s scheme could not have been accomplished unless UBS had agreed not only to look the other way, but also to pretend that they were truly ensuring the existence of assets and trades when in fact they were not and never did,” David J. Sheehan, a partner at Baker & Hostetler LLP and the appointed counsel for Picard, said in an e-mailed statement. The complaint, filed yesterday in U.S. Bankruptcy Court in New York, alleges 23 counts of financial fraud and misconduct against UBS “and related entities and individuals” for collaborating with Madoff. Madoff, 72, was arrested in December 2008 and charged with securities fraud for directing the biggest Ponzi scheme in U.S. history. He pleaded guilty in March 2009 and is serving a 150- year prison sentence. The case is Picard v. UBS AG, 10-ap-4285, U.S. Bankruptcy Court, Southern District of New York (Manhattan.)

Madoff Trustee Sues UBS For $2 billion By Nathan Vardi Forbes (blog) November 24, 2010 Irving Picard, the court-appointed trustee for Bernard Madoff’s bogus investment firm, has gone after a big bank in his expensive two-year quest to retrieve funds for some Madoff investors. Picard filed a sealed complaint against UBS in Manhattan’s federal bankruptcy court yesterday, accusing the Swiss bank of fraud and misconduct in connection with feeder funds that funneled investor cash into the Ponzi scheme. The lawsuit seeks to recover at least $2 billion. In a press release, Picard claims UBS actively assisted the Madoff Ponzi scheme by sponsoring and administrating Luxalpha SICAV and Groupement Financier, two feeder funds. Picard says that UBS’s own due diligence revealed “indicia of fraud” with the UBS feeder funds, but that UBS nevertheless made Bernard Madoff the subcustodian of the feeder fund assets, allowing Madoff to “run the operation with no checks and balances.” Picard says that UBS enabled Madoff to be the “only source of information for valuing the funds.’ “Madoff’s scheme could not have been accomplished unless UBS had agreed not only to look the other way, but also to pretend that they were truly ensuring the existence of assets and trades when in fact they were not and never did,” David Sheehan, Picard’s lawyer, said in a statement. Sheehan said that Picard has “battled” with UBS over disclosure of information regarding Bernard Madoff Investment Securities. The lawsuit is the latest effort in Picard’s controversial effort, which has included attempts to clawback funds from some of Madoff’s victims, sometimes through lawsuits against them. So far Picard has recovered some $1.5 billion, but the vast majority of that sum was simply recovered by grabbing the cash that remained on hand in Madoff’s investment company following the exposure of the fraud. It has been a rich business for Picard and his firm, Baker Hostetler, yielding more than $85 million in fees. But Picard and Sheehan claim they are on the right track. Said Sheehan: “Without UBS’s serving as promoter, custodian, manager and administrator for the feeder funds, [Madoff] would have been deprived of more than a billion dollars in investments, and Madoff’s fraud would have been diminished.”

Media Coverage November 26 – 29, 2010

The Wall Street Journal – Madoff Trustee Files Flurry of Suits (11.29.10) The New York Times – Madoff Relatives Sued for $69 Million (11.28.10) Associated Press – Trustee for Madoff victims files 40 lawsuits in NY (11.26.10) Reuters – Madoff's relatives and employees face 40 new lawsuits (11.26.10) Bloomberg – Madoff Investors Sued by Trustee Trying to Recover Fake Profits (11.27.10) UPI – Madoff family, staff sued to recover loot (11.27.10) Portfolio.com – The Madoff Mess: Don't Mess With Picard (11.27.10) WPTV.com – Madoff’s trustee files 40 lawsuits (11.28.10) CNNMoney.com – Madoff kin and former workers sued for $69 million (11.28.10)

Madoff Trustee Files Flurry of Suits By Michael Rothfeld The Wall Street Journal November 29, 2010 Dozens of former customers of Bernard Madoff, including relatives of the convicted felon and his wife, were sued late Friday by the trustee who is attempting to recover money for victims of his Ponzi scheme. The trustee, Irving Picard, said he had filed 40 lawsuits in federal bankruptcy court in Manhattan to recover $69 million for investors. He said 22 of the lawsuits were filed against relatives of Mr. Madoff and his wife, Ruth Alpern Madoff, while 18 others were filed against former employees of Bernard L. Madoff Investment Securities and related entities. Mr. Madoff, who pleaded guilty to orchestrating the multibillion-dollar fraud in March 2009, is serving a 150-year sentence in federal prison in North Carolina. Mr. Picard, who had recovered $1.5 billion for investors as of late September, has previously sought additional funds in suits against Mr. Madoff's close family members, including his brother, sons and his wife. They have denied any wrongdoing. The flurry of lawsuits on the day after Thanksgiving came as Mr. Picard faces a legal deadline within weeks to file lawsuits attempting to "claw back" funds from investors who withdrew money from the investment firm before its collapse. He must file those suits by the two-year anniversary of the December 2008 demise of Mr. Madoff's firm and his arrest. In some of the suits filed Friday, Mr. Picard sought millions of dollars withdrawn from the Madoff firm within the last six years, a statute of limitations to recover funds under New York law. In the news release his aides sent after 10 p.m. Friday night, Mr. Picard said the lawsuits were brought those "who were closest to the center of the fraud and who were, in many cases, among those who benefited most from the Ponzi scheme." However, those ties were unclear from some of the complaints he filed. Some of those complaints alleged only that the people being sued were former Madoff customers who had withdrawn more money from the firm than they had invested in principal. Mr. Picard has previously said he would sue such "net winners," because their money was never invested and any profits withdrawn were fictitious ones that came from money deposited by other customers. The promised lawsuits against former Madoff customers have been controversial; the "net winners" consider themselves victims as well in that they believed based on their account statements that they had more money than they actually did.

Madoff Relatives Sued for $69 Million The New York Times (via Bloomberg) November 28, 2010 The trustee seeking to recover money for people who were defrauded by Bernard L. Madoff filed lawsuits Friday against investors, employees and Madoff family members. Irving H. Picard, appointed trustee by a federal bankruptcy court, filed 40 lawsuits seeking $69 million against people who he said had invested with Mr. Madoff and withdrawn more money than they contributed. The filings are the latest in a series of “clawback suits” filed by Mr. Picard, a New York lawyer, attempting to obtain as much as $17.5 billion total for victims of the largest Ponzi scheme in American history. Mr. Madoff, 72, is serving 150 years in prison after pleading guilty to orchestrating the fraud that destroyed his New York- based firm, which collapsed in December 2008. Mr. Picard said in a statement that the targets in this round of lawsuits were family members and employees, or their relatives. In some of the complaints filed in bankruptcy court, he did not identify the defendants as having such connections to Madoff. Among those previously sued were Mr. Madoff’s wife, Ruth, who was named in a complaint filed in July 2009. Among those named in the complaint filed on Friday was Marion Madoff, the wife of Mr. Madoff’s brother Peter, who Mr. Picard said received $14.1 million in customer funds that should be returned. Mr. Picard already sued Peter Madoff in October 2009. Charles T. Spada, a lawyer for Peter Madoff, did not immediately return a call to his office on Friday. Peter Chavkin, a lawyer for Ruth Madoff, did not immediately return an e-mail or call seeking comment on Saturday. The new complaints follow more than two dozen filed by Mr. Picard seeking to recover money from various parties, including feeder funds that directed most or all of their clients’ money to Mr. Madoff’s firm.

Trustee for Madoff victims files 40 lawsuits in NY Associated Press November 26, 2010 NEW YORK (AP) — Relatives of both Bernard Madoff and his wife are among those being targeted in 40 lawsuits announced Friday by the trustee endeavoring to recover money for victims fleeced by the disgraced financier. Twenty-two of the lawsuits were filed against relatives of Madoff and his wife, trustee Irving H. Picard said in a news release. Eighteen lawsuits were filed against former employees of Bernard L. Madoff Investment Securities LLC, he said. An attorney for Ruth Madoff didn't immediately respond to an e-mailed request for comment Friday night. Picard said his firm is seeking about $69 million in funds deposited by the company's customers and stolen in the 72-year-old's vast Ponzi scheme. Picard said the lawsuits were filed as part of an effort to recover funds from relatives and employees "who were closest to the center of the fraud and who were, in many cases, among those who benefited most from the Ponzi scheme." Among the complaints, Madoff's sister, Sondra M. Weiner, is accused of having "profited for decades" from the scheme, Picard said. A woman who answered the phone at Boynton Beach, Fla., listing for Weiner hung up without commenting late Friday. Picard said the lawsuits were filed after discussions with the defendants and their attorneys collapsed. Other complaints were previously filed against relatives of Madoff and senior BLMIS employees. The fresh batch of lawsuits comes three days after Picard announced a lawsuit against Swiss bank UBS AG, alleging it funneled clients to Madoff and then "looked the other way." The bank called the allegation "completely unfounded." Madoff is serving a 150-year sentence in federal prison in North Carolina after confessing to the nearly two-decade scheme that ensnared thousands of victims, including charities, celebrities and institutional investors. An estimated $20 billion was lost, making it the biggest investment fraud in U.S. history.

Madoff's relatives and employees face 40 new lawsuits By Jonathan Spicer Reuters November 26, 2010 The trustee seeking to recover money for defrauded Bernard Madoff investors said he filed 40 lawsuits on Friday, including several against relatives of the convicted money manager. Trustee Irving Picard filed suits against Madoff's wife, Ruth Alpern Madoff, his sister and his nephew. Ruth's sister and relatives, as well as former employees of Bernard L. Madoff Investment Securities LLC, and their relatives, also face suits which in total aim to recapture $69 million, Picard's law firm said in a statement. The once-respected Madoff is in prison after his massive Ponzi scheme was uncovered late in 2008. Irving's legal actions have piled up in the last few days, ahead of a December 11 legal deadline. "The complaints filed today are a continuation of our recovery efforts against the Madoff relatives and employees who were closest to the center of the fraud and who were, in many cases, among those who benefited most from the Ponzi scheme," Picard said in a statement. Earlier this week, Picard sued Swiss bank UBS AG and others for more than $2 billion for their involvement in a Luxembourg-regulated Madoff feeder, so called because assets it collected were passed directly to Madoff funds. Friday's suits were brought in the United States Bankruptcy Court for the Southern District of New York. The suits -- 22 of which were against relatives of Madoff and his wife -- add to previous legal actions against his relatives and employees. Under U.S. law, claimants have two years to file a suit from the time they knew of a fraud, giving potential claimants in Madoff's estimated $65 billion fraud until December 11 to file any actions.

Madoff Investors Sued by Trustee Trying to Recover Fake Profits By Bob Van Voris and Edvard Pettersson Bloomberg November 27, 2010 Bernard Madoff’s investors, employees and family members were sued by a trustee seeking to recover as much as $69 million in fake profits they received before the con man’s firm collapsed. New York attorney Irving Picard, appointed trustee by a federal bankruptcy court, yesterday sued people who allegedly invested with Madoff and withdrew more money than they contributed. Picard, with the approval of the Manhattan judge overseeing the liquidation of New York-based Bernard L. Madoff Investment Securities LLC, has filed such “clawback suits” in an attempt to obtain as much as $17.5 billion for victims of the largest Ponzi scheme in U.S. history. Picard said in a statement late yesterday that those targeted in this latest round of lawsuits are family members and employees, or their relatives. In some of the complaints filed yesterday in U.S. Bankruptcy Court, he didn’t identify the defendants as having such connections to Madoff. “The transfers received by defendant constitute non- existent profits supposedly earned in the account, but, in reality, they were other people’s money,” Picard said in a complaint seeking $2.8 million from David Washburn, a Madoff investor. Washburn didn’t return a phone call seeking comment. $14.1 Million Among those previously sued by the trustee is Bernard Madoff’s wife Ruth, who was named in a complaint filed in July 2009. Defendants in lawsuits filed yesterday include Marion Madoff, the wife of Madoff’s brother Peter, who Picard said received $14.1 million in customer funds that should be returned. Picard sued Peter Madoff in October 2009. Charles Spada, a lawyer for Peter Madoff, didn’t immediately return a call to his office after business hours yesterday. “We have been in touch with each defendant and their counsel, seeking a prompt settlement of these claims and an out- of-court resolution,” Picard said in the e-mailed statement. “However, as these attempts have not reached a satisfactory conclusion, we are moving ahead with litigation.” The new complaints follow more than two dozen filed by Picard seeking to recover more than $17.5 billion from various parties, including Madoff’s friends and family, and from feeder funds, which directed most or all of their clients’ money to Madoff. One of the suits, filed Nov. 23, seeks $2 billion from UBS AG over claims the Swiss bank aided Madoff’s fraud. UBS said the claims are “unfounded.” Madoff, 72, is serving 150 years in prison after pleading guilty to orchestrating the fraud that destroyed his New York- based firm, which collapsed in December 2008. At the time of his arrest, Madoff’s financial statements reflected 4,900 accounts with $65 billion in nonexistent investments, according to Picard. Investors lost about $20 billion in principal. The bankruptcy case is SIPC v. Bernard L. Madoff Investment Securities LLC, 08-1789, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

Madoff family, staff sued to recover loot UPI November 27, 2010 NEW YORK, Nov. 27 (UPI) -- The trustee for Bernard Madoff's victims is suing 40 of the swindler's relatives and employees to recover money. Irving Picard filed the suits Friday in Manhattan federal bankruptcy court to recover $69 million for investors, The Wall Street Journal reported Saturday. The trustee said 22 of the suits were filed against relatives of Madoff and his wife, Ruth, and 18 against former employees of Bernard L. Madoff Investment Securities and associated firms. Madoff pleaded guilty to a multibillion-dollar Ponzi scheme in March 2009 and is serving a 150-year sentence in federal prison in North Carolina. Picard, who has recovered $1.5 billion for investors so far, must file suits attempting to "claw back" funds from investors who pulled their money out of Madoff's firm early by the second anniversary of the scandal in December. Some of the suits are going after millions withdrawn within the last six years, a statute of limitations to recover funds under New York law. Picard said he is targeting those "who were closest to the center of the fraud and who were, in many cases, among those who benefited most from the Ponzi scheme."

The Madoff Mess: Don't Mess With Picard Portfolio.com November 27, 2010 Nearly two years after Bernard Madoff's massive fraud came to public attention, Irving Picard is showing he has no intention of letting anyone forget about the $65 billion Madoff took from his clients. On Friday, Picard filed 40 fresh lawsuits in his bid to get those who benefited financially from Madoff to pay back those who did not. Among those Picard hit: Madoff relatives like his sister, his nephew, and his wife, Ruth Alpern Madoff. Several former employees of his eponymous investment firm were also hit with lawsuits. The latest action follows a flurry of activity in the past few weeks—from the arrest of two former Madoff associates to the auctioning of Madoff's personal affects to a lawsuit against the Swiss bank UBS. Picard, the trustee tasked with getting as much money back so it can help those who in many cases lost their life savings, is moving fast because he's facing a December deadline to file legal actions. In a statement issued on Friday, Picard said the new lawsuits were all part of his effort to target those "who were closest to the center of the fraud and who were, in many cases, among those who benefited most from the Ponzi scheme."

Madoff’s trustee files 40 lawsuits WPTV.com November 28, 2010 PALM BEACH COUNTY, Fla. - It is the biggest investment fraud in US history. "Why it’s taken 2 years for some of these lawsuits to come to be, is totally beyond me,," said Ronnie Ambrosino. Ambrosino was among the thousands of investors whom investigators say fell victim to Bernard Madoff's Ponzi scheme. She's now a member of the Bernard Madoff Victims' Coalition. "You live your life based on the amount of money you have saved over the years, and all of a sudden you're down to zero," said Ambrosino. Now Madoff's trustee, Irving Picard, says he is working to get people like Ambrosino their money. In a news release Friday night, Picard said the lawsuits were filed as part of an effort to recover funds from relatives and employees, "Who were closest to the center of the fraud and who were, in many cases, among those who benefited most from the Ponzi scheme." But according to Ambrosino this may not be the best thing for victims. "Some of these lawsuits are against people who may or may not have been complicit in this, some of these are against victims that have lost everything that they had," said Ambrosino. That is because Picard is going after anyone that withdrew large amounts of money prior to the investment firm's collapse. "We worked we saved our money and we invested with a man the SEC was a legitimate broker," said Ambrosino. Madoff is currently serving a 150-year sentence in federal prison after confessing to the nearly two-decade scheme. "The ultimate goal here is for justice to prevail, and I know that sounds cliché," said Ambrosino. The latest lawsuits follow more than two dozen filed by Picard to recover money from various parties, including feeder funds that directed most or all of their clients' money to Madoff's firm.

Madoff kin and former workers sued for $69 million By Miguel Susana CNNMoney.com November 28, 2010 NEW YORK (CNNMoney.com) -- The court-appointed trustee trying to recover money stolen by Bernard Madoff has sued the Ponzi con's relatives and former employees in a bid for $69 million. Trustee Irving Picard said he brought 40 lawsuits on Friday in U.S. Bankruptcy Court in Manhattan. He filed 22 suits against relatives of Madoff and his wife, Ruth. The other 18 cases were filed against former employees of Madoff's company. The defendants had among them 66 accounts through which the $69 million was allegedly diverted to Madoff and others, according to Picard. "The [lawsuits] are a continuation of our recovery efforts against the Madoff relatives and employees who were closest to the center of the fraud and who were, in many cases, among those who benefited most from the Ponzi scheme," said Picard. Earlier last week, Picard sued UBS (UBS) AG for $2 billion, accusing the Swiss financial firm of participating in Madoff's Ponzi scheme. As of Nov. 19, in the most recent tally available, the trustee had approved a total of 2,305 claims from victims, totaling nearly $5.8 billion in damages. Madoff, 72, pleaded guilty in March 2009 to 11 counts related to running the largest Ponzi scheme in history and was sentenced to 150 years. He is incarcerated at a medium security federal prison in Butner, N.C. Using his investment firm as a front, Madoff claimed to be investing his clients' money. He kept the fraud going by using deposits from new clients to provide so-called returns to more mature clients. But in reality, he was stealing the money and there were no returns.

Media Coverage December 2 – 3, 2010

The Wall Street Journal – Trustee Sues J.P. Morgan for $6 Billion (12.03.10) Financial Times – Madoff trustee sues JPMorgan for $6.4bn (12.02.10) The New York Post – Suits gone wild (12.02.10) The New York Times – Dealbook Blog – Madoff Trustee Sues JPMorgan for $6.4 Billion (12.02.10) New York Daily News – Bernie Madoff bank J.P. Morgan Chase accused in $6.4B lawsuit of ignoring his Ponzi scheme (12.02.10) Bloomberg – JPMorgan, Madoff's `Primary Banker,' Is Sued for $6.4 Billion by Trustee (12.02.10) Associated Press – Madoff trustee sues JP Morgan for $6.4-billion (12.02.10) MarketWatch – Madoff trustee seeks more than $8 bln from big banks (12.02.10) AFP – Madoff trustee seeks 6.4 bln dollars from JPMorgan (12.02.10) The Guardian (UK) – Bernard Madoff trustee sues JP Morgan for $6.4bn (12.03.10) The National Law Journal – Trustee Sues JPMorgan Chase as 'Blind' to Madoff Fraud (12.03.10) ABA Journal – Madoff Trustee Sues JPMorgan Chase, Seeks $6B for Alleged Blind Eye to Massive Swindle (12.02.10) CNNMoney.com – Madoff trustee sues JPMorgan for $6.4 billion (12.02.10) Barron’s – Focus on Funds Blog – Trustee for Madoff’s Victims Plans $6.4 Billion Suit Against JPMorgan (12.02.10) FT Alphaville Blog – Madoff is “too good to be true” – JP Morgan, October 2008 (12.03.10) Fortune – Blog – JPMorgan and Madoff: tighter than you thought? (12.02.10) Portfolio.com – The Business Blotter Blog – Ponzi Trustee Looks to Another Deep Pocket (12.02.10) The Palm Beach Post – JPMorgan slapped with $6.4 billion lawsuit by trustee seeking money for Madoff victims (12.02.10) On Wall Street – Madoff Trustee Sues JPMorgan Chase for $6.4 Billion (12.03.10)

Trustee Sues J.P. Morgan for $6 Billion By Michael Rothfeld and Chad Bray The Wall Street Journal December 3, 2010 The trustee seeking money f or victims of Bernard Madoff's scheme sued J.P. Morgan Chase & Co. for more than $6 billion on Thursday, claiming the bank was complicit in his fraud. The lawsuit, filed in federal bankruptcy court in Manhattan on Thursday, is the latest salvo by Irving Picard, who has filed a flurry of cases in recent days seeking to recover false profits from the fraud. Under federal bankruptcy law, Mr. Picard must bring such lawsuits by Dec. 11, the two-year anniversary of Mr. Madoff's arrest and his firm's demise. Mr. Picard's specific allegations against J.P. Morgan, the Madoff firm's primary bank, weren't made public because the lawsuit was filed under seal. He said the bank's information was designated as confidential, and he would soon make a motion to lift the seal. "J.P. Morgan was willfully blind to the fraud, even after learning about numerous red flags surrounding Madoff," said David J. Sheehan, a lawyer for Mr. Picard, in a statement. He said the bank "was at the very center of that fraud, and thoroughly complicit in it." J.P. Morgan said that the suggestion it enabled Mr. Madoff's fraud is "utterly baseless and demonstrably false." The bank said it has shared significant information with the trustee and addressed his questions and would defend itself against Mr. Picard's "meritless" and "unfounded claims." "The complaint filed today by the trustee for the Madoff estate blatantly distorts both the facts and the law in an attempt to grab headlines," J.P. Morgan said in a statement. The bank said it "complied fully with all applicable laws and regulations governing customer accounts." The complaint seeks the return of nearly $1 billion in profits and fees, plus damages of $5.4 billion. In a previous lawsuit against J.P. Morgan filed by a Madoff customer last year, the bank was accused of learning through an internal "due diligence" investigation that the Madoff firm's purported returns were false and then liquidated one of its own investments based on that knowledge. The complaint by MLSMK Investments Co. of Florida said J.P. Morgan in 2006 created a "derivative" investment product tied to Mr. Madoff's returns. The product allegedly tracked the Fairfield Greenwich Group's Sentry Fund, which invested almost all of its assets with Mr. Madoff. After conducting its investigation, J.P. Morgan in September 2008 withdrew $250 million from the Sentry Fund despite a 5% gain, according to the complaint. The bank denied wrongdoing and the lawsuit was dismissed in July in part because a judge ruled that MLSMK hadn't adequately made a case that the bank committed fraud. It was unclear Thursday if Mr. Picard has made similar claims against J.P. Morgan. His lawsuit claims the bank had clear and "documented" suspicions about the legitimacy of Mr. Madoff's operation, but didn't act on the information and continued to collect fees, according to Mr. Picard. J.P Morgan is the second large financial institution Mr. Picard has sued in as many weeks. Last week, he alleged 23 counts of financial misconduct and fraud against UBS AG and related entities in connection with feeder funds that the Swiss bank sponsored. UBS said the allegations were "completely unfounded and without merit" and that it had made clear to shareholders that it wasn't responsible for protecting their assets.

This week, Mr. Picard started filing scores of lawsuits against so-called net winners who withdrew more money than they originally invested with Mr. Madoff, seeking in some cases $1 million or $2 million to help make up for an estimated $20 billion in losses by others.

Madoff trustee sues JPMorgan for $6.4bn By Justin Baer and Brooke Masters Financial Times December 2, 2010 JPMorgan Chase is being sued for $6.4bn (£4.1bn) by the court-appointed trustee of Bernard Madoff’s investment firm, becoming the latest financial institution to be drawn into the legal battle over the Ponzi scheme’s liquidation. Irving Picard, the trustee charged with recovering funds for the collapsed investment firm’s clients, accused JPMorgan, Mr Madoff’s “primary banker”, of aiding and abetting the fraud. “JPMorgan was wilfully blind to the fraud, even after learning about numerous red flags surrounding Madoff,” David Sheehan, the trustee’s attorney, said in a statement. “While many financial institutions enabled Madoff’s fraud, JPMorgan was at the very centre of that fraud and thoroughly complicit in it.” Mr Picard is in the middle of filing scores of last-minute lawsuits as the two-year anniversary of Mr Madoff’s arrest approaches next week, and with it a key legal deadline for filing claims. He recently sued UBS, 22 relatives of Mr Madoff and a fund affiliated with Thomas Lee, the private equity pioneer, among others. As of November 26, the trustee had approved 2,300 claims from investors and denied nearly 13,000, mostly because the investors put their money with Mr Madoff through other funds and must seek redress from them rather than directly from his business. The latest complaint represents a new front in the trustee’s push to recover clients’ funds. Unlike many of Mr Picard’s prior targets, JPMorgan served as Mr Madoff’s bank and not as a feeder fund that directed investments to his firm. The trustee has argued that JPMorgan had been suspicious of Mr Madoff’s returns in the months before his arrest and should have been “more vigilant” in investigating why cash had moved in and out of the investment firm’s accounts. JPMorgan called Mr Picard’s allegations “irresponsible and over-reaching”, and denied any wrongdoing. “Contrary to the trustee’s allegations, JPMorgan did not know about or in any way assist in the fraud orchestrated by Bernard Madoff,” the bank said. “As a provider of regular commercial-banking services to Madoff’s brokerage firm, JPMorgan complied fully with all applicable laws and regulations.” The JPMorgan complaint remains under seal in US bankruptcy court; in his statement, Mr Picard said he intended to make the suit public “soon”.

Suits gone wild By Kaja Whitehouse The New York Post December 2, 2010 The court-appointed trustee charged with the dirty task of cleaning up Bernie Madoff's multibillion dollar Ponzi scheme has shifted into warp drive. The trustee, Irving Picard, has filed more than 140 lawsuits in a matter of days, seeking to collect upwards of $8.5 billion of ill-gotten gains from the massive fraud. The $8.5 billion is more than half the $15.5 billion Picard had moved to recover in the past 21 months, according to the most recent report that details the trustee's activities through the end of September. And the figure could grow in the coming days as Picard rushes to meet a looming Dec. 11 deadline for taking legal action to claw back improper profits benefiting Madoff's family, friends and associates. Dec. 11 will mark the second anniversary of the day Madoff revealed his $65 billion fraud -- the biggest Ponzi scheme in history. The Ponzi king, who admitted to carrying out the fraud, is serving a 150-year sentence in a federal prison in North Carolina. Yesterday, Picard zeroed in on his latest target, JPMorgan Chase, which the trustee sued for $6.4 billion, including $1 billion in profits and $5.4 billion in damages. The trustee's complaint, filed in Manhattan bankruptcy count under seal, charges JPMorgan with being Madoff's "primary banker" and accuses the bank of turning a blind eye to the fraud in order to collect fees and profit from it. The complaint said JPMorgan had "clear, documented suspicions" about the legitimacy of Madoff's operations but decided not to act on them because of the bank fees it was collecting, according to a press release from Picard's office announcing the lawsuit. JPMorgan said in statement that Picard's lawsuit "blatantly distorts both the facts and the law in an attempt to grab headlines." The bank said it intends to "defend itself vigorously against the meritless and unfounded claims." A few weeks ago, Picard sued UBS for $2 billion over similar claims. The trustee accused the Swiss bank, which acted as a sponsor and custodian for funds that invested with Madoff, of "enabling Madoff to run an operation with no checks and balances." Earlier this week, Picard filed more than 100 lawsuits against "net winners," or Madoff investors who withdrew more money than they invested. While the investors didn't participate in the scheme, Picard argues they should return the profits to reduce the losses for Madoff's victims. Last week, Picard announced 40 more lawsuits against Madoff's friends, family and former employees, seeking a total of $69 million. The majority of the lawsuits were filed against relatives of Madoff and his wife Ruth, including Madoff's sister, Sondra Weiner, and Ruth's sister and brother-in-law, Joan and Robert Roman. The other lawsuits targeted Madoff's former employees and their relatives.

Madoff Trustee Sues JPMorgan for $6.4 Billion By Diana Henriques The New York Times – Dealbook Blog December 2, 2010 The trustee who is tracking down assets for the victims of Bernard L. Madoff’s Ponzi scheme sued JPMorgan Chase for $6.4 billion on Thursday, contending that the bank bears some responsibility for the losses of victims because it continued to serve as Mr. Madoff’s primary banker despite growing evidence that he was running an enormous fraud. “Madoff would not have been able to commit this massive Ponzi scheme without this bank,” David J. Sheehan, a lawyer for the trustee, Irving H. Picard, said in a statement after the case was filed in United States District Court in Manhattan. The complaint was filed under seal to conform with a confidentiality agreement the bank negotiated with the trustee when it first began responding to his document requests. According to Mr. Sheehan, the lawsuit contends that JPMorgan ignored “clear, documented suspicions” about Mr. Madoff. Moreover, he said, the bank should have spotted highly suspicious cash movements through Mr. Madoff’s accounts and recognized them as hallmarks of a Ponzi scheme. In a statement on Thursday, JPMorgan called the trustee’s claims “irresponsible and overreaching” and said it had no advance knowledge that anything was amiss at Mr. Madoff’s firm. The trustee’s complaint “blatantly distorts both the facts and the law in an attempt to grab headlines,” the bank said in the statement. “Contrary to the trustee’s allegations, JPMorgan did not know about or in any way assist in the fraud orchestrated by Bernard Madoff.” The bank intends to “defend itself vigorously against the meritless and unfounded claims” in the lawsuit, the statement concluded. For nearly two years, Mr. Picard has used his subpoena power to obtain internal bank documents and conduct depositions with bank employees, and the lawsuit will clearly reflect his conclusions from that research. But with the complaint filed under seal, the trustee’s specific accusations are not yet public. There may be clues, however, to the case’s main themes in excerpts of internal bank documents that were leaked to the French media after the bank submitted them last summer to a magistrate in France who is investigating the Madoff scandal. According to an exclusive account in L’Express on July 10, the bank provided a computer disk with more than 500 pages of documents to the magistrate. L’Express published what it identified as excerpts of those documents that show that some bank executives had expressed concern about Mr. Madoff several years before his fraud unraveled in December 2008. In assessing a large European feeder fund, a document identified as an internal bank report from 2008 noted the fund’s total reliance on Mr. Madoff to confirm what its assets were worth from day to day. With “no real way to confirm those valuations, fraud presents a material risk,” the report said. But Mr. Madoff’s personal wealth and his status over several decades as a respected leader in a regulated industry were also cited in the report as “factors making fraud unlikely.”

The excerpted documents also included what was described as a confidential report the bank made to British authorities in October 2008, after the bank had withdrawn nearly $250 million of its own money from the Fairfield Sentry fund, the largest of the Madoff feeder funds. The report said the bank was concerned that Mr. Madoff’s investment performance was “so consistently and significantly ahead of its peers” that it appeared “too good to be true — meaning that it probably is.” The report also asserted that a Swiss investment manager had made “thinly veiled” threats to a bank employee after learning that one of the bank’s Madoff-linked investments could lose value. In the report, the bank complained that the Swiss banker had insisted the price of the investment must not fall and made references to “Colombian interests who will not be happy” with the bank’s actions. A spokeswoman for the bank could not immediately comment on the authenticity of these excerpts, but there is no sign that L’Express ever published a retraction of its article. The trustee’s lawsuit against JPMorgan Chase is the second-largest claim he has filed in the Madoff liquidation so far, after a $7.2 billion claim last year against the estate of Jeffry M. Picower, one of Mr. Madoff’s longtime investors. Negotiations between the trustee and the Picower estate have been continuing since before Mr. Picower’s death in October 2009, and lawyers for the trustee have hinted at court hearings that a settlement in the billions of dollars is possible. But so far, no final agreement has been reached, according to several people who have been briefed on the discussions. A large number of significant cases against big banks, large feeder funds and prominent longtime investors are likely to be filed in the next dozen days because Mr. Picard faces an ironclad deadline of Dec. 15 for filing lawsuits against those who received money from Mr. Madoff’s fraud before it collapsed in December 2008. Last week, Mr. Picard sued UBS and its feeder fund affiliates for $2 billion, accusing the Swiss bank of profiting from the fraud by accepting fees for lending its name and sponsorship to several big Madoff feeder funds without providing the supervision or due diligence that its role required.

Bernie Madoff bank J.P. Morgan Chase accused in $6.4B lawsuit of ignoring his Ponzi scheme By Scott Shifrel New York Daily News December 2, 2010 The overseer trying to recover funds for Bernie Madoff's victims slapped J.P. Morgan Chase with a $6.4 billion suit Thursday, claiming the bank turned a blind eye to the mega-fraudster's swindling. Trustee Irving Picard says officials at J.P. Morgan, Madoff's longtime banker, should have spotted red flags alerting them to the Ponzi scheme. "Just as in the children's fable, they knew the 'Emperor had no clothes,' but looked the other way, allowing the fraud to continue," Picard's lawyer, Deborah Renner, said Thursday. The bank "admitted in the months before Madoff's arrest that ... returns were too good - especially in down markets - to be believable, but for years they pretended that was not the case." The suit, which is still sealed, seeks nearly $1 billion in fees and profits and another $5.4 billion in damages for "willfully blind to the fraud," according to another Picard lawyer, David Sheehan. Picard earlier this month sued giant Swiss bank UBS for $2 billion for sending clients to Madoff, as well as suing more than 40 former employees that worked for the uber-swindler, including his wife and other relatives. Madoff, 72, is serving a 150-year sentence in federal prison in North Carolina after admitting ripping off thousands of investors. The estimated $20 billion Ponzi scheme came to light in the December 2008 after Madoff came clean to federal investigators.

JPMorgan, Madoff's `Primary Banker,' Is Sued for $6.4 Billion by Trustee By Bob Van Voris Bloomberg December 2, 2010 JPMorgan Chase & Co., Bernard Madoff’s “primary banker,” was sued for $6.4 billion by the trustee liquidating the imprisoned con man’s former firm. Irving H. Picard, the lawyer appointed as trustee by a New York bankruptcy court, said in a statement that he sued JPMorgan today over claims the bank aided and abetted Madoff’s fraud. Picard said his suit seeks $1 billion in fees and $5.4 billion in damages. “JPMorgan was willfully blind to the fraud, even after learning about numerous red flags surrounding Madoff,” David J. Sheehan,” counsel to Picard, said in the statement. “JPMC was at the very center of that fraud, and thoroughly complicit in it.” Any money recovered from JPMorgan will be returned to Madoff’s victims on a pro rata basis, Picard said. “JPMorgan did not know about or in any way assist in the fraud orchestrated by Bernard Madoff,” the bank said today in a statement. JPMorgan, the second-biggest U.S. bank, called Picard’s claims “irresponsible and over-reaching.” The bank, based in New York, said it has assisted Picard in his investigation of Madoff’s firm. The lawsuit was filed under seal in U.S. Bankruptcy Court in Manhattan, according to Picard’s statement. JPMorgan “has designated virtually all of their information as confidential,” Picard said. “We intend to move to have the complaint made public as soon as possible.” Second-Biggest The suit is the second-biggest filed by Picard in the Madoff bankruptcy, after a $7.2 billion claim he filed against investor Jeffry Picower in May 2009. Picower died in October 2009. On Nov. 23, Picard sued UBS AG for at least $2 billion, claiming the Swiss wealth-management firm also helped Madoff in his fraud. UBS said it bears no responsibility for Madoff’s crimes. Madoff, 72, is serving a 150-year sentence after admitting he directed the biggest Ponzi scheme in history. At the time of his arrest in December 2002, Madoff’s account statements reflected 4,900 accounts with $65 billion in nonexistent investments. Investors lost about $20 billion in principal. The case is Picard v. JPMorgan Chase & Co., 10-ap-4932, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

Madoff trustee sues JP Morgan for $6.4-billion By Tom Hays Associated Press December 2, 2010 The bank used most by Bernard Madoff was “willfully blind” and “thoroughly complicit” in the disgraced financier's epic fraud, lawyers working for a court-appointed trustee alleged Thursday. JP Morgan Chase (JPM-N39.311.163.04%) responded by accusing trustee Irving Picard of “blatantly distorting” the bank's role. Mr. Picard is in the midst of a nearly two-year quest to recover funds for Mr. Madoff's victims with a flurry of lawsuits against financial institutions and brokers. The latest suit, filed in federal bankruptcy court in Manhattan, seeks $6.4-billion (U.S.) from JP Morgan and its affiliates. The suit alleges that as Mr. Madoff's primary bank for 20 years, JP Morgan had to know that the unwavering double-digit returns Mr. Madoff reported to wealthy investors were too good to be true. The trustee cited bank documents showing questionable transactions by Mr. Madoff as evidence it was in on the scheme. The bank “was willfully blind to the fraud, even after learning about numerous red flags surrounding Madoff,” said David Sheehan, an attorney working for Mr. Picard. “While many financial institutions enabled Madoff's fraud, JPMC was at the very centre of that fraud, and thoroughly complicit in it. ... Madoff would not have been able to commit this massive Ponzi scheme without this bank.” In a statement, JP Morgan denied having any suspicions about Mr. Madoff. It said it followed all commercial banking regulations in its dealings with him. “The complaint filed today by the trustee for the Madoff estate blatantly distorts both the facts and the law in an attempt to grab headlines,” the statement said. “Any suggestion that JP Morgan supported Madoff's fraud is utterly baseless and demonstrably false.” JP Morgan also challenged allegations that it profited from the fraud by using its foreign affiliates to invest in offshore funds that traded with Mr. Madoff. “Those affiliates,” it said, “invested significantly more than they ever redeemed.” Mr. Madoff, 72, is serving a 150-year sentence in a federal prison in North Carolina after admitting that he ran his scheme for at least two decades, using his secretive investment advisory service to cheat thousands of individuals, charities, celebrities and institutional investors. Losses are estimated at around $20-billion, making it the biggest investment fraud in U.S. history. Last month, the trustee filed a similar suit seeking to recover $2-billion from UBS AG. The bank called the allegations “completely unfounded.” In the suit against JP Morgan, the trustee seeks $5.4-billion in damages and $1-billion in fees and profits.

Madoff trustee seeks more than $8 bln from big banks By Alistair Barr MarketWatch December 2, 2010 SAN FRANCISCO (MarketWatch) — The trustee overseeing the liquidation of Bernard Madoff’s investment empire is suing two of the world’s biggest banks to try to get more than $8 billion for victims of the largest Ponzi scheme in history. Trustee Irving Picard sued J.P. Morgan Chase & Co. (JPM 38.93, -0.38, -0.97%) on Thursday, alleging the U.S. lending giant knew about and helped Madoff dupe investors out of billions of dollars. The complaint seeks to recover nearly $1 billion in fees and profits and an additional $5.4 billion in damages for what Picard said was J.P. Morgan’s “decades-long role” as the main banker to Bernard L. Madoff Investment Securities LLC, or BLMIS. “J.P. Morgan Chase was willfully blind to the fraud, even after learning about numerous red flags surrounding Madoff,” David Sheehan, a partner at law firm Baker & Hostetler LLP, the court-appointed counsel for the Trustee. “While many financial institutions enabled Madoff’s fraud, J.P. Morgan Chase was at the very center of that fraud, and thoroughly complicit in it,” he added in a statement. J.P. Morgan said the suit “blatantly distorts” facts and the law. The bank didn’t know about or help with Madoff’s fraud, it added. The complaint comes a week after Picard sued UBS AG (UBS 15.94, +0.04, +0.25%) , claiming the Swiss banking giant “actively assisted” the Ponzi scheme by serving as the sponsor, custodian and administrator of funds that fed investor money to Madoff. Picard is seeking at least $2 billion from UBS. Add in the J.P. Morgan suit and that’s more than $8 billion that the trustee hopes to recoup for Madoff victims. Madoff’s Ponzi scheme came to light in late 2008, at the height of the global financial crisis. He’s now serving a lengthy prison sentence, but investors have been left with at least $15 billion of losses. Read more about the Madoff scandal. On Thursday, Picard said that Madoff wouldn’t have been able to pull off such a huge fraud without J.P. Morgan. The complaint claims that J.P. Morgan had “clear, documented suspicions” about the legitimacy of BLMIS’s operations. Instead of acting on that information, it simply continued to collect fees and profit from the fraud, according to the suit. “J.P. Morgan Chase admitted in the months before Madoff’s arrest that BLMIS’s returns were too good — especially in down markets — to be believable, but for years they pretended that was not the case,” said Deborah Renner, a Baker & Hostetler partner representing the trustee. “Just as in the children’s fable, they knew the ‘Emperor had no clothes,’ but looked the other way, allowing the fraud to continue,” she added. The full complaint was filed with the Bankruptcy Court under seal. “J.P. Morgan Chase has designated virtually all of their information as confidential, Picard said.

“While J.P. Morgan Chase may want to hide the full extent of its significant role in the Madoff fraud from the public, we intend to move to have the complaint made public as soon as possible,” he added.

Madoff trustee seeks 6.4 bln dollars from JPMorgan AFP December 2, 2010 NEW YORK — The trustee charged with recouping assets for victims of Wall Street fraudster Bernard Madoff said Thursday he was seeking 6.4 billion dollars from JPMorgan Chase for supporting the scam. In a statement, Irving Picard said a suit was filed in a New York federal bankruptcy court seeking to recover nearly one billion dollars in fees and profits and 5.4 billion dollars in damages for JPMorgan's role as Madoff's primary banker, "aiding and abetting Madoff's fraud." "While many financial institutions enabled Madoff's fraud, JPMC was at the very center of that fraud, and thoroughly complicit in it," David Sheehan, counsel for the Madoff trustee, said in the statement. JPMorgan Chase (JPMC), was Madoff's primary banker for more than 20 years, he said, adding, "Madoff would not have been able to commit this massive Ponzi scheme without this bank." All recovered monies from the liquidation of the Bernard L. Madoff Investment Securities LLC -- Madoff's Ponzi scheme -- were to be distributed to customers with valid claims. Picard, the government-appointed trustee, filed a suit against Swiss bank UBS on February 24, seeking two billion dollars in damages for its part in the massive fraud. Madoff, who touted himself as one of New York's most successful money managers, was arrested in early December 2008 for running a pyramid scheme, which he said totalled 65 billion dollars. He was sentenced in June 2009 to 150 years in prison. Madoff's victims, including charities, major banks, Hollywood moguls and savvy financial players, handed him tens of billions of dollars over more than two decades. The crime rocked Wall Street, where Madoff was a former chairman of the Nasdaq stock market and pillar of the New York and Florida Jewish communities. Madoff's right hand man, Frank DiPascali, and his accountant, David Friehling, have since pleaded guilty in an investigation that has yet to fully unravel the crime or compensate the approximately 16,000 direct victims. Even the amount of money stolen remains elusive: Madoff originally claimed to have been managing 65 billion dollars, but in October the court-appointed liquidator said the real bottom line was 21.2 billion dollars. Madoff has insisted he acted alone, but a handful of others, including an assistant, two executives, computer experts and a bookkeeper have also been arrested. Madoff, who rose from a humble start as a lifeguard in New York to become one of Wall Street's most trusted and powerful money managers, is incarcerated in North Carolina. His luxury watches, piano and other personal items were sold at auction to raise money for his fraud victims on November 13.

Bernard Madoff trustee sues JP Morgan for $6.4bn By Dominic Rushe The Guardian (UK) December 3, 2010 The trustee charged with recovering billions lost by victims of disgraced financier Bernard Madoff yesterday sued JP Morgan for $6.4bn (£4.1bn) claiming the bank played a central role in his fraud. A lawsuit filed in New York by Irving Picard alleges the bank ignored well-documented suspicions about Madoff and continued to collect fees and profits. Picard, who took the action in the US bankruptcy court, is seeking to recover at least $1bn in fees and profits and $5.4bn in damages to be distributed to Madoff's victims. "JP Morgan was wilfully blind to the fraud, even after learning about numerous red flags surrounding Madoff," said David Sheehan of Baker & Hostetler, legal counsel for the trustee. He said that while many financial institutions enabled Madoff to carry out his fraud, JP Morgan was "at the very centre of that fraud, and thoroughly complicit in it". It was primary banker to Bernard L Madoff Investment Securities (BLMIS) for more than 20 years, and was responsible for knowing the business of its customers, he said. "Madoff would not have been able to commit this massive Ponzi scheme without this bank. JP Morgan should pay the price for its central role in enabling Madoff's fraud." According to the complaint, JP Morgan had clear and documented suspicions about the legitimacy of BLMIS's operations. "JP Morgan admitted in the months before Madoff's arrest that BLMIS's returns were too good – especially in down markets – to be believable, but for years they pretended that was not the case," said Deborah Renner, a partner at Baker & Hostetler. "Just as in the children's fable, they knew the 'emperor had no clothes,' but looked the other way, allowing the fraud to continue." JP Morgan strongly denied all the allegations. In a statement the bank said the suit "distorted the facts" and it would defend itself "vigorously" against the charges. Victims lost billions when Madoff's business empire was exposed as a giant fraud in December 2008. He is serving 150 years in prison.

Trustee Sues JPMorgan Chase as 'Blind' to Madoff Fraud By Noeleen Walder The National Law Journal December 3, 2010 The trustee charged with liquidating Bernard Madoff's investment firm yesterday brought a $6.4 billion suit against JPMorgan Chase. Filed under seal in the Southern District Bankruptcy Court, the complaint accuses the bank, which served as Bernard L. Madoff Investment Securities LLC's primary banker for more than 20 years, of continuing to profit from Mr. Madoff's massive Ponzi scheme in spite of having suspicions about the legitimacy of his firm. David J. Sheehan of Baker & Hostetler, who represents trustee Irving H. Picard, said JPMorgan Chase was "willfully blind to the fraud, even after learning about numerous red flags" and claimed that Mr. Madoff could not have pulled off his scheme without the bank. "JPMC should pay the price for its central role in enabling Madoff's fraud," he said in a press release. Mr. Picard said the bank had designated all of its information as confidential. "While JPMC may want to hide the full extent of its significant role in the Madoff fraud from the public, we intend to move to have the complaint made public as soon as possible," he said. JPMorgan responded by accusing Mr. Picard of "blatantly distorting" the bank's role. In a statement, JPMorgan denied having any suspicions about Mr. Madoff. It said it followed all commercial banking regulations in its dealings with him. "The complaint filed today by the trustee for the Madoff estate blatantly distorts both the facts and the law in an attempt to grab headlines," the statement said. "Any suggestion that JPMorgan supported Madoff's fraud is utterly baseless and demonstrably false."

Madoff Trustee Sues JPMorgan Chase, Seeks $6B for Alleged Blind Eye to Massive Swindle By Martha Neil ABA Journal December 2, 2010 In a complaint filed under seal in U.S. Bankruptcy Court in Manhattan, a court-appointed trustee winding up the business affairs of convicted swindler Bernard Madoff has accused a major bank of aiding and abetting his record-breaking Ponzi scheme over a period of decades. JPMorgan Chase & Co., which was Madoff's primary bank, was "was willfully blind to the fraud, even after learning about numerous red flags surrounding Madoff," said attorney David Sheehan, who represents trustee Irving Picard, in a written statement, reports CNNMoney. The suit seeks some $1 billion in alleged bank profits and another $5.4 billion in damages. Chase called allegations that it aided the fraud "utterly baseless and demonstrably false" and said it followed the law and knew nothing of Madoff's wrongdoing, reports the Wall Street Journal (sub. req.). "JPMorgan intends to defend itself vigorously against the meritless and unfounded claims brought by the trustee," the bank continued. Picard has filed more than 100 lawsuits against "net winners" surrounding Madoff as a Dec. 11 deadline , to launch such so-called clawback lawsuits looms, the newspaper notes.

Madoff trustee sues JPMorgan for $6.4 billion By Aaron Smith CNNMoney.com December 2, 2010 NEW YORK (CNNMoney.com) -- The court-appointed trustee for the liquidation of Bernard Madoff's estate is suing JPMorgan Chase for $6.4 billion for allegedly aiding the most massive Ponzi scheme in history. The trustee, Irving Picard, is suing the banking company for "nearly $1 billion in fees and profits and an additional $5.4 billion in damages for [JPMorgan's] decades-long role as [Madoff's] primary banker, aiding and abetting Madoff's fraud," according to a statement. Picard said the complaint was filed under seal in U.S. Bankruptcy Court in Manhattan. "J.P. Morgan was willfully blind to the fraud, even after learning about numerous red flags surrounding Madoff," said David Sheehan, counsel for the trustee, in a prepared statement. He accused JPMorgan (JPM, Fortune 500) of being "at the very center of that fraud, and thoroughly complicit in it." JPMorgan officials were not immediately available for comment. Just days before, on Nov. 24, the trustee announced a similar lawsuit against UBS AG for $2 billion. The trustee accused the Swiss financial firm of participating in Madoff's Ponzi scheme. More recently, on Nov. 28, the trustee announced a wave of 40 lawsuits against Madoff family members and former workers in a bid for $69 million. Madoff, 72, pleaded guilty in March 2009 to 11 counts related to running the Ponzi scheme and was sentenced to 150 years in prison. He is incarcerated at a federal medium security facility in Butner, N.C. Using his investment firm as a front, Madoff claimed to be investing his clients' money. He kept the fraud going by using deposits from new clients to provide so-called returns to more mature clients. But in reality, he was stealing the money and there were no returns In the most recent tally, on Nov. 26, the trustee said it had recognized 2,309 claims worth more than $5.8 billion.

Trustee for Madoff’s Victims Plans $6.4 Billion Suit Against JPMorgan By Murray Coleman Barron’s – Focus on Funds Blog December 2, 2010 The victims of Bernard Madoff have filed a $6.4 billion lawsuit accusing J.P. Morgan (JPM) of aiding in the ponzi scheme. At least, that’s what the trustee trying to collect money for Madoff’s former clients told Reuters. J.P. Morgan was the primary bank used by Madoff’s company for more than 20 years, according to the report. Investors weren’t shaken by the news. Shares of J.P. Morgan were up 2.9% in afternoon trading today.

Madoff is “too good to be true” – JP Morgan, October 2008 By Tracy Alloway FT Alphaville Blog December 3, 2010 Bernie Madoff. Colombian Interests. Threats to lives. Oh my. This time two years ago the world’s largest ponzi scheme had just come to light. Some 24 months on and the legal-wrangling between Madoff’s investors and related parties continues. On Thursday it was revealed that JP Morgan is being sued for $6.4bn by the court-appointed trustee of Madoff’s erstwhile investment firm. The reason? Trustees are claiming JPM, which was Madoff’s primary banker, was “willfully blind to the fraud, even after learning about numerous red flags surrounding Madoff.” The lawsuit is reportedly under seal, but ABC News has a nice find which is supposedly part of it — a ‘Suspicious Activity Report’ filed by JPM to the UK’s Serious Organised Crime Agency in October 2008 — some two months before Bernie was arrested. The document also has JPM withdrawing money from Madoff feeder funds. According to ABC News, while JP Morgan’s London office sent the below warning to UK authorities, it did not send a similar notification to their US counterparties. Here it is (any spelling mistakes/errors are from our own transcription): JPMCB has sold several hundred million dollars worth of structured investment products to clients through its SIDM unit in London. The products reference various underlying funds which are advised and ultimately controled by Bernhard L Madoff Investment Securities (CHK) LLC in New York, into which funds of the sale proceeds are invested, either directly or via funds of funds. The economic effect of the funds is then passed on to the holders of the structured products. The funds are Lagoon Trust Ltd., Fairfield Sentry/Sigma Ltd. (BVI) and Herald Pund SPC. As part of the distribution of product, JPMCB has sold product to a Swiss introducer/product distributor group called Aurelia Finance SA, whose ultimate clients thus hold the securitised products, the return on which is linked to the Madoff-controlled funds. We believe that Aurelia Finance approached us with the structure. JPMCB’s concerns around Madoff Securities are based (1) on the investment performance achieved by its funds which is so consistently and significantly ahead of its peers year-on-year, even in the prevailing market conditions, as to appear too good to be true – meaning that it probably is; and (s) the lack of transparency around Madoff Securities trading techniques, the implementation of its investment strategy, and the identity of its OTC option counterparties; and (3) its unwillingness to provide helpful information. As a result JPMCB has sent out redemption notices in respect of one fund, and is preparing similar notices for two more funds. JPMCB’s concerns around Aurelia focus on the distributor’s awareness of the redemption action which JPMCB is undertaking on the Madoff funds, and its reaction to it. Transcriptions of the conversation between bank traders who deal with the funds and Aurelia contain references by Aurelia to Columbian Interests who will not be happy with JPMCB’s actions, statements that the value of the funds in question must not fail, and thinly veiled threats to the security of bank staff involved e.g. we know who you are and where you live/work. Transcriptions (conversations are in French) are held on CD format and can be made available if necessary. Aurelia Finance is a Geneva-based fund manger and is a 5-man partnership. It is a member of the Swiss Association of Fund Managers, which is designated by the Swiss authorities as a Self-Regulatory Organisation.

… Oh my. Oh my. Oh my.

JPMorgan and Madoff: tighter than you thought? By Colin Barr Fortune – Blog December 2, 2010 Perhaps JPMorgan Chase had more to do with Bernie Madoff than Jamie Dimon would like to admit. That is the contention of Irving Picard (right), the court-appointed trustee who is charged with recovering funds on behalf of Madoff's victims. He sued JPMorgan Chase (JPM) in U.S. bankruptcy court Thursday, saying the bank enabled Madoff's massive fraud. Picard wants almost $1 billion in fees and profits the bank pocketed over two decades as the banker for Bernard L. Madoff Investment Securities, plus $5.4 billion for its alleged role in aiding and abetting the fraud. He said the bank saw clear signs Madoff was ripping off his clients but did nothing. "JP Morgan was willfully blind to the fraud, even after learning about numerous red flags surrounding Madoff," said David J. Sheehan, counsel for the Trustee and a partner at Baker & Hostetler LLP, the court-appointed counsel for the Trustee. "While many financial institutions enabled Madoff's fraud, JPMC was at the very center of that fraud, and thoroughly complicit in it." The suit against JPMorgan Chase comes in spite of CEO Jamie Dimon's claim at the bank's 2009 annual meeting that "we had almost nothing to do with" Madoff. JPMorgan is sticking with that line. It blasted Picard Thursday, calling his claims "disappointing" and "demonstrably false." The complaint filed today by the trustee for the Madoff estate blatantly distorts both the facts and the law in an attempt to grab headlines. Contrary to the trustee's allegations, JPMorgan did not know about or in any way assist in the fraud orchestrated by Bernard Madoff. As a provider of regular commercial banking services to Madoff's brokerage firm, JPMorgan complied fully with all applicable laws and regulations governing customer accounts. Moreover, to the extent foreign affiliates of JPMorgan made indirect investments with offshore funds that in turn invested with Madoff, those affiliates invested significantly more than they ever redeemed. Any suggestion that JPMorgan supported Madoff's fraud is utterly baseless and demonstrably false. The trustee's irresponsible and over-reaching allegations are especially disappointing in light of the significant effort that JPMorgan has made to assist the trustee in investigating the Madoff fraud. Since the fraud was revealed in December 2008, JPMorgan has shared significant information with the trustee and addressed the questions that the trustee has raised. JPMorgan intends to defend itself vigorously against the meritless and unfounded claims brought by the trustee. JPMorgan isn't the only bank in Picard's cross hairs. Last week he sued Switzerland's UBS (UBS) for $2 billion, claiming it furthered Madoff's ripoff scheme by lending "an aura of legitimacy" to the flow of money going into the scheme via so-called feeder funds. Madoff, 72, pleaded guilty in March 2009 to ripping off his clients and was sentenced to 150 years. Estimates of client losses initially ranged as high as $65 billion but have since come down to around a third of that.

The Picard suit isn't the first one JPMorgan has faced in the Madoff mess. A federal judge in New York this summer dismissed a suit by an investment partnership that lost $13 million when Madoff's scheme collapsed. The partnership, known as MLSMK Investments, claimed JPMorgan Chase looked into Madoff's operations and concluded he was defrauding investors before the bank pulled $250 million of its own money from Madoff's funds. Chase's decision to pull the funds before Madoff's collapse was reported in a January 2009 New York Times story. But the judge ruled the investors in the lawsuit didn't show Chase had actually investigated Madoff before making the withdrawal. Picard contends in his press release Thursday that a request by JPMorgan compelled the bankruptcy court to seal the complaint, but he says he will work to have it unsealed. "JPMC has designated virtually all of their information as confidential," he said. "While JPMC may want to hide the full extent of its significant role in the Madoff fraud from the public, we intend to move to have the complaint made public as soon as possible."

Ponzi Trustee Looks to Another Deep Pocket Portfolio.com – The Business Blotter Blog December 2, 2010 Madoff trustee Irving Picard has filed suit against JPMorgan Chase, claiming the bank overlooked the massive fraud and should fork over $1 billion in fees and profits—and a whopping $5.4 billion in damages. As Willie Sutton supposedly once said, he robs banks because that is where the money is. "JPMorgan was willfully blind to the fraud, even after learning about numerous red flags surrounding Madoff," David Sheehan, a partner at Baker & Hostetler LLP and counsel to Irving Picard, told Reuters. Picard, who has a limited time to file clawback suits, is targeting the nation's No. 2 bank because it served as the main financial institution for Bernard L. Madoff Investment Securities LLC. He sued UBS earlier this year, and has filed more than 500 suits this week alone, to recover monies well in excess of $25 billion for jilted Madoff investors. JPMorgan is having none of it, and calls the allegations "utterly baseless and demonstrably false."

JPMorgan slapped with $6.4 billion lawsuit by trustee seeking money for Madoff victims By Jane Musgrave The Palm Beach Post December 2, 2010 Banking and investment behemoth JPMorgan Chase on Thursday was slapped with a $6.4 billion lawsuit by a trustee seeking to recover money for the victims of Bernard Madoff's epic Ponzi scheme. Noting that JPMorgan was the primary bank Madoff used to funnel the billions he stole from investors, trustee Irving Picard is asking the bank to return $1 billion it pocketed in fees and profits and to pay $5.4 billion in damages. "JPMorgan was willfully blind to the fraud, even after learning about numerous red flags surrounding Madoff," said attorney David Sheehan, who represents Picard. "While many financial institutions enabled Madoff's fraud, (JP Morgan) was at the very center of that fraud, and thoroughly complicit in it." In the months before Madoff's Dec. 11, 2008 arrest, JP Morgan withdrew $250 million it had invested in Madoff-related securities. After Madoff admitted his decades-long operation was a scam, JP Morgan officials said it withdrew its funds for various reasons, including that it became concerned about Madoff's operation. However, bank officials vehemently denied Picard's charges. "Contrary to the trustee's allegations, JPMorgan did not know about or in any way assist in the fraud orchestrated by Bernard Madoff," spokeswoman Jennifer Zuccarelli said in a statement. "Any suggestion that JPMorgan supported Madoff's fraud is utterly baseless and demonstrably false." Further, she said, JPMorgan has been cooperating with Picard in his investigation of the scheme that cost thousands of investors their retirement nest eggs, devastated charities and shook the foundation of the financial world. While Madoff reported roughly $65 billion on his books, the actual loss to investors is estimated at about $20 billion. "The trustee's irresponsible and over-reaching allegations are especially disappointing in light of the significant effort that JPMorgan has made to assist the trustee," Zuccarelli said. However, some victims who are still reeling from the losses that forced many elderly retirees back to work, said they can't believe JPMorgan wasn't involved. "They knew exactly what he was doing," said Stephanie Halio, a Boca Raton woman who had invested with Madoff since 1992. She said she doesn't believe it was a coincidence that the bank pulled out its money mere months before the long-running scam imploded. "They were handling all of Madoff's transactions." While pleased Picard acted, she questioned why it took two years. Further, she questioned whether the bank will be forced to pony up the billions Picard is seeking. Picard, for instance, sued Barbara and the late Jeffry Picower for $7.2 billion, claiming they knew annual returns of up to 950 percent were phony. According to court records, however, settlement talks would force Barbara Picower, a beloved Palm Beach philanthropist, to repay $2 billion. New York City lawyer Howard Kleinhendler said devasted investors should cheer the JPMorgan lawsuit. "Victims will have another deep pocket that can be used to compensate them. After all, that's what it's all about, compensating the victims."

He filed an unsuccessful lawsuit against JPMorgan last year on behalf of several Palm Beach families who invested $12.8 million with Madoff just before the scheme collapsed. A judge threw the lawsuit out, saying Kleinhendler didn't have the financial documents he needed to recoup losses for the families, who formed MLSMK Investments Co. "Picard has something I didn't have," Kleinhendler said. As the court-appointed trustee, Picard has been able to analyze JPMorgan's books and undoubtedly has seen hundreds of emails, documenting the scheme. For the time being, however, Picard can't reveal what he has learned. The lawsuit was sealed after JPMorgan attorneys claimed it contained confidential information. Picard, in a statement, said he hopes to persuade the judge to allow the lawsuit to be made public. The suit is one of dozens Picard has filed recently. On Nov. 24, he filed a $2 billion lawsuit against UBS AG, a Swiss wealth management company, claiming it helped Madoff perpetuate the fraud. Last Friday, he filed 40 lawsuits, including ones against Madoff's sister, nephew and in-laws, seeking $69 million of what he claimed were ill-gotten gains. By law, he has two years to file such complaints. The deadline is Dec. 11.

Madoff Trustee Sues JPMorgan Chase for $6.4 Billion On Wall Street December 3, 2010 The trustee seeking to recover funds lost in the multibillion Ponzi scheme run by Bernard Madoff Thursday sued JP Morgan Chase & Co. for $6.4 billion. The trustee, Irving H. Picard, cited JP Morgan Chase's "decades-long role" as the primary banker for Bernard L. Madoff Investment Securities LLC. The suit, filed in the United States Bankruptcy Court for the Southern District of New York, seeks to recover nearly $1 billion in fees and profits and pull in an additional $5.4 billion in damages for JP Morgan Chase's alleged "aiding and abetting" of Madoff's fraud. “The complaint filed today by the trustee for the Madoff estate blatantly distorts both the facts and the law in an attempt to grab headlines,'' said JP Morgan Chase vice president of Americas media relations Jennifer R. Zuccarelli. “JPMorgan intends to defend itself vigorously against the meritless and unfounded claims brought by the trustee.” The trustee's attorney said JP Morgan failed to properly investigate Madoff's activities. “JP Morgan was willfully blind to the fraud, even after learning about numerous red flags surrounding Madoff,” David J. Sheehan, counsel for the trustee, said in a statement. “While many financial institutions enabled Madoff's fraud, JPMC was at the very center of that fraud, and thoroughly complicit in it.'' The trustee said any money recovered from Chase would be distributed pro rate to Madoff customers with valid claims. Madoff committed his fraud by manufacturing trades in batches in an IBM computer and assigning the fictitious transactions to customer accounts ("How Bernie Made Basket Cases of His Customers' Accounts"). Chase "had only to review its internal account records to determine whether there was a legitimate explanation for the cash moving in and out of the BLMIS accounts. And when there ultimately was suspicion of illegal activity, JPMC had a duty to take action. It failed to do so,” Sheehan said. Contrary to the trustee’s allegations, Zuccarelli said, "JPMorgan did not know about or in any way assist in the fraud orchestrated by Bernard Madoff. As a provider of regular commercial banking services to Madoff’s brokerage firm, JPMorgan complied fully with all applicable laws and regulations governing customer accounts. "Any suggestion that JPMorgan supported Madoff’s fraud is utterly baseless and demonstrably false,'' she said. The trustee said Chase was Madoff's "primary banker for more than 20 years, and was responsible for knowing the business of its customers – in this case, a very large customer. Madoff would not have been able to commit this massive Ponzi scheme without this bank. JPMC should pay the price for its central role in enabling Madoff’s fraud.” On the banking side, the complaint charges, JPMC should have been more vigilant in seeing illegal cash flows. Instead, “JPMC was willing to ignore decades of suspicious and inexplicable activity,” said Deborah Renner, also representing the Trustee. “The trustee’s irresponsible and over-reaching allegations are especially disappointing in light of the significant effort that JPMorgan has made to assist the trustee in investigating the Madoff fraud,'' said Zuccarelli.

Meanwhile, in more fallout from the credit crunch of 2008, JP Morgan Chase countersued Lehman Brothers Holdings. J.P. Morgan Chase, which served as Lehman's main clearing bank before Lehman failed, said Lehman used "collusion and deception" to persuade the bank to lend more than $70 billion in the days after it filed for Chapter 11 bankruptcy protection two years ago.

Media Coverage December 5 – 6, 2010

The Wall Street Journal – Madoff Trustee Goes After HSBC (12.06.10) Financial Times – HSBC had ‘Madoff warnings in 2001’ (12.06.10) Financial Times – Madoff trustee sues HSBC for $9bn (12.06.10) The New York Times – Madoff Suit Cites HSBC as a Helper (12.06.10) NPR – HSBC Sued For $9 Billion Over Ties To Madoff (12.06.10) Bloomberg – HSBC Holdings Sued by Madoff Trustee for $9 Billion (12.06.10) Reuters – HSBC says Madoff trustee's claims unfounded (12.06.10) The New York Times – Madoff Case Lingers as Menace to Mets (12.05.10) Courthouse News Service – Madoff Trustee Sues HSBC (12.06.10) The Telegraph (UK) – HSBC hit with $9bn lawsuit over Madoff (12.06.10) The Guardian (UK) – HSBC was 'deliberately blind' to Bernie Madoff fraud, alleges $9bn lawsuit (12.06.10) BBC News – Madoff trustee sues HSBC for $9bn (12.06.10) CNNMoney.com – Madoff trustee sues HSBC for $9 billion (12.06.10) TheStreet.com – Madoff Suits Show Banks Open to Liability (12.06.10) ABA Journal – Madoff Trustee Sues Third Major Bank, Seeks $9B (12.06.10) FT Alphaville (Blog) – Madoff performance was “magic,” according to HSBC (12.06.10) Forbes (Blog) – Madoff Trustee Sues HSBC And Others For $9 Billion in Biggest Madoff Suit (12.05.10) On Wall Street – Madoff Trustee Seeks $9 Billion from HSBC (12.06.10) Herald Sun (Australia) – Madoff victims sue HSBC for $9bn (12.06.10) This is Money (UK) – HSBC sued by victims of Madoff fraud (12.06.10) FINAlternatives – Madoff Trustee Hits HSBC For $9 Billion (12.06.10) Gothamist (Blog) – Madoff Trustee Goes On Multi-Billion Dollar Suing Spree (12.06.10)

Madoff Trustee Goes After HSBC By Chad Bray The Wall Street Journal December 6, 2010 The trustee seeking money for victims of Bernard Madoff's fraud sued HSBC Holdings PLC and a group of feeder funds on Sunday for at least $9 billion. The lawsuit, filed in federal bankruptcy court in Manhattan, is the latest move by Irving Picard, who has filed more than 100 lawsuits in recent days in an effort to recover money from investors who received false profits from the Ponzi scheme or persons or institutions he claims enabled the fraud. Under federal bankruptcy law, Mr. Picard must bring such lawsuits by Dec. 11, the two-year anniversary of Mr. Madoff's arrest and his firm's demise. In a statement, Mr. Picard said HSBC and a network of feeder funds in Europe, the Caribbean and Central America directed more than $8.9 billion in the fraudulent investment advisory business to Mr. Madoff's firm. He said they ignored indications that Mr. Madoff engaged in a fraud. "Had HSBC and the defendants reacted appropriately to such warnings and other obvious badges of fraud outlined in the complaint, the Madoff Ponzi scheme would have collapsed years, billions of dollars and countless victims sooner," Mr. Picard said in a statement. "The defendants were willfully and deliberately blind to the fraud, even after learning about numerous red flags surrounding Madoff." The trustee is seeking to recover $9 billion, as well additional damages. HSBC declined comment late Sunday. A number of HSBC companies have been named as defendants in Madoff-related lawsuits in the U.S., Ireland, Luxembourg and other jurisdictions. In August, HSBC said those cases were at an early stage and the bank believes that it has good defenses to these claims and would defend them vigorously. Mr. Picard has filed suit after several financial institutions in recent weeks, including J.P. Morgan Chase & Co. and UBS AG. Both banks have said the allegations are without merit. Oren Warshavsky, a lawyer representing Mr. Picard, said the defendants engineered a "labyrinth" of hedge funds, management companies and service providers in order to make it appear there was a system of checks and balances. However, it actually just created another way to direct money to Mr. Madoff while avoiding scrutiny, Mr. Warshavsky said. "At the core of this architecture was a remarkably small group of individuals and the bank on which they all relied to help project an air of credibility: HSBC," Mr. Warshavsky said. "HSBC alone performed due diligence in its multiple capacities, giving it a level of insight into [Bernard L. Madoff Investment Securities] that was unsurpassed." Mr. Madoff, who pleaded guilty to orchestrating the multibillion-dollar fraud in March 2009, is serving a 150-year sentence in federal prison in North Carolina.

HSBC had ‘Madoff warnings in 2001’ By Brooke Masters Financial Times December 6, 2010 HSBC continued to act for funds that fed money into Bernard Madoff’s Ponzi scheme in spite of repeated warning from the bank’s own executives and outside auditors about the “baffling” and potentially fraudulent structure of the scheme, according to a US lawsuit launched against the global bank. In the $9bn claim against HSBC and other European institutions, the trustee charged with recovering money for Mr Madoff’s victims alleged the warnings began as early as 2001, seven years before the scheme collapsed, revealing one of the biggest frauds in history. The lawsuit also alleges that Mr Madoff sent HSBC-connected funds account statements that included extraordinary discrepancies, yet the bank’s subsidiaries continued to serve as administrators, custodians and marketers for feeder funds that sent money to the $65bn Ponzi scheme, the complaint said. Among other things, the statements included claims that Mr Madoff was parking investors’ cash in a money market fund that ceased to exist in 2005, that trades had settled on non-working days, and at prices outside the reported daily price range. The lawsuit filed in New York seeks $6.6bn from HSBC subsidiaries and demands more than $2bn from UniCredit’s Bank Austria and Bank Medici and a series of feeder funds and individual executives. The HSBC claim is the largest in a flurry of huge lawsuits that Irving Picard, the trustee, has filed against US and European institutions as a two-year deadline for filing claims looms. Mr Picard has also filed separate lawsuits seeking $2bn from UBS and $6.4bn from JPMorgan, as well as money from Madoff relatives and friends, and US feeder funds. The HSBC claims offer some of the most detailed information about a big bank’s relationship with Mr Madoff, who was arrested in December 2008 and is serving a 150-year sentence for fraud. One-third of all the money that went to the scheme came through HSBC-related funds, the complaint said. “The fees they received for their various roles were nothing more than kickbacks paid for looking the other way,” the complaint alleges. HSBC said it “believes that the US court-appointed trustees’ claims of wrongdoing are unfounded and it will defend itself vigorously against these claims”. The bank is already fighting investor lawsuits in the US, France and Ireland. A spokeswoman for UniCredit said: “We intend to defend ourselves vigorously.” Mr Picard’s complaint says HSBC twice hired KPMG to look at Mr Madoff’s operation and received detailed warnings about the potential for fraud in 2006 and 2008 but the bank continued to work with the broker.

Madoff trustee sues HSBC for $9bn By Greg Farrell Financial Times December 6, 2010 The court-appointed trustee of Bernard Madoff’s failed investment firm is suing HSBC for $9bn, claiming the London-based bank turned a blind eye to “red flags” that should have caused the institution to stop channel money to Mr Madoff’s operation. Irving Picard, the court-appointed trustee for Bernard L. Madoff Investments, has also filed claims in recent weeks against two other global banks that did significant business with Mr Madoff, seeking $6.4bn from JPMorgan Chase and $2bn from UBS. In addition to HSBC, the latest complaint, filed on Sunday in the US, named as defendants Sonja Kohn, an owner of Bank Medici, and members of the Benbassat family – Mario, Alberto and Stephane – along with several hedge funds. It was filed just days before the two-year expiration date of the trustee’s mandate in the case. The case against Mr Madoff was initiated on December 15, 2008, days after law enforcement officials first learnt that the fund managed by the fabled investor was a Ponzi scheme. Mr Madoff pleaded guilty in the matter last year and was sentenced to 150 years in prison. Prosecutors eventually determined that Mr Madoff took in some $64bn from investors. In the latest filing, Mr Picard alleged that representatives of HSBC noticed that the consistent ability of Mr Madoff’s to generate healthy returns raised “red flags” internally, but that the bankers continued to channel investor funds to Mr Madoff. Mr Picard cited one exchange between bankers at HSBC in 2006 which reflected an attitude of sarcasm: “It’s the magic of Madoff,” said one.

Madoff Suit Cites HSBC as a Helper By Diana Henriques The New York Times December 6, 2010 The trustee seeking assets for victims of Bernard L. Madoff’s global Ponzi scheme filed a lawsuit on Sunday seeking $9 billion from a roster of defendants headed by HSBC, the London-based financial giant with hedge fund clients that fed piles of cash into the enormous fraud. According to the complaint, a hedge fund official dealing with HSBC once attributed Mr. Madoff’s stellar performance — which later turned out to be purely fictional — to a “magic formula” that no one else could replicate. The lawsuit is the third multibillion-dollar complaint the Madoff trustee, Irving H. Picard, has filed against major financial institutions in the last two weeks. It almost certainly will not be the last. Under federal bankruptcy law, the trustee must file all his recovery claims within two years of the initial bankruptcy filing. That did not occur until Dec. 15, 2008, but the bankruptcy court has defined the filing date as Dec. 11, 2008, the day of Mr. Madoff’s arrest. That gives Mr. Picard until midnight on Saturday either to sue to recover cash withdrawn from Madoff accounts before the Ponzi scheme collapsed or to seek punitive damages from anyone involved in those withdrawals. The large banks the trustee has sued — the Swiss-based UBS, JPMorgan Chase in New York, and now HSBC in London — were not alone in providing services or marketing products related to the Madoff fraud. For example, several other global banks sold investment vehicles that tracked Mr. Madoff’s performance, and some smaller banks provided services to “feeder funds” that channeled investments into Mr. Madoff’s funds. It is unclear how many of those other entities may be in Mr. Picard’s sights. With the deadline approaching, Mr. Picard said in a recent report to the bankruptcy court that he “anticipates that he will file extensive additional litigation in the coming weeks.” Some complaints may be filed in foreign jurisdictions. The trustee has law firms working for him in Europe, Gibraltar, Canada, Bermuda and the Caribbean to help untangle connections between Mr. Madoff and “foreign individuals, feeder funds and international banking institutions,” he said in the court filing. The latest lawsuit contends that the Madoff fraud “could not have been accomplished or perpetuated unless the HSBC defendants agreed to look the other way and to pretend that they were ensuring the existence of assets and trades when, in fact, they did no such thing.” It asserts that HSBC and a dozen of its subsidiaries “aided, enabled and sustained” Mr. Madoff’s fraud in two important ways: by lending the bank’s prestige and performing services for hedge funds that raised money for Mr. Madoff; and by developing complex derivative products that provided additional sources of cash for the Ponzi scheme. A dozen hedge funds, nearly two dozen European money-management businesses and 13 individuals were included as defendants in the 170-page complaint. Among them were Sonja Kohn, the prominent Viennese financier who had ties to some of the largest Madoff feeder funds, and UniCredit, the Italian holding company whose Bank Austria unit was a partner with Ms. Kohn in her flagship company, Bank Medici. A spokesman for HSBC declined to comment Sunday. Representatives of the other defendants in Europe could not be reached for comment Sunday evening.

But in vigorous defenses against similar lawsuits filed by investors, lawyers for the HSBC units, the UniCredit subsidiaries and the Bank Medici defendants have all consistently denied that their clients had any knowledge of the Madoff fraud or were responsible in any way for not detecting it before its collapse. To outsider investors, the “labyrinth” created by the hedge funds, managers and HSBC subsidiaries named as defendants looked like “a formidable system of checks and balances,” said Oren J. Warshavsky, a partner at Baker & Hostetler, the trustee’s law firm. “Yet the purpose of this complex architecture was just the opposite,” he said, “to avoid scrutiny and generate more fees.” The trustee’s HSBC claim, filed electronically in United States District Court in Manhattan, is the largest, surpassing a $7.2 billion demand filed against the estate of Jeffry Picower, a longtime Madoff investor who died last year. By the end of September, Mr. Picard had filed 19 lawsuits seeking to recover a total of $15.5 billion from members of Mr. Madoff’s immediate family, longtime individual investors like Mr. Picower, and major feeder funds, including those operated by the Fairfield Greenwich Group and J. Ezra Merkin, a prominent Wall Street investment manager. Mr. Picard’s recent lawsuits against JPMorgan, UBS and HSBC have added $17.4 billion to the amount he is claiming on behalf of victims, for a total of more than $32 billion. That amount, which includes demands for punitive damages, is 50 percent more than the $20 billion he has estimated as the actual cash losses in the fraud, but he is not assured of recovering all the money he is seeking. JPMorgan, UBS and HSBC have already vowed that they will fight the trustee’s claims in court, and those battles could take years. The total shown on investor account statements on the eve of the fraud’s collapse was nearly $65 billion, the sum of fictional paper profits that had accumulated in some accounts for decades. Mr. Picard has recovered about $1.5 billion through asset sales and out-of-court settlements. Mr. Madoff is serving 150 years in prison after pleading guilty to orchestrating the fraud.

HSBC Sued For $9 Billion Over Ties To Madoff NPR December 6, 2010 Story available at: http://www.npr.org/2010/12/06/131842273/Business-News The man in charge of recovering money from the victims of Bernard Madoff's ponzi scheme has filed another lawsuit, this time against the global bank HSBC for nearly $9 billion. Irving Picard announced his lawsuit Sunday, saying HSBC fueled the scheme by helping to funnel investor money to Madoff. He also says the bank ignored warnings from its own accountants about Madoff's operation.

HSBC Holdings Sued by Madoff Trustee for $9 Billion Bloomberg December 6, 2010 Dec. 5 (Bloomberg) -- HSBC Holdings Plc, Europe's biggest lender, was sued for $9 billion over allegations of financial fraud and misconduct by the trustee liquidating Bernard Madoff's former investment firm. Irving H. Picard, trustee for the liquidation of Bernard L. Madoff Investment Securities LLC, filed the complaint in U.S. Bankruptcy Court in Manhattan, according to a statement. The suit alleges the bank and some affiliates "enabled" the con man's fraud through the "creation, marketing and support" of a dozen feeder funds in Europe, the Caribbean and Central America. Last week, Picard sued JPMorgan Chase & Co. for $6.4 billion over claims the bank aided and abetted Madoff's fraud. Picard has filed 18 other claims and is seeking the return of $15.5 billion paid to Madoff friends and family, feeder funds and some investors. He faces a Dec. 11 deadline for filing suits to recover false profits. A call placed to HSBC North American spokeswoman Lisa Sodeika wasn't immediately returned. Madoff, 72, is serving a 150-year sentence in a North Carolina federal prison after admitting he directed the biggest Ponzi scheme in history. At the time of his arrest, Madoff's account statements reflected 4,900 accounts with $65 billion in nonexistent balances. Investors lost about $20 billion in principal.

HSBC says Madoff trustee's claims unfounded By Steve Slater Reuters December 6, 2010 LONDON, Dec 6 (Reuters) - HSBC Holdings (HSBA.L) said claims the bank had aided the fraud scheme of convicted swindler Bernard Madoff were unfounded and it would "defend itself vigorously" against all Madoff-related claims. U.S. court-appointed trustee Irving Picard sued HSBC for $9 billion on Sunday, accusing it of aiding the Madoff fraud "through the creation, marketing and support of an international network of a dozen feeder funds". An HSBC spokesman said the bank was defending itself against Madoff-related claims brought against it in various jurisdictions, including U.S. class action cases. "HSBC believes that the U.S. court appointed trustee's claims of wrongdoing are unfounded and it will defend itself vigorously against those claims as well," the spokesman said. The so-called feeder funds named in the lawsuit in U.S. Bankruptcy Court in New York included Swiss firm Genevalor, Benbassat & Cie which said it strongly denied any wrongdoing and rejected the claims. "In particular, it strongly denies any allegation that it had prior knowledge of the fraud committed by Madoff," Genevalor said, adding "this unfounded action causes a significant harm to the investors and to itself".

Madoff Case Lingers as Menace to Mets By Peter Lattman and Michael Schmidt The New York Times December 5, 2010 As the Mets head into this week’s winter meetings in Orlando, Fla., they are dealing with an issue that would seem to overshadow whatever modest moves they may make in the days ahead to fill out the 2011 roster. The issue, and not for the first time, is Bernard L. Madoff’s Ponzi scheme and its effect on the owners of the Mets, who were substantial investors with Madoff. Irving H. Picard, the court-appointed trustee now overseeing the dissolution of Madoff’s firm, has a deadline of Saturday to bring legal action against those investors who he thinks profited from the Madoff scheme before it collapsed in December 2008 — even if they are not accused of criminal wrongdoing. As such, he has already filed lawsuits that seek to recover more than $32 billion. And through September, he has managed to recover $1.5 billion through asset sales and out-of-court settlements. He has filed claims against Madoff family members, prominent lawyers and private-equity dealmakers as he seeks to claw back Madoff-generated profits and redistribute them equally to eligible victims. He has filed multi-billion dollar lawsuits against UBS, JPMorgan Chase and HSBC, alleging they were complicit in the fraud scheme, which the three banks deny. But at least one prominent investor who may have made tens of millions of dollars from investments with Madoff — the Wilpon family, which owns the Mets — has yet to be sued. Although there had been widespread speculation that the Wilpons lost money in the Ponzi scheme, an account called Mets Limited Partnership put a total of $522.7 million into Madoff accounts and withdrew $570.5, a profit of $47.8 million, according to a 2009 bankruptcy court filing made by Picard in New York that detailed the “net winners.” With the Wilpons emerging as alleged net winners, they remain a target for Picard, who has until midnight Saturday to file lawsuits to recover money that was withdrawn from Madoff accounts before the scheme’s collapse or to seek punitive damages from those involved in the withdrawals. A spokesman for Picard declined to comment about the possibility of a case against Wilpon. Karen Wagner, a lawyer at Davis Polk & Wardwell, the New York law firm representing the Wilpon family in its current dealings with Picard, did not return a call or respond to an e-mail seeking comment. A lawsuit could force the Wilpons to repay tens of millions of dollars just as they are trying to rebuild the Mets under a new general manager and manager, and as they try to cope with the largest drop in attendance in Major League Baseball in 2010. Sandy Alderson, the Mets’ new general manager, has made it clear that he has no plans to spend significant amounts of money this winter on free agents and that if the Mets are to do better in 2011, it will have to be because of better performances from players already under contract. But it is unclear whether this is simply a strategic move to let Alderson get the Mets’ house in order, and to get through the final contract year of several players who have worn out their welcome in New York, or whether the Mets are holding back because they fear potential liabilities in any actions brought by Picard. Fred Wilpon, the 74-year-old principal owner of the Mets, and his business partner, Saul Katz, run Sterling Equities, a group of companies that include a large real estate business and the Mets. The Mets,

Sterling Equities and the Wilpons had more than 20 investment accounts with Madoff, who is serving a 150-year sentence in a federal prison in North Carolina. The Wilpon family has repeatedly tried to assuage any concerns that the Madoff fraud put the Mets or the family in financial jeopardy. “The team is not for sale, not a piece of it, not a part of it,” Jeff Wilpon, the son of Fred Wilpon and the team’s chief operating officer, said shortly after the scheme’s collapse. “We are not for sale. We have no reason to sell.” Fred Wilpon reiterated that stance last year, saying: “I’m fine, my family’s fine, my business family’s fine. Are we all saddened by what Bernie Madoff did to our family? Yes. But we’re probably more saddened by what he did to people who can’t fight back, who are really affected financially. To be betrayed by a friend is a burden. You don’t expect that to happen. I’ve known him for 30 years.” Indeed, Fred Wilpon and Madoff were close friends. During the 1970s and 1980s, the men lived with their families in Roslyn, N.Y., and had children close in age. Madoff was a Mets season-ticket holder, with two premium box seats behind home plate. The men also had other ties. Madoff’s wife, Ruth, had an interest in Sterling Equities real estate funds, and federal authorities have wrested control of her stake. Employees of Sterling Equities also had their retirement savings invested with Madoff. This year, a widow of a former Sterling employee filed a lawsuit against Sterling and Fred Wilpon, alleging that they breached their fiduciary duties by investing $16.2 million, or 92 percent, of the company’s 401(k) plan’s $17.6 million of assets with Madoff. A lawyer for Sterling did not return a call or respond to an e-mail seeking comment. Sterling has said previously in a statement that the case has no merit. Meanwhile, a bigger issue is looming: what Picard may or may not do before Saturday.

Madoff Trustee Sues HSBC Courthouse News Service December 6, 2010 MANHATTAN (CN) - The trustee seeking recovery for victims of Bernard Madoff's $70 billion Ponzi scheme demands $9 billion from HSBC bank, which trustee Irving Picard claims "look[ed] the other way" and "pretend[ed] they were ensuring the existence of assets and trades when, in fact, they did no such thing." Picard's latest complaint accuses HSBC and a slew of co-defendants of supporting a network of feeder funds that helped Madoff sustain his giant scam. The trustee claims that HSBC twice hired KPMG to take a look at Madoff's firm, and both time KPMG reported "serious risks already known to HSBC," Reuters reported this morning. Picard sued JPMorgan Chase & Co. for $6.4 billion last week, and has asked for $2 billion from Swiss bank UBS. The raft of filings is coming now because Picard must file such lawsuits for recovery within 2 years after Madoff and his firm filed for bankruptcy, which was on Dec. 11, 2008.

HSBC hit with $9bn lawsuit over Madoff By Richard Blackden The Telegraph (UK) December 6, 2010 Iving H Picard, the court-appointed trustee seeking to recover more than $15.5bn billion for Mr Madoff's former customers, alleges that HSBC ignored "red flags" surrounding Mr Madoff's business and asked accountancy firm KPMG to investigate its suspicions. A spokesperson for HSBC declined to comment on Sunday evening. The suit accuses HSBC of creating and maintaining a network of feeder funds that channelled money to Mr Madoff, who was sentenced to 150 years in jail after pleading guilty last year to the biggest ponzi scheme in history. Rather than invest customers' funds, Mr Madoff's used money from new investors to pay the returns he had promised to older ones - a fraud that worked until customers began wanting their money back as the financial crisis deepened in the autumn of 2008. HSBC was "wilfully and deliberately blind to the fraud even after learning about numerous red flags surrounding Madoff," Mr Picard alleged. The suit against HSBC follows a $6.4bn claim filed last week against JPMorgan and a $2bn claim against UBS.

HSBC was 'deliberately blind' to Bernie Madoff fraud, alleges $9bn lawsuit By Dominic Rushe The Guardian (UK) December 6, 2010 The British banking group HSBC was "wilfully and deliberately blind" to Bernard Madoff's multibillion-pound fraud, according to a law suit filed late yesterday. Irving Picard, the trustee charged with recovering billions for the victims of Madoff's Ponzi scheme, has sued HSBC and others for $9bn (£6bn) in New York, accusing the bank of ignoring warnings from accountants KPMG that Madoff's phenomenal investment record was too good to be true. "Had HSBC and [its executives] reacted appropriately to such warnings and other obvious badges of fraud outlined in the complaint, the Madoff Ponzi scheme would have collapsed years, billions of dollars, and countless victims sooner," Picard said in a statement. "The defendants were wilfully and deliberately blind to the fraud, even after learning about numerous red flags surrounding Madoff." The suit alleges HSBC was instrumental in "engineering a labyrinth" of international sources of funding for the fraudster. "At the core of this architecture was a remarkably small group of individuals and the bank on which they all relied to help project an air of credibility: HSBC," said Oren Warshavsky, a partner at Baker Hostetler, the court-appointed lawyers for Picard. The bank has so far declined to comment but is expected to contest the claim vigorously. Madoff was enabled in his multibillion-dollar scam by an international network of "feeder funds" based in Europe, the Caribbean and Central America, which brought in new investors. The suit also names the heads of some of those funds including Sonja Kohn, once known as "Austria's woman on Wall Street", who was one of Madoff's biggest sources of international clients and reportedly introduced Russian oligarchs to the fraudster. All of the defendants "possessed a strong financial incentive to participate in, perpetuate and stay silent about Madoff's fraudulent scheme", said David Sheehan, a partner at Baker Hostetler. The complaint alleges that the defendants directed more than $8.9bn into Bernard L Madoff Investment Securities (BLMIS). The defendants also earned "hundreds of millions of dollars" backing financial instruments the suit alleges were "designed to substantially assist Madoff by pumping money into BLMIS and prolonging the Ponzi scheme". The HSBC suit is just the latest from Picard, who last week filed a $6.4bn suit against JP Morgan and in November sued the Swiss bank UBS for $2bn. Both banks are similarly accused of aiding Madoff in his scam. Picard has until this Saturday to file claims for recovery, two years from the initial bankruptcy filing. Picard has so far recovered $1.5bn. John Coffee, a professor at Columbia Law School, said these latest suits would be hard fought. "I don't expect anyone to settle quietly while there is so much interest in the case and settling would entail an admission of wrongdoing," he said.

Madoff trustee sues HSBC for $9bn BBC News December 6, 2010 The trustee for the liquidation of Bernard Madoff's investment firm is suing HSBC for $9bn (£5.7bn; 6.8bn euros). Iriving Picard, who is seeking to recover funds on behalf of Madoff's victims, is alleging 24 counts of fraud and misconduct against the bank. He alleges that HSBC aided Madoff's scheme through the creation of a network of international feeder funds. HSBC said it was defending itself "vigorously" against the claims. In the complaint filed on Sunday in the US, Mr Picard named other defendants in the filing, including the management companies and providers of the feeder funds. The complaint alleged that the defendants were well aware of the signs of fraud that were already circulating around Bernard L Madoff Investment Securities (BLMIS). The complaint said that HSBC had twice asked accountants KPMG to identify concerns with BLMIS, and KPMG twice reported serious risks already known to HSBC. "Had HSBC and the defendants reacted appropriately to such warnings and other obvious badges of fraud... the Madoff Ponzi scheme would have collapsed years, billions of dollars, and countless victims sooner," said Mr Picard. "The defendants were wilfully and deliberately blind to the fraud, even after learning about numerous red flags surrounding Madoff." An HSBC spokesman told the BBC: "HSBC is defending itself vigorously against Madoff-related claims that have been brought against it in various jurisdictions around the world, including class actions in the United States," "HSBC believes that the US court appointed trustee's claims of wrongdoing are unfounded and it will defend itself against these claims as well." The other defendants include former Austrian lender Bank Medici, and Italian bank UniCredit. The lawsuit was filed days before the two-year expiration of the trustee's mandate. It follows similar suits filed against banks JP Morgan Chase and UBS. Bernard Madoff admitted defrauding thousands of investors through a Ponzi scheme, which paid out using new investors' money rather than from any profits. The scheme, which had been running since the early 1990s, unravelled when Madoff's investors tried to withdraw about $7bn at the height of the economic downturn. Madoff could not produce the money. Madoff is serving 150 years for the fraud.

Madoff trustee sues HSBC for $9 billion By Hibah Yousuf CNNMoney.com December 6, 2010 NEW YORK (CNNMoney.com) -- The court-appointed trustee liquidating Bernard Madoff's former investment firm has filed a lawsuit against HSBC for $9 billion for allegedly aiding the most massive Ponzi scheme in history. The trustee, Irving Picard, alleged that London-based HSBC Holdings PLC (HBC) enabled Madoff's fraud "through the creation, marketing and support of an international network of a dozen feeder funds based in Europe, the Caribbean, and Central America," in a statement released Sunday. He claimed that HSBC and the feeder funds funneled more than $8.9 billion to Madoff's fraudulent investment advisory business, and earned hundreds of billions of dollars despite being "well aware" of the fraud after accounting firm KPMG twice notified the bank of "serious risks." "Had HSBC and the defendants reacted appropriately to such warnings and other obvious badges of fraud outlined in the complaint, the Madoff Ponzi scheme would have collapsed years, billions of dollars, and countless victims sooner," Picard said in the statement. David Sheehan, counsel for the trustee, said HSBC and the feeder funds' "financial sophistication" gave them insight to Madoff's scheme "long before his confession and arrest," but "each possessed a strong financial incentive to participate in, perpetuate and stay silent about Madoff's fraudulent scheme." HSBC spokesman Adrian Russell said the "claims of wrongdoing are unfounded," and the bank will "defend itself vigorously." The lawsuit, filed in federal bankruptcy court in Manhattan, is the latest in a wave of complaints Picard has filed ahead of the two-year anniversary of Madoff's arrest on Dec. 11. Most recently, he went after JPMorgan Chase (JPM, Fortune 500) for $6.4 billion. Madoff, 72, pleaded guilty in March 2009 to 11 counts related to running the Ponzi scheme and was sentenced to 150 years in prison. He is incarcerated at a federal medium security facility in Butner, N.C. Using his investment firm as a front, Madoff claimed to be investing his clients' money. He kept the fraud going by using deposits from new clients to provide so-called returns to more mature clients. But in reality, he was stealing the money and there were no returns. In a recent tally, on Nov. 26, the trustee said it had recognized 2,309 claims worth more than $5.8 billion from victims of Madoff's scheme.

Madoff Suits Show Banks Open to Liability By Philip van Doorn TheStreet.com December 6, 2010 NEW YORK (TheStreet) -- The high-profile lawsuit by Madoff bankruptcy trustee Irving Picard against JPMorgan Chase (JPM_) and HSBC (HBC_) is just one of a number of lawsuits focusing on the scope of a bank's responsibility to protect its customers. Picard is suing for $1 billion in fees and an additional $5.4 billion in damages from JPMorgan Chase, accusing the bank of "aiding and abetting Madoff's fraud" during its "decades-long role" as the primary banker for Bernard L. Madoff Investment Securities. Separately, HSBC is being sued for 24 counts of financial fraud and misconduct by Picard, who is seeking to recover "at least $9 billion" from the London-based bank on top of unspecified damages. The suit claims that HSBC, which marketed Madoff's funds overseas, was "willfully and deliberately blind to the fraud." JPMorgan Chase denied the allegations, according to a report in the New York Times Dealbook blog, saying that the claims were false. A spokesperson for HSBC could not be reached. David Sheehan, counsel for the Madoff trustee and a partner at Baker Hostetler, said that JPMorgan was "willfully blind to the fraud, even after learning about the numerous red flags surrounding Madoff," and that the bank "should pay the price for its central role in enabling Madoff's fraud." But these type of lawsuits are not relegated to large banks. Smaller institutions can be embroiled in legal action of they don't keep an eye on the questionable activity of some customers. For example, a class action lawsuit has been filed against TD Bank (TD_) and Gibraltar Private Bank of Coral Gables, Fla., by William Scherer, for violating its own procedures and "blindly authorizing" numerous suspicious money transfers and disregarding apparent fraud warning signs" involving the accounts of Scott Rothstein, the Fort Lauderdale lawyer who pleaded guilty to a $1.2 billion Ponzi scheme in January. Rothstein was sent to cool off in prison for 50 years in June even though he agreed to cooperate with prosecutors. Scherer's firm, Conrad & Scherer, is suing on behalf of 37 former customers of Rothstein. In April Gibraltar said in a statement that there was no reason for the bank to be added to Scherer's lawsuit, since none of Rothstein's investors were clients of Gibraltar and that "the bank upheld all of its regulatory duties." A TD Bank spokesperson told TheStreet that the bank can't discuss the case but has a pending motion to dismiss the claims. The spokesperson also said that TD Bank "believes and expects the facts to prove that it is not liable for the acts of Scott Rothstein, and will, as it has done to date, defend itself vigorously." Thomas Tew of Tew Cardenas - a Miami law firm representing Gibraltar - said that one legal question surrounding the numerous lawsuits against banks springing from clients that run alleged Ponzi schemes is whether or not a bank is responsible to protect the customers of its client. He also believes that "in order to be responsible for a fraud, you have to have actual knowledge of the fraud being committed." This argument was previously tested in another case against JPMorgan chase related to the Madoff affair, where MLSMK Investments Company sued JPMorgan. In July, Judge Barbara Jones of New York's Southern District ruled that "while it may be true that defendants could have connected the dots to

determine Madoff committed fraud, the plaintiffs offered no facts to support the claim that they (JPM) actually reached a conclusion." "So, you can have all these red flags, but just because they could have connected the dots, [plaintiffs] need to show facts to support that they actually reached that conclusion," said Tew. Finally, Tew added that Ponzi schemes bring about lawsuits with plaintiffs saying that banks should police the financial environment, but in his view, "you cannot have banks being watch dogs and questioning every transaction." While it is uncertain what effect it will have on any civil lawsuits, Gibraltar Private Bank entered into cease and cesist order with the Office of Thrift Supervision in October. The bank was required to revise its procedures for compliance with the Bank Secrecy Act, anti money-laundering rules and Office of Foreign Assets Control regulations. Gibraltar was taken private by an investor group led by founder Steven Hayworth that purchased the bank in September 2009 for $93 million from Boston Private Financial Holdings(BPFH), which had acquired Gibraltar in October 2005 for roughly $248 million. While courts may rule that banks don't have a responsibility to protect the customers of their deposit clients, banks do have enforcement responsibilities under federal law, making them the first line of defense against money laundering and other suspicious activities. All bank employees are required to attend annual training to learn how to detect and report red flags, by filing Suspicious Activity Reports (SAR) with the Financial Crimes Enforcement Network, or FinCen, which is a U.S. Treasury bureau. Jonathan Hullick, Gibraltar's former chief operating officer and a former senior policy specialist at the Federal Deposit Insurance Corp.'s Washington headquarters, told TheStreet that "banks have a federally-mandated responsibility to know their customers' businesses and monitor their activities for potential red flags, regardless of the importance of a customer relationship." "If a bank fails to report suspicious activity involving a prominent customer that they report for other customers, that could violate federal law and create substantial liability for the bank and the executives involved in the decisions," he said.

Madoff Trustee Sues Third Major Bank, Seeks $9B By Debra Cassens Weiss ABA Journal December 6, 2010 The trustee seeking to recover money for Bernard Madoff investors has filed a third multbillion-dollar lawsuit against a major bank. Trustee Irving Picard sued London-based HSBC on Sunday, along with about 60 other defendants, including hedge funds and HSBC subsidiaries, the New York Times reports. The complaint was filed in federal bankruptcy court in Manhattan. The suit alleges the Madoff fraud “could not have been accomplished or perpetuated unless the HSBC defendants agreed to look the other way and to pretend that they were ensuring the existence of assets and trades when, in fact, they did no such thing.” Picard has already sued Madoff’s primary bank, JPMorgan Chase & Co., and the Swiss-based bank UBS. Bankruptcy deadlines give him another week to file additional suits.

Madoff performance was “magic,” according to HSBC By Tracy Alloway FT Alphaville (Blog) December 6, 2010

Bejesus. The Madoff trustee complaint against HSBC makes for good reading.

For background: the court-appointed trustee for Madoff’s failed investment business is suing HSBC for

$9bn — claiming, as in the JP Morgan case, that the bank turned a blind eye to “red flags” surrounding

the business. They even, and we kid you not, allegedly described Bernie’s legendary ponzi performance

as nothing less than supernatural.

From the complaint:

The HSBC brand was backed not by reasonable due diligence, but by the explanation—to which several

Feeder Fund Defendants subscribed—that BLMIS’s performance in the market was the result of “magic.”

One Feeder Fund Defendant official explained that the feeder fund with which he was associated had

“confirmed” that BLMIS’s returns were, in fact, the product of a “magic formula” because others in the

industry had tried to replicate Madoff’s returns, but were unable to do so.

HSBC, for those wondering, acted as administrator and (supposedly) custodian for several of the Bernard

L. Madoff Investment Securities (BLMI) feeder funds.

In fact, the complaint claims that HSBC’s role should have been quick to catch on to a laundry list of

warning signals.

For instance, trades for the feeder funds executed outside of the daily price ranges for the shares:

Or negative cash balances (with no interest charged):

Or the notion the idea that there were not enough options in existence to hedge the the billions of dollars

under management at Madoff’s investment advisory business:

The list goes on and on. What’s really interesting (and somewhat confusing) is that HSBC called in

accountants a couple of times to get to the bottom of the Madoff funds:

The red flags signaling Madoff’s fraud were apparent to the Defendants in September 2005, when

HSBC Bank engaged KPMG to review BLMIS for fraud and related operational risk.KPMG’s review

focused on fraud risks in BLMIS’s methods of recording and reporting client funds held by BLMIS,

HSBC’s ability to detect suspected fraud or misconduct in client funds for which HSBC served as primary

custodian. These funds included Thema International, Thema Fund, Hermes, Primeo, Herald, Alpha

Prime, and Square One.

KPMG’s findings were encapsulated in a February 16, 2006 report, titled “Review of fraud risk and related

operational risks at Bernard L. Madoff Investment Securities LLC” (the “2006 Report”). In the 2006

Report, KPMG identified a laundry list of fraud and related operational risks related to BLMIS’s

operations including: • falsification of client mandates; • embezzlement of client funds; • use of fabricated

client instructions to disguise poor proprietary positions; failure to segregate client funds from BLMIS

funds; • diversion of client funds for Madoff’s personal gain; • inaccurate allocation of reinvested funds

from Fidelity across individual accounts; • manipulation of option prices to maximize commissions; • use

of BLMIS claim funds to settle options exercised against HSBC; • practice of exercising options without

informing the client that the option was set to expire; • use of client funds to make opportunistic trades

that deviated from the SSC Strategy; • diversion of cash resulting from the sale of equities and Treasury

bills; • systematic over-valuing of positions and the failure to report positions to HSBC in order to

manipulate control relationships; • stocks were not held in client names; • inflation of call values to

disguise misappropriation or poor positions; • unauthorized trading in client accounts; • trades executions

made by unauthorized BLMIS staff members; • sham trades to divert client cash; • front-running order

flow in the market-making business; • false reporting of trades without execution to collect commissions;

and • falsification of trade confirmations.

KPMG was particularly concerned that it could not identify the owners of individual HSBC client assets,

and that controls in place at BLMIS might not prevent fraud or errors in client accounts.

Despite the litany of fraud and operational risks identified by KPMG, the HSBC Defendants

continued their relationship with Madoff, delegated custodial duties to BLMIS, and took no steps to

implement KPMG’s recommendations.

After ignoring KPMG’s dire warnings in 2006, the HSBC Defendants asked KPMG to conduct another

review of BLMIS in March 2008. The terms and scope of the review were identical to the 2006 review,

except that KPMG was also asked to assess the risk of placing HSBC investments with BLMIS. The

relevant HSBC custodial clients were identified as Primeo, Lagoon (Hermes), Alpha Prime, Herald, Herald

(Lux), Senator, Thema Wise (Thema Fund), Thema International, Defender, Landmark, and Kingate

Global.

KPMG’s conclusions were contained in a September 8, 2008, report entitled “Review of fraud risk and

related operational risks at Bernard L. Madoff Investment Securities LLC” (the “2008 Report”). KPMG

wrote that, according to Madoff, HSBC’s client investments represented an astonishing 33% of BLMIS’s

assets under management.

In the 2008 Report, KPMG identified three additional fraud concerns at BLMIS, not previously

identified in the 2006 Report: • Client cash is diverted—signatures falsified on client instruction in an

attempt to legitimize an unauthorized transaction (i.e., redemption). • Madoff LLC claim funds have been

used to settle options exercised against HSBC. • Stocks are intentionally not allocated a fair price from

the bulk trade.

Yet again, the HSBC Defendants ignored KPMG’s warnings and recommendations. The HSBC

Defendants, instead, perverted the 2008 Report and used it as a marketing tool to encourage

additional investment in the IA Business. Upon information and belief, in mid-2008, HSBC was

asked to explain Madoff’s investment strategy to Andreas Pirkner, an employee of Bank Medici. In

response, HSBC forwarded to Pirkner the 2008 Report with the comment that the Feeder Fund

Defendants were in good shape.

That must have been some, erm, magical marketing tool.

There’s still much, much more in the full document.

Madoff Trustee Sues HSBC And Others For $9 Billion in Biggest Madoff Suit By Nathan Vardi Forbes (Blog) December 5, 2010 Move over Jeffry Picower. The biggest target of the court–appointed Madoff trustee is now London-based banking behemoth HSBC and other European banks associated with an international network of 12 feeder funds that funneled cash into the Ponzi scheme from Europe, the Caribbean and Central America.

Irving Picard announced a lawsuit against HSBC and other European banks that seeks $9 billion Sunday evening, kicking off a week that is likely to see him file other notable litigation as he rushes to beat a legal deadline pegged to the two-year anniversary of Bernard L. Madoff Investment Securities’ bankruptcy filing. Picard filed the lawsuit in Manhattan’s federal bankruptcy court. In a press release, Picard claimed that HSBC enabled Madoff’s financial fraud by extending the scam through feeder funds that found $8.9 billion of fresh cash for the Ponzi scheme across the globe. Other defendants named in the suit include European banks Unicredit and Bank Medici. Picard claims HSBC and the other individuals and entities he sued “were well aware of the indicia of fraud surrounding” Madoff’s investment firm. For example, Picard says that HSBC twice hired KPMG to identify concerns with Madoff’s investment firm and twice ignored KPMG’s findings that Madoff’s firm carried serious risks. In a statement, David Sheehan, Picard’s lawyer, said that HSBC “possessed a strong financial incentive to participate in, perpetuate, and stay silent about Madoff’s fraudulent scheme.” Prior to this latest $9 billion lawsuit against HSBC and others, Picard’s biggest lawsuit in his controversial two-year effort to recover funds for some of the victims of Bernard Madoff’s Ponzi Scheme was his $7.2 billion lawsuit against the late Jeffry Picower, who drowned in his swimming pool last year. That lawsuit, now essentially directed against Picower’s estate, looked like it would be settled at one point, but it has yet to be resolved. Just last week Picard filed a sealed complaint against JPMorgan Chase & Co. partly over the bank’s commercial banking role with Madoff’s investment firm, seeking $1 billion in fees and profits JPMorgan earned in connection with its Madoff business and $5.4 billion in damages. JPMorgan denied any wrongdoing. Picard also recently sued UBS in a $2 billion lawsuit, which claimed the Swiss bank committed fraud and misconduct in connection with other Madoff feeder funds. UBS denied wrongdoing. As part of that lawsuit, Picard also sued Claudine de la Villehuchet, the widow of Rene-Thierry Magon de la Villehuchet, a French hedge fund manager who killed himself soon after the Ponzi scheme came to light. In a controversial move that Picard has long advertised, Picard has also recently started to sue tens of individual Madoff investors in so called-clawback suits, alleging these investors took out more from the Madoff Ponzi scheme than they put in. In the two years Picard and his firm, Baker Hostetler, have been working the Madoff investment firm bankruptcy, they have recovered $1.5 billion for the “net losers” of the scam and earned some $85 million in fees. Still, most of the funds Picard has recovered were simply sitting in the Madoff firm’s bank account when the fraud was exposed. With the recent flurry of activity, it is clear Picard’s effort is just getting started.

Madoff Trustee Seeks $9 Billion from HSBC By Tom Steinert-Threlkeld On Wall Street December 6, 2010 The trustee seeking to recover funds lost in the Bernard Madoff securities fraud Sunday sought $9 billion from international banking firm HSBC, in a bankruptcy court complaint. Irving H. Picard, trustee for the liquidation of Bernard L. Madoff Investment Securities, brought 24 counts of alleged fraud and misconduct against HSBC Holdings plc, HSBC Bank plc, and affiliated entities. The complaint alleges that HSBC enabled Madoff’s Ponzi scheme through the creation, marketing and support of an international network of a dozen feeder funds based in Europe, the Caribbean, and Central America, also named in the complaint. Other defendants named in the filing include the management companies and service providers of those feeder funds. These included Sonja Kohn, Genevalor, Mario Benbassat and his sons, Albert and Stephane, as well as Bank Medici and Unicredit. According to the complaint, the Defendants directed more than $8.9 billion into BLMIS’s fraudulent investment advisory business. The filing comes as the two-year anniversary of the arrest of Madoff, formerly a vice chairman of the National Association of Securities Dealers. The trustee must file any complaints seeking restitution by that anniversary date, which is Saturday. Last week, Picard sued JP Morgan Chase & Co. for $6.4 billion. The trustee, Irving H. Picard, cited JP Morgan Chase's "decades-long role" as the primary banker for Bernard L. Madoff Investment Securities LLC. The suit, filed in the United States Bankruptcy Court for the Southern District of New York, seeks to recover nearly $1 billion in fees and profits and pull in an additional $5.4 billion in damages for JP Morgan Chase's alleged "aiding and abetting" of Madoff's fraud. “The complaint filed today by the trustee for the Madoff estate blatantly distorts both the facts and the law in an attempt to grab headlines,'' said JP Morgan Chase vice president of Americas media relations Jennifer R. Zuccarelli. “JPMorgan intends to defend itself vigorously against the meritless and unfounded claims brought by the trustee.” Madoff committed his fraud by manufacturing trades in batches in an IBM computer and assigning the fictitious transactions to customer accounts ("How Bernie Made Basket Cases of His Customers' Accounts").

Madoff victims sue HSBC for $9bn Herald Sun (Australia) December 6, 2010 BRITISH bank HSBC was being sued yesterday on behalf of the victims of fraudster Bernard Madoff. The bank was accused in the suit of fuelling the disgraced financier's fraud. The latest lawsuit brought by Irving Picard, the trustee in charge of recovering losses for Madoff's victims, was seeking £5.7 billion ($A9 billion) in illicit earnings and damages from HSBC. It alleged 24 counts of financial fraud and misconduct including "aiding and abetting Madoff's fraud; unjust enrichment in the form of millions of dollars; and over £1.5 billion ($A2.4 billion) in fraudulent transfers". Picard said the bank helped funnel more than £5.7 billion to Madoff through a dozen feeder funds based in Europe, the Caribbean and Central America, adding that it was "well aware" of suspicious activity but ignored warnings from its accountants, KPMG. "Had HSBC and the defendants reacted appropriately to such warnings and other obvious badges of fraud outlined in the complaint, the Madoff Ponzi scheme would have collapsed years, billions of dollars and countless victims sooner," Picard said in a statement. "The defendants were willfully and deliberately blind to the fraud, even after learning about numerous red flags surrounding Madoff." HSBC did not respond when approached regarding the allegations. Madoff is serving a 150-year prison sentence for the biggest investment fraud in US history. The 72-year-old former NASDAQ chairman admitted running his Ponzi scheme -- where new investors pay off old investors -- for more than two decades.

HSBC sued by victims of Madoff fraud By Tanya Jefferies This is Money (UK) December 6, 2010 A lawyer representing victims of Bernard Madoff's 'Ponzi' scheme is suing banking giant HSBC for £5.7bn. Court-appointed trustee Irving Picard has accused HSBC of helping Madoff's £41bn fraud by creating a dozen so-called feeder funds across the world. He has launched separate suits against UBS for £1.25bn and JP Morgan for £4.1bn, among many others. His campaign to win redress for victims includes legal action against former Madoff clients that were 'net winners' because they withdrew more from his firm than they invested. Mr Picard's lawsuit against HSBC, which contains 24 counts of alleged financial fraud and misconduct, was filed at the US Bankruptcy Court in New York on Sunday. He has accused the bank of ignoring warnings from its accountants that Madoff's huge investment record was suspicious. HSBC twice asked accountants KPMG to identify concerns with BLMIS, and KPMG twice reported serious risks already known to HSBC, Mr Picard claims. His filing said: 'Had HSBC and the defendants reacted appropriately to such warnings and other obvious badges of fraud, the Madoff Ponzi scheme would have collapsed years, billions of dollars, and countless victims sooner.' The other defendants include former Austrian lender Bank Medici, and Italian bank UniCredit. HSBC declined to comment. The lawyer's complaint against UBS alleges that the bank lent feeder funds 'an aura of legitimacy', allowing it to collect nearly £50m in middleman fees. Mr Picard said that despite identifying warning signs about Madoff Investment Securities, UBS 'chose to enable Madoff's fraud for their own gain'. 'Madoff's scheme could not have been accomplished unless the UBS defendants had agreed to look the other way and to pretend that they were truly ensuring the existence of assets and trades,' said Picard. 'In fact they never did.' UBS said investors had been well aware that funds were being directed to Madoff, adding that it 'does not have responsibility to these shareholders for the unfortunate results of the Madoff scandal'. Madoff is serving a 150-year term for his fraud. He admitted deceiving thousands of investors through a Ponzi scheme, which paid out using new investors' money rather than from any profits.

Madoff Trustee Hits HSBC For $9 Billion FINAlternatives December 6, 2010 His time may be running short, but the court-appointed receiver in the Bernard Madoff case saved some of his biggest shots for last. Irving Picard yesterday sued HSBC for at least $9 billion, accusing the banking giant of aiding and abetting Madoff's massive Ponzi scheme by building and marketing a network of a dozen feeder funds. It is the largest lawsuit filed by Picard, who is seeking more than $30 billion in more than 100 lawsuits against Madoff investors, family members, employees and affiliates. Last week, Picard sued JPMorgan Chase for $6.4 billion and a week before sought $2 billion from UBS. As with his other cases against Madoff's banks, service providers and funds of hedge funds, Picard accuses HSBC of ignoring a veritable forest of red flags. "Had HSBC and the defendants reacted appropriately to warnings and other obvious badges of fraud outlined in the complaint, the Madoff Ponzi scheme would have collapsed years, billions of dollars and countless victims sooner," Picard said. His lawsuit, which features 24 counts against the bank, alleges the HSBC is guilty of "contribution to Madoff's scheme, aiding and abetting Madoff's fraud, unjust enrichment in the form of millions of dollars and over $2.3 billion in fraudulent transfers." The Madoff Ponzi scheme is believed to have cost investors more than $20 billion. Madoff himself is serving a 150-year prison sentence after pleading guilty to the fraud. Picard has to date collected about $1.5 billion to return to the scam's victims. Picard faces a Saturday deadline—the two-year anniversary of Madoff's arrest—to file lawsuits seeking to recoup money.

Madoff Trustee Goes On Multi-Billion Dollar Suing Spree By Garth Johnston Gothamist (Blog) December 6, 2010 Expect to hear a bit more about Bernie Madoff this week. Under federal bankruptcy law Irving Picard, the trustee in charge of tracking down Madoff's many missing assets, has two years from the initial bankruptcy filing to file claims for recovery. Since Madoff's filing date is considered December 11, 2008, that means we should have a busy few days ahead of us. In the past week Picard has already sued JPMorgan for $6.4 billion, UBS for $2 billion and, yesterday, HSBC for another $9 billion bringing the total he is claiming on behalf of victims to more than $32 billion (including the 19 suits he's already filed). That number, which includes punitive damages and "is 50% more than the $20 billion he has estimated as the actual cash losses in the fraud," is so high since Picard and co. don't expect to get all of it back. (Of course, Picard is probably also showing he's worth his high fees.) And, if you are keeping track at home, yes, the HSBC suit is so far the largest brought forth in the Madoff mess. The previous record holder was a $7 billion suit against the late Jeffry Picower (his estate later settled). The latest suits claim the large banks named made Madoff's scam possible, alleging that the fraud “could not have been accomplished or perpetuated unless the defendants agreed to look the other way and to pretend that they were ensuring the existence of assets and trades when, in fact, they did no such thing.” The banks, in a real surprise, have vowed to fight the claims in court. Which means at this rate we'll still be talking about Madoff in 2020.

Media Coverage December 8 – 9, 2010

General The Wall Street Journal – Madoff Kin, Global Banks Sued for Funds (12.8.10) The Wall Street Journal – With Flurry of New Suits, Picard’s March to Saturday Moves On (12.9.10) Bloomberg – Citigroup, Bank of America Sued by Madoff Trustee to Benefit Fraud Victims (12.9.10) The New York Times – Dealbook Blog – Madoff Trustee Sues Citigroup and 6 Other Banks for $1 Billion (12.8.10) Reuters – Analysis: Madoff trustee takes on banks as deadline looms (12.9.10) Associated Press – Madoff trustee seeks $1bn from banks (12.8.10) New York Daily News – New York-based Citi, Merrill Lynch among targets in Bernie Madoff case suit (12.8.10) New York Magazine (Blog) – Bernie Madoff’s Debts Have Fallen Even Further Down the Family Tree (12.9.10) AFP – New Madoff suits take aim at big global banks (12.8.10) Euronews – Madoff victim’s trustee chases banks (12.9.10) CNNMoney.com – Tough luck for Madoff feeder fund investors (12.9.10) Gothamist – Trustee Wants Madoff's Grandkids to Pay Up Too (12.9.10) Los Angeles Business Journal – Madoff trustee sues Merrill Lynch (12.9.10) DuchNews.nl – ABN Amro, Fortis sued for role in Madoff pyramid scheme (12.9.10) Irish Times – Madoff's downfall does Mets no favours (12.9.10) Carl Shapiro Boston Globe – Hunt is on to fill Shapiros’ generous role (12.9.10) Courthouse News Service – Investor to Forfeit $625M for Madoff Victims (12.8.10) FIM Advisers Reuters – Exclusive: FIM Advisers, facing Madoff suits, sees execs quit (12.9.10) Madoff Securities International Daily Mail (UK) – Claim launched against Madoff's UK staff (12.9.10)

IAFOnline (UK) – Madoff trustees file case in UK High Court (12.9.10) The Telegraph (UK) – Bernard Madoff trustee to sue UK directors (12.9.10) City A.M. (UK) – Madoff’s UK directors sued for $80m (12.9.10) MassMutual Boston Globe – Trustee in Madoff case sues insurer (12.9.10) Maxam FINAlternatives – Madoff Trustee Targets Self-Styled Investor Rights Advocate Manzke (12.9.10) Bloomberg – Madoff Trustee Sues Former Tremont Capital CEO Manzke Over `Stolen Money' (12.8.10) Natixis The Wall Street Journal – Natixis Denies Madoff Trustee Claims (12.8.10) Network for Investor Action and Protection FINAlternatives – Madoff Investors' Group Questions Clawback Suits (12.8.10)

Madoff Kin, Global Banks Sued for Funds By Michael Rothfeld The Wall Street Journal December 8, 2010 Five of Bernard Madoff's grandchildren, former directors of his London investment branch and seven global banks were among those sued on Wednesday by a trustee seeking a total of more than $30 billion in an avalanche of lawsuits intended to recover money for the fraudster's victims. Irving Picard, who is overseeing the bankruptcy of Bernard L. Madoff Investment Securities, faces a Saturday deadline under federal law to file lawsuits to recover money withdrawn from the multibillion-dollar Ponzi scheme perpetrated by Mr. Madoff. Mr. Madoff's family members, including his brother Peter and his sons Mark and Andrew, have been targeted by Mr. Picard in previous lawsuits. Two of the lawsuits filed on Wednesday were the first to name his grandchildren. In one, Mr. Picard is seeking $248,000 from Andrew Madoff and his wife, Deborah, who filed for divorce around the time of Bernard Madoff's arrest in December 2008, and their minor children, identified as A.M. and E.M, according to the lawsuit. The divorce hasn't been finalized. About $80,000 each was allegedly transferred to Deborah, A.M. and E.M. from a bank account of Mr. Madoff and his wife, Ruth, according to the lawsuit. Mr. Picard is seeking the money in conjunction with Alan Nisselson, the trustee overseeing Bernard and Ruth Madoff's personal bankruptcy. In a second lawsuit, Mr. Picard and Mr. Nisselson are seeking $274,000 allegedly transferred by Bernard and Ruth Madoff to Mark Madoff's children and his current and former wives. That suit names Mark Madoff, his wife, Stephanie Morgan, and their minor child, identified as A.V.M.; and Susan Elkin, Mark Madoff's ex-wife, their son Daniel Madoff and daughter, identified as K.M. A spokesman for Mark and Andrew Madoff and their wives declined to comment on the lawsuits against their children. Ms. Elkin declined to comment. Peter, Mark and Andrew Madoff were also named Wednesday in the $80 million lawsuit filed in London against them and other former directors of Madoff Securities International Ltd. The suit was filed in the United Kingdom's High Court of Justice Commercial Court by Mr. Picard and Stephen J. Akers, a joint liquidator of the London business, Mr. Picard said. Sonja Kohn, an Austrian banker who worked extensively with Mr. Madoff in Europe, was named as well. A copy of the suit couldn't be obtained because it hasn't yet been made public under English law. According to Mr. Picard, the lawsuit accuses directors and officers of violating their duties to the company by making fraudulent payments, including some that benefited Mr. Madoff and his family. He alleged that the money was used to pay for among other things, a yacht, a home in the south of France and a luxury car. "The directors had duties, among others, to be honest in recording the purposes and activities of the business," Mr. Akers said in a statement. But instead, he said, they allegedly signed off on false documents and misrepresented the true nature of transactions, "all of which assisted Madoff's fraudulent scheme." "These are baseless claims against Mark and Andrew Madoff, who were not involved in the financial operations of Madoff Securities International. They were outside directors with [minimal] ownership interests," said Martin Flumenbaum, a lawyer for Mr. Madoff's sons. "They had no knowledge of their father's crimes, including any fraudulent activity related to the London entity."

Lawyers for Peter Madoff and Sonja Kohn declined to comment. In the London lawsuit, Mr. Picard also alleged that more than $27 million was channeled through Mr. Madoff's firm in sham transactions to entities used by Ms. Kohn. Mr. Madoff's London branch, incorporated in 1983, was part of his "global shell game," Mr. Picard said. The lawsuits against the seven banks filed Wednesday evening seek a total of about $1.4 billion from Citibank Inc., Natixis, Fortis Prime Fund Solutions Bank (Ireland) Ltd., ABN AMRO Bank NV, Banco Bilbao Vizcaya Argentaria SA, Nomura Bank International PLC and Merrill Lynch International & Co. Mr. Picard said the lawsuits, which were filed under seal, accuse the banks of overlooking warning signals about Mr. Madoff's fraud while receiving transfers of money from his firm through so-called "feeder funds" that invested most or all of their assets with him. The complaints also accuse the banks of helping sustain the fraud by creating derivative investment products linked to the performance of Madoff feeder funds, Mr. Picard said. Citibank said it would "vigorously defend against these claims by the Trustee as they are without merit and entirely untrue." The bank said it "did not know about nor in any way assist in the Madoff fraud." Nomura and Merrill declined to comment; the others didn't immediately respond to requests for comment. His office said that at least $600 million was allegedly sent to the London operation from Mr. Madoff's firm in New York and other sources. Payments were then allegedly made out of London to benefit the family and others, including Ms. Kohn. More than $310 million was sent back to the Madoff firm in New York and falsely recorded as trading commissions, the trustee's office said. Late Wednesday, Mr. Picard and Mr. Nisselson also sued the Mark and Stephanie Madoff Foundation for $2 million it allegedly received from Bernard and Ruth Madoff's bank account in December 2007. In yet another lawsuit, the Deborah and Andrew Madoff Foundation was sued for $2 million that Bernard Madoff allegedly wired to the organization from a Lehman Brothers account.

With Flurry of New Suits, Picard’s March to Saturday Moves On By Ashby Jones The Wall Street Journal – Law Blog December 9, 2010 It’s not exactly William Tecumseh Sherman’s March to the Sea. But Irv Picard, the trustee for the victims of Bernard Madoff’s fraud, has got something similar going — call it Irv’s March to Saturday. Picard (pictured) and his loyal team over at Baker Hostetler face a Saturday deadline to file their lawsuits seeking to claw back money that was taken out of Madoff’s Ponzi scheme prior to its collapse two years ago. To put it mildly, they’re leaving no stone unturned. On Wednesday, Picard brought suit against five of Bernard Madoff’s grandchildren, former directors of his London investment branch and seven global banks, among others. Click here for the WSJ story; here and here for recent LB posts chronicling Picard’s flurry of activity. Madoff’s family members, including his brother Peter and his sons Mark and Andrew, have been targeted by Picard in previous lawsuits. But two of the lawsuits filed on Wednesday were the first to name his grandchildren. In one, Picard is seeking $248,000 from Andrew Madoff and his wife, Deborah, who filed for divorce around the time of Bernard Madoff’s arrest in December 2008, and their minor children, identified as A.M. and E.M, according to the lawsuit. The divorce hasn’t been finalized. In a second lawsuit, Picard and Nisselson are seeking $274,000 allegedly transferred by Bernard and Ruth Madoff to Mark Madoff’s children and his current and former wives. A spokesman for Mark and Andrew Madoff and their wives declined to comment on the lawsuits against their children. Elkin declined to comment. The lawsuits against the seven banks filed Wednesday evening seek a total of about $1.4 billion from Citibank Inc., Natixis, Fortis Prime Fund Solutions Bank (Ireland) Ltd., ABN AMRO Bank NV, Banco Bilbao Vizcaya Argentaria SA, Nomura Bank International PLC and Merrill Lynch International & Co. Mr. Picard said the lawsuits, which were filed under seal, accuse the banks of overlooking warning signals about Mr. Madoff’s fraud while receiving transfers of money from his firm through so-called “feeder funds” that invested most or all of their assets with him. Citibank said it would “vigorously defend against these claims by the Trustee as they are without merit and entirely untrue.” The bank said it “did not know about nor in any way assist in the Madoff fraud.” Nomura and Merrill declined to comment; the others didn’t immediately respond to requests for comment.

Citigroup, Bank of America Sued by Madoff Trustee to Benefit Fraud Victims By Edvard Pettersson and Bob Van Voris Bloomberg December 9, 2010 Citigroup Inc.’s Citibank, Bank of America Corp.’s Merrill Lynch unit and five other banks were sued by the trustee liquidating Bernard Madoff’s firm to recover more than $1 billion for the con man’s defrauded customers. The banks, which include Natixis SA, Fortis Prime Fund Solutions Bank (Ireland) Ltd., ABN Amro Bank NV, Nomura Bank International Plc. and Banco Bilbao Vizcaya Argentaria SA, received money through Madoff feeder funds when they knew, or should have known, that Madoff’s investments were a fraud, the trustee, Irving Picard, said yesterday in a statement. Picard, who faces a two-year legal deadline that runs out Dec. 11, has filed hundreds of suits in the past month, seeking more than $34 billion from banks, feeder funds, investors and others alleged to have profited from Madoff’s decades-long Ponzi scheme, the biggest in history. So far, Picard has recovered about $2.5 billion for victims of the fraud. “Citi will vigorously defend against these claims by the trustee as they are without merit and entirely untrue,” Danielle Romero-Apsilos, a Citigroup spokeswoman, said in an e- mailed statement. “Citi did not know about nor in any way assist in the Madoff fraud.” Natixis denied the allegations in a statement today and said it plans to “take all steps” to defend itself. The Paris- based bank said it had no knowledge of Madoff’s fraud and didn’t benefit from the scheme. The company set aside provisions of 463 million euros ($612 million) by the end of 2009, or 100 percent of its exposure to Madoff assets net of insurance, it said. UBS, Tremont ABN Amro spokesman Arien Bikker declined to comment, and a BBVA spokesman wasn’t immediately available. Representatives of the other banks didn’t immediately return requests seeking comment after regular business hours yesterday. Picard filed the complaints under seal yesterday in U.S. Bankruptcy Court in Manhattan. “The complaints allege that the banks enabled the Madoff Ponzi scheme by opening a spigot of new money into the Madoff feeder fund network, by creating and offering derivative investment products linked to various Madoff feeder funds,” Picard said in his statement. “Often, the derivative products were developed in conjunction with the Madoff feeder funds.” Picard also sued UBS AG and Tremont Group Holdings Inc., the hedge-fund firm owned by Oppenheimer Acquisition Corp., over claims they profited from Madoff’s fraud. Picard, along with the liquidators of Madoff’s U.K. operation, sued the unit’s former directors in a London court seeking at least $80 million. Madoff’s Victims The claim against UBS, for at least $555 million, was filed in U.S. Bankruptcy Court in New York. It came after a $2 billion suit against the Zurich-based bank last month. Picard, who sued Tremont in a sealed complaint filed in New York, said in a statement that Tremont, its funds, affiliates and owners including Massachusetts Mutual Life Insurance Co. ignored obvious warning signs of fraud to maximize their own profits and self-interest. The statement didn’t say how much Picard was seeking from Tremont. Any money recovered will be returned to Madoff’s victims on a pro rata basis, Picard said.

Chris Cockerill, a Hong Kong-based spokesman for UBS, said in an e-mail that the bank would take “all appropriate steps” to show Picard’s latest allegations are “false and unfounded.” Mark Cybulski, a spokesman for MassMutual, couldn’t immediately be reached for comment. Picard also sued former Tremont Capital Management Chief Executive Officer Sandra Manzke and Maxam Capital Management seeking more than $100 million. ‘Stolen Money’ Maxam, which Manzke started after she left Tremont in 2005, invested more than $300 million of investors’ money with Madoff in less than three years, Picard said in a complaint filed yesterday in U.S. Bankruptcy Court in Manhattan. He seeks a return of almost $100 million that Maxam withdrew from Madoff as well as fees the firm received. “Every dollar the Maxam defendants purportedly earned and every dollar they kept to unjustly enrich themselves, their funds or other investors, was other investors’ stolen money,” Picard said in the complaint. Manzke didn’t immediately respond to an e-mailed request seeking comment yesterday. Jonathan Cogan, a lawyer who represents Manzke in a separate securities lawsuit against Tremont, also didn’t immediately return a call to his office after regular business hours yesterday. HSBC, JPMorgan On Dec. 5, Picard sued HSBC Holdings Plc for $9 billion, alleging Europe’s biggest lender enabled Madoff’s fraud. Last week, the trustee sued JPMorgan Chase & Co. for $6.4 billion over claims the New York-based bank aided and abetted the fraud. Madoff, 72, is serving a 150-year sentence in a North Carolina federal prison after pleading guilty. At the time of his arrest, Madoff’s account statements reflected 4,900 accounts with $65 billion in nonexistent balances. Investors lost about $20 billion in principal. The main case is Securities Investor Protection Corp. v. Bernard L. Madoff Investment Securities LLC, 08-01789, U.S. Bankruptcy Court, Southern District of New York (Manhattan). The London case is Madoff Securities International Ltd. v. Stephen Ernest John Raven, 10-1468, High Court of Justice, Queen’s Bench Division (London). The Maxam case is Irving Picard v. Maxam Absolute Return Fund, 10-ap-5342, U.S. Bankruptcy Court, Southern District of New York (Manhattan.)

Madoff Trustee Sues Citigroup and 6 Other Banks for $1 Billion By Thomas Kaplan The New York Times – Dealbook Blog December 8, 2010 The trustee seeking to recover money for Bernard L. Madoff’s victims has turned his sights to Citigroup and six other banks that offered complicated investment products tied to funds that funneled money to the huge Ponzi scheme. The trustee, Irving H. Picard, filed lawsuits on Wednesday seeking more than $1 billion from the banks. The suits call for $425 million from Citigroup and $400 million from Natixis. He also filed complaints seeking lesser amounts from Merrill Lynch, Fortis, ABN Amro, Banco Bilbao Vizcaya Argentaria and Nomura. The complaints, which were filed under seal in United States Bankruptcy Court, are among a string of so-called clawback lawsuits that Mr. Picard has announced in the last three weeks, including multibillion-dollar claims against HSBC, JPMorgan Chase and UBS. The latest banks named offered investors derivative investment products and other financial instruments whose returns were tied to the performance of funds that channeled investments to Mr. Madoff’s firm. In turn, the banks hedged their exposure to the derivative investors by buying shares of the funds, known as feeder funds. The suits seek to recover money that the banks received in connection with the derivative products they had offered and redemptions they had made before Mr. Madoff’s extensive fraud became public. Mr. Picard said the banks had continued to structure transactions to take advantage of the returns that Mr. Madoff’s firm appeared to be producing, even though there were signs of fraud. Mr. Picard cited an e-mail message and a meeting between a Citigroup managing director and Harry Markopolos, a whistle-blower said to have alerted the bank that Mr. Madoff was running a Ponzi scheme. “Evidence of awareness of the fraud is clear,” said David J. Sheehan, a lawyer for Mr. Picard. “However, even as suspicion grew about Madoff, Citi still took monies from Madoff that rightfully belong to” Mr. Madoff’s victims, he added. A spokeswoman for Citigroup, Danielle Romero-Apsilos, said the bank would fight Mr. Picard’s suit. “Citi did not know about nor in any way assist in the Madoff fraud,” she said. Mr. Picard has a Saturday deadline to file lawsuits seeking to recover money for Mr. Madoff’s victims.

Analysis: Madoff trustee takes on banks as deadline looms By Grant McCool Reuters December 9, 2010 For nearly two years, lawyer and court-appointed trustee Irving Picard has hounded hedge funds, banks and individual investors worldwide to recover money from Bernard Madoff's epic fraud. With $2.6 billion collected in settlements and asset sales, Picard has so far recouped just a fraction of the tens of billions of dollars lost in the biggest financial fraud in history. A recent flurry of new cases against big banks such as UBS AG and HSBC could sweeten the recovery pot, but the companies have vowed to fight the lawsuits. So far, Picard has sued an array of defendants for a total of about $32 billion and is seeking nearly $20 billion from the banks alone. Under the two-year statute of limitations for such lawsuits, he cannot file any more after December 15. When the FBI arrested Madoff on December 11, 2008, U.S. prosecutors estimated that as much as $65 billion flowed through the firm over decades. The disgraced money manager, now 72, pleaded guilty in March 2009 to running the fraud and is serving a 150-year prison sentence. Picard's lawsuits against the banks accuse them of allowing money to flow through them by way of derivatives into Madoff's international network of feeder funds. He also contends they ignored warning signs that Madoff was running a Ponzi scheme. in which early investors are paid with the money of new clients. "(Picard) has gone after the biggest fish he can find, and he has gone after a couple of smaller fish, but my sense is there are a couple of additional targets that he could have had with more years," said William Prickett, partner of Seyfarth Shaw LLP in Boston, who has represented some wealthy individuals and nonprofit organizations in the Madoff matter. Bank defendants include JPMorgan Chase & Co, Citigroup Inc's Citibank, Natixis, Fortis, ABN AMRO Bank NV, Banco Bilbao Vizcaya Argentaria, Nomura and Merrill Lynch, owned by Bank of America since January 1, 2009. Some defendants have denied wrongdoing and vowed to fight the charges. A few settlements have been reached, including one on Monday with private Swiss bank Union Bancaire Privee and a related Cayman Islands-based fund, M-Invest Limited, which agreed to forfeit $500 million. Some of the complaints in U.S. Bankruptcy Court in New York were filed under seal, so specifics of the allegations are not available. COURT CHALLENGES As the liquidator of Bernard L. Madoff Investment Securities LLC to recover money and return it to swindled investors, Picard is short more than 40 percent of the money needed to pay the claims of former Madoff customers he has so far approved. The amount of approved claims was worth $5.8 billion as of Friday, compared with the $2.6 billion recovered so far plus $766.5 million that the Securities Investor Protection Corp has committed to cover them, according to figures on the website www.madofftrustee.com. SIPC is the entity established by Congress to help investors of brokerages that fail. Investors are also challenging the trustee in court over his method of calculating the so-called "net winners" -- clients who took out more than they deposited. Some of them lost their life savings, but Picard

is still suing them in so-called clawback lawsuits, because according to his calculations, they made more over the years than they lost. Madoff victims complain that Picard is undervaluing their losses, and an appeal of his methods is pending. "Why is it necessary to also sue innocent people, who often are aged, many who are suffering tremendous economic stress and emotional distress, and cannot even afford lawyers?" said Ron Stein, president of the Network for Investor Action and Protection advocacy group. Picard declined to comment beyond a series of press statements outlining the higher-profile complaints. The lawsuits against those he says knew or should have known about the fraud include cases against Madoff's wife, brother, two sons, a niece and extended family. Picard sued five of Madoff's grandchildren to get millions purportedly transferred from a firm account to them. Most defendants Picard alleges helped further the fraud are in the United States, Britain, Switzerland, the British Virgin Islands or Cayman Islands. Some investors have welcomed Picard's most recent lawsuits. Others will not be satisfied unless the trustee also sues the U.S. Securities and Exchange Commission, the market regulator that missed red flags waved about Madoff. "The victims believe that Picard also has the obligation to pursue the SEC for complicity," Ronnie Sue Ambrosino, coordinator of Madoff Victims Coalition, said in a statement. "Mr. Picard has proven that he can win many uphill, even preposterous battles," she wrote. "It is my fear, however, that he will miss his deadline to file suit against the SEC." Among the trustee's successes have been a $625 million forfeiture announced on Tuesday from Madoff associate Carl Shapiro; the $500 million Union Bancaire Privee and M-Invest Limited settlement; and a $220 million payment by the family of longtime Madoff friend and client Norman Levy. Picard has said he is negotiating with some other defendants, including Fred Wilpon, owner of the New York Mets Major League Baseball team. But at least in the case of the Madoff family, that appears not to be so. "We have been in touch with each defendant and their counsel, seeking a prompt settlement of these claims and an out-of-court resolution," Picard said. "However, as these attempts have not reached a satisfactory conclusion, we are moving ahead with litigation."

Madoff trustee seeks $1bn from banks Associated Press December 8, 2010 THE trustee recovering assets for investors in jailed financier Bernard Madoff's fraudulent business is suing seven international banks in an effort to recover more than $US1 billion ($1.02 billion). Lawyer Irving Picard on Wednesday announced the complaints against Citibank, Natixis, Fortis, ABN AMRO, Banco Bilbao Vizcaya Argentaria, Merrill Lynch, and Nomura. The complaints accuse the banks of receiving transfers of money from Madoff's business through numerous feeder funds when they either knew or should have known of Madoff's fraud. Picard said in a release that the banks enabled the Madoff pyramid scheme by creating and offering derivative investment products linked to various Madoff feeder funds. The 72-year-old Madoff is serving a 150-year prison sentence after pleading guilty to fraud charges.

New York-based Citi, Merrill Lynch among targets in Bernie Madoff case suit By Leo Standora New York Daily News December 9, 2010 Seven international banks, including New York-based Citi and Merrill Lynch, are the targets of a court-appointed trustee trying to recover $1 billion for investors ripped off by convicted swindler Bernie Madoff. Irving Picard alleged in bankruptcy court the financial institutions, which received funds from Madoff's investment firm, either knew or should have known fraud was involved. The largest claims are $425 million against Citi and $400 million against Paris-based Natixis. Neither institution had immediate comment. The other banks named in complaints were Fortis, ABN AMRO, Banco Bilbao Vizcaya Argentaria and Nomura. Madoff is serving a 150-year prison sentence after pleading guilty in March 2009 to running a decades-long investment fraud of up to $65 billion.

New Madoff suits take aim at big global banks AFP December 8, 2010 NEW YORK — Seven big global banks from the United States, Europe and Japan were sued Wednesday by the trustee seeking to recover assets from the massive Bernard Madoff fraud case. The trustee, Irving Picard, is seeking more than one billion dollars from the banks, claiming they knew or should have known of the fraud in accepting money through various Madoff funds. The seven latest banks added to the litigation are US-based Citibank and Merrill Lynch (now part of Bank of America); the broken-up former Belgian bank Fortis; Natixis of France; Dutch-based ABN Amro; Spain's Banco Bilbao Vizcaya Argentaria (BBVA); and Japan's Nomura. The separate complaints filed in New York allege that the banks enabled the Madoff Ponzi scheme "by opening a spigot of new money into the Madoff feeder fund network." Because they were promised hefty returns, "the financial institutions hedged their exposure to the derivative investors by purchasing shares of the feeder funds." The suit against Citibank, which is part of Citigroup, seeks 425 million dollars. "Armed with considerable non-public information about Madoff, Citi either knew or should have known that Madoff's investment advisory business was a fake, and that the funds Citi received from these two Madoff feeder funds came from Madoff's fraudulent activities," said Picard. Picard noted that warning signs to Citi included an email from and a meeting with an early Madoff whistleblower stating that the Madoff investments were a Ponzi scheme. Similar allegations were made against Natixis, with the trustee seeking 400 million dollars. "Armed with knowledge of many badges of fraud, Natixis and its related entities nevertheless provided substantial momentum furthering Madoff's Ponzi scheme, especially in Europe," said Mark Kornfeld, a lawyer for the trustee. The suites seek to recover addition funds from Fortis (230 million dollars); ABN Amro (270 million); BBVA (45 million); Nomura (35 million); and Merrill Lynch (16 million). In a separate announcement Wednesday, Picard said he was seeking 100 million dollars from Sandra Manzke, members of her family, and the Maxam Capital Management which she created. Picard also filed a complaint in London seeking to recover at least 80 million dollars from the British unit of the Madoff funds, Madoff Securities International Ltd. Madoff, who touted himself as one of New York's most successful money managers, was arrested in early December 2008 for running a pyramid scheme. He was sentenced in June 2009 to 150 years in prison. Madoff's victims, including charities, major banks, Hollywood moguls and savvy financial players, handed him tens of billions of dollars over more than two decades. The amount of money stolen remains elusive: Madoff originally claimed to have been managing 65 billion dollars, but in October the court-appointed liquidator said the real bottom line was 21.2 billion dollars.

Bernie Madoff’s Debts Have Fallen Even Further Down the Family Tree New York Magazine (Blog) December 9, 2010 Irving Picard, who oversees the bankruptcy of Bernard L. Madoff Investment Securities, just brought lawsuits against former directors of Madoff’s London office (right), seven international banks (okay), and, for the first time, five Madoff grandchildren (really!?), four of whom are actually minors. Picard’s seeking upwards of $500,000 allegedly transferred from accounts owned by Bernie and Ruth Madoff to the current wives, a former wife, and the children of their sons. These lawsuits come as Picard aims to recover $30 billion for victims of Madoff’s scheme before a Saturday deadline. Wonder how much he'll have to spend to do it?

Madoff victim’s trustee chases banks Euronews December 9, 2010 Video link: http://www.euronews.net/2010/12/09/madoff-victim-s-trustee-chases-banks/ The court-appointed trustee for victims of convicted fraudster Bernard Madoff has launched an attempt to get hundreds of millions of euros from seven international financial institutions. Madoff is serving a 150-year prison sentence for a worldwide fraud involving around 50 billion euros. The complaints have been filed against Fortis , Citibank, ABN AMRO, Natixis, BBVA, Nomura and Merrill Lynch, now owned by Bank of America. Citi, Natixis and ABN AMRO deny the allegations against them. The others have not commented. The trustee has accused the financial institutions of receiving transfers of money from Madoff’s investment company when they either knew or should have known of the fraud. He says the banks “enabled” Madoff’s scheme by giving credit to various of his feeder funds and creating and offering derivative investment products linked to them. So far, the trustee and his team of lawyers have recovered around two billion euros.

Tough luck for Madoff feeder fund investors By Aaron Smith CNNMoney.com December 9, 2010 NEW YORK (CNNMoney.com) -- Most of Bernard Madoff's victims have two things in common: a) they'd never heard of the Ponzi schemer before he was arrested nearly two years ago and b) they're not eligible to get any of their money back. That's because the majority of Madoff's victims did not invest directly in his firm. They invested in third-party feeder funds, and therefore don't qualify for the financial protections extended to direct investors. "I think it's grossly unfair," said Peter J. Leveton of Boulder, Colo., who counts himself as one of the more than 200 "indirect investors" who lost money to Agile Funds, a feeder fund for Madoff. "Virtually none of the Agile investors knew that any portion of our money was going into the Madoff organization." So far, 16,394 claims have been filed by investors who claim to have lost money in Madoff's Ponzi scheme, according to the office of Irving Picard, the trustee appointed by federal bankruptcy court to recover and distribute stolen assets. The majority of the claims -- 13,054, or nearly 80% of the total -- have been denied, according to the trustee. Most of these denied claims -- some 10,299 -- were shot down because the claimants are considered "third party" investors that put their money into feeder funds, rather than directly in Madoff's firm. This detail is essential in getting money back from the seized assets, or in becoming eligible for insurance coverage from the Securities Investor Protection Corp., the organization that restores lost assets to investors burned by bankruptcy or fraud. "The third party folks did not have an account with the Madoff brokerage firm," said SIPC Chief Executive Steve Harbeck. "They invested in some other entity that opened an account with the Madoff firm. That entity is a customer and will get whatever it's entitled to." So while the feeder funds could be eligible for financial protection from SIPC, their investors are not. Kenneth Springer, a certified fraud examiner and former special agent of the Federal Bureau of Investigation, said this is a case of caveat emptor -- let the buyer beware. "When you go to a feeder fund, it's up to you to make sure that they're doing what [you] think they're doing," said Springer, president of Corporate Solutions and co-author of "Digging for Disclosure: Tactics for Protecting Your Firm's Assets from Swindlers, Scammers and Imposters." "There's a whole lot of things that should have been uncovered by the feeder funds," he said. "But unfortunately with Madoff, you didn't see as many red flags as you did with Allen Stanford and other [alleged Ponzi scammers]." SIPC provides a line of protection of up to $500,000 to eligible investors who lost money. The trustee has declared 2,355 investors to be eligible for more than $766 million in SIPC funds. This averages to about $325,000 per eligible investor. SIPC-eligible investors who lost more than $500,000 must reclaim the rest of their damages from assets seized from Madoff's estate.

But they're unlikely to get all of their money back. So far, the trustee has recognized about $5.1 billion in claims that fit this description -- more than triple the amount of recovered assets that would be used to compensate them. About $1.5 billion of Madoff's estate has been recovered so far, according to the trustee. These assets will be awarded pro rata -- in proportion to what the investors put in and to what was recovered. Meanwhile, the second anniversary of Madoff's arrest, which occurred on Dec. 11, 2008, is fast approaching. He's been incarcerated in federal prison since March, 2009, when he pleaded guilty to orchestrating the most massive Ponzi scheme in history while masquerading as a brilliant investor. He was sentenced to 150 years. While Madoff languishes in prison, Leveton is organizing with other feeder fund investors to try to get Congress to change SIPC requirements. He wants the protection to be extended to the so-called "third parties" who unknowingly invested in Madoff and other Ponzi schemes. "It seems to us that the group that actually sought out Madoff knew who he was," said Leveton. "It's the innocent victims that really deserve some protection here."

Trustee Wants Madoff's Grandkids to Pay Up Too By Garth Johnston Gothamist December 9, 2010 With hours to go until his Saturday filing deadline, Irving Picard's suing spree has not let down. After hitting up the big banks (and the Mets owner) the trustee in charge of getting back Bernie Madoff's ill-gotten gains is now going after the Madoff family. Having already sued Madoff's brother and sons, Picard is now climbing down the family tree and taking aim at Madoff's son's wives and ex-wives as well as his grandchildren. He's looking to get roughly a half-million bucks out of them.

Madoff trustee sues Merrill Lynch Los Angeles Business Journal December 9, 2010 The court-appointed trustee seeking to recover funds for victims of the Bernard Madoff scam has filed lawsuits against seven large financial institutions, including Merrill Lynch, which is part of Bank of America Corp. Trustee Irving Picard filed lawsuits against Citibank and Natixis seeking $825 million. Picard is seeking lesser amounts from Merrill Lynch and other financial institutions. In total, Picard is seeking more than $1 billion, news agencies report. The complaints were filed under seal in bankruptcy court in New York. According to Reuters, the financial institutions received transfers of funds from Madoff during his fraud. Madoff, 72, is serving a 150-year prison sentence. In March 2009, he admitted to turning his wealth-management business into a massive Ponzi scheme that defrauded investors of billions. Charlotte, N.C.-based Bank of America (NYSE: BAC) is the largest bank in Los Angeles and the state of California.

ABN Amro, Fortis sued for role in Madoff pyramid scheme DutchNews.nl December 9, 2010 BN Amro and Fortis banks are being sued in the US for their role in the Bernard Madoff investment scandal. Irving Picard, the trustee in charge of winding up Madoff's investment fund is taking legal action against the two Dutch banks and five other financial institutions: US-based Citibank and Merrill Lynch (now part of Bank of America); Natixis of France; Spain's Banco Bilbao Vizcaya Argentaria (BBVA); and Japan's Nomura. Picard says the banks all received money from the investment funds even though they knew, or should have known, that fraud was involved. One billion dollars In total, Picard is suing the seven banks for over one billion dollars. ABN Amro is being sued for $270m and Fortis $230m. A spokesman for ABN Amro, which is now state owned, told news agency ANP the bank had not yet seen the legal papers. 'But we do now we will rigorously defend ourselves,' he said. Madoff was arrested in early December 2008 for running a pyramid scheme. He was sentenced in June 2009 to 150 years in prison.

Madoff's downfall does Mets no favours By George Kimball Irish Times December 9, 2010 AMERICA AT LARGE: ALTHOUGH HE periodically dabbled in more wholesome diversions like promoting rock bands and managing boxers, my late friend Jack McClain spent most of his adult life in earnest pursuit of his chosen profession of white collar crime. This occasionally brought him into direct conflict with the authorities, as it did in the late 1970s when he was packed away for an involuntary vacation spent at a correctional facility following his apprehension and subsequent conviction involving activities that the US government deemed to have constituted securities fraud. Once inside, Jack soon carved out his own niche. Utilising the same basic skills – a facility for numbers, coupled with an innate understanding of human nature – that had gotten him locked up in the first place, he became the commissioner, record-keeper, and statistician for the inmate softball league, a position which made him as universally respected and possibly indispensable as any prisoner in the entire federal system. Whether Bernie Madoff, whose talents seem to have mirrored Jack McClain’s, has involved himself with the intramural sports programme at his current place of residence, a medium security prison in Butner, North Carolina, remains unlearned. But six months into a 150-year stretch for fraud, perjury, and money-laundering in connection with an elaborate Ponzi scheme that represented the largest swindle in Wall Street history, Madoff continues to cast a long shadow over the fortunes of at least one major league baseball team, namely the New York Mets, who, just as baseball’s Winter Meetings were getting underway in Orlando two days ago, were hit with a Madoff-related lawsuit that could lighten their coffers by almost $50 million. Madoff’s house of cards collapsed with blinding alacrity almost exactly two years ago, and it shortly became known that Mets’ owner Fred Wilpon had been among the prominent investors in a get-rich-quick scam that seemed to symbolise everyone’s worst thoughts about Wall Street greed. Wilpon was reported to have lost as much as $500 million in his dealings with Madoff – an alarming figure, considering that the Mets franchise was at the time valued at $824 million, placing it second to only the Yankees among MLB clubs. Within days, commissioner Bud Selig and MLB president Bob DuPuy conferred with Wilpon and issued a public vote of confidence that the operation of the baseball team would not be imperilled by L’Affaire Madoff. “Any fraud that has been committed against Fred is something of deep distress to all of us and we feel very badly about the entire matter, but we all believe that this will not affect the team,” DuPuy told the New York Times in December of 2008. Wilpon was only one of many prominent figures on Madoff’s client list, which included celebrity victims ranging from Nobel laureate Elie Weisel and Lady Victoria de Rothschild to Baseball Hall of Famer Sandy Koufax, Steven Spielberg, and the estate of the late John Denver. (Kevin Bacon – Kevin Bacon! – even made the list.) Jewish foundations in New York, Los Angeles, Washington, and Minneapolis had also heavily invested in the scam, which also threatened the endowments of several major New York museums, but more significantly, literally hundreds of individuals who had placed their entire life savings in Madoff’s hands had been wiped out.

At least two of Madoff’s victims committed suicide in the wake of the collapse, and the Mets’ ability to compete in baseball’s free-agent market seemed a matter of scant consequence in the face of the wholesale devastation that faced many. When Irving H Picard, who had been appointed trustee for the liquidation of Bernard Madoff Investment Securities, LLC, convened a meeting of the financier’s creditors last year, it quickly became apparent that there were two distinct classes of victims, and before the day was out they were already at one another’s throats. There were those who had lost everything, and those who had lost, well, maybe not as much. Much of the $65 million price tag the government had originally placed on the value of Madoff’s empire reflected paper transactions. That’s how a Ponzi scheme works. Say you invested $5 million with Bernie, and over five years the value doubled to $10 million, you withdrew $5 million. You’d have $5 million left on the books. The guy sitting next to you had invested $5 million six months ago and lost it all. In any reasonable distribution of assets, should your five million be considered the equivalent of his? Even though their money was multiplying at a dizzying rate, some Madoff investors had prudently withdrawn portions of their investment along the way, and much as it must have aggrieved him to do so, Madoff had unflinchingly paid up. After all, whether it’s a crooked dice game on the corner or a zillion-dollar Wall Street scam, you have to let the citizens win once in a while; otherwise nobody would play. After the conclusion of the Mets’ second consecutive fourth-place season this fall, the team completed an overall housekeeping by hiring the respected Sandy Alderson away from the commissioner’s office. Shortly after he had been named the Mets’ new general manager, Alderson raised a few eyebrows when he made it clear that the club had “no plans” to spend large sums of money on the offseason free agent market. While the affirmation of this policy may have been disappointing to Mets’ fans, it now appears Alderson may merely have known something the rest of us did not. In the course of exhuming the detritus of Madoff’s failed empire, it came to light that while Wilpon and a family-held firm called Sterling Equities, through an account called Mets Limited Partnership, had indeed invested a total of $522.7 million in Madoff’s scheme, he had also withdrawn $570.5 million along the way, and while the balance sheet might have shown on paper that Sterling and Mets Limited Partnership incurred a $500 million loss when Madoff Investments went down in flames, in actuality Wilpon had realised a $47.8 million profit on his original investment. In recent weeks Picard, in his capacity as trustee, had already filed multi-billion dollar lawsuits against several firms, including JP Morgan Chase, UBS, and HSBC bank, charging that they had, if only by disregarding the obvious, been complicit in keeping the Ponzi scheme afloat for as long as it lasted. The trustee’s suits hope to recover as much as $32 billion, which would then be equitably distributed among the defrauded investors. And this past Tuesday the trustee added to his “clawback” list by filing suit against Wilpon and Sterling, seeking to add the $47.8 million windfall profit to the kitty for redistribution to the collective Madoff victims. If only from a public relations standpoint, the timing of the suit could hardly have been worse for the Mets, coming as it did just as the crosstown rival Yankees took their most prominent potential free agents off the market by re-signing pitcher Mariano Rivera ($30 million for two years) and shortstop Derek Jeter ($51 million for three). For the record, Wilpon continues to insist that he is a victim, not a beneficiary, of Madoff’s scheme, and while the Mets issued a face-saving statement assuring their fans that the team “will have all the necessary financial and operational resources to fully compete and win”, it’s hard to see how.

Hunt is on to fill Shapiros’ generous role By Megan Woolhouse, Geoff Edgers, and Erin Ailworth Boston Globe December 9, 2010 Art, cultural, and educational institutions will probably face a fund-raising void now that Carl Shapiro has agreed to surrender much of his fortune in the Madoff case. So who will fill that hole? Could it be tech entrepreneur Phillip Terrence Ragon, who just made a splash giving $100 million to AIDS research? Or someone who, like Edward C. “Ned’’ Johnson III of Fidelity Investments or cable millionaire Amos B. Hostetter Jr., prefers to give millions away quietly, without his name in boldface? Or perhaps the benefactor is someone not yet on the radar of local fund-raisers? “That’s probably what every development officer in town is trying to find: the next Shapiros,’’ said Patricia Jacoby, who led the Museum of Fine Arts’ recent campaign to raise $504 million for its new Art of the Americas Wing. “There are certainly people out there who have the capacity.’’ Shapiro and his wife, Ruth, are major donors in Boston’s philanthropic circles. Their names adorn the new courtyard in the stunning atrium the MFA built as part of the new wing, and is on buildings and wings at Beth Israel Deaconess Medical Center, Brigham and Women’s Hospital, and Brandeis University. They have also given generously to numerous other organizations around the region for years. The Shapiro family had already warned Boston’s nonprofit community that it might not be able to give away as much because of Wall Street financier Bernard Madoff’s massive scam. But on Tuesday the family agreed to return $625 million in fictitious profits under a settlement it reached with US officials. The money will go to other victims of Madoff’s thefts, and so will not be available for the Shapiros to give away. Members of Boston’s nonprofit community said there are up and coming donors, including Ragon. The owner of Cambridge software firm InterSystems Corp., he has pledged $10 million a year for the next decade for a new research center at Massachusetts General Hospital, Harvard University, and MIT, named for him and his wife. Another is high-tech executive Gururaj “Desh’’ Deshpande, who with his wife has funded large-scale service projects in the United States and India and founded and financed the Deshpande Center for Technological Innovation at MIT in 2002. Deshpande made a fortune in communications companies and is chairman of battery-maker A123 Systems. “A lot more money that’s in town is coming from the technology entrepreneurs like him or the high-end financial industry,’’ said Paul Grogan, president of the Boston Foundation. “Hedge fund guys and gals who lean very strongly in the direction of social entrepreneurship.’’ Ragon and Deshpande were unavailable for comment. There are of course many big-time donors in Boston, some of whom give as much — or more than — the Shapiros and some whose scale of generosity isn’t as fully known because they try to keep a low profile. H. Peter Karoff, the founder of the Philanthropic Initiative in Boston, a nonprofit that helps wealthy clients choose causes, cites Johnson and Hostetter as examples of the latter. Both have been prodigious donors, to everything from the arts to education and environmental issues, Johnson through a fund bearing his name and Hostetter through his Barr Foundation. And though they often don’t associate their names with their gifts, Karoff said they are well known in fund-raising circles.

“You can’t be anonymous when you’re operating at that level of giving,’’ Karoff said. Earlier this year, the Barr Foundation said it would give $50 million to fight climate change, in grants of $100,000 to $1 million over the next five years. Johnson is passionate about art, and museums such as the MFA and Peabody Essex in Salem have been beneficiaries of his generosity. He also launched the Brookfield Arts Foundation, largely to acquire American and Asian furniture and decorative arts and lend them for public viewing. Michael K. Durkin, president and chief executive of the United Way of Massachusetts Bay and Merrimack Valley, said it could take more than one agency to replace the Shapiros’ contributions. “It is still a very tough economy,’’ Durkin said. “So to look to any one organization — or even several — to fill that gap would be a challenge.’’ For example the Hyde Square Task Force, a community nonprofit in Jamaica Plain, turned to multiple sources to replace money it was no longer receiving from the Shapiros. Paul Trunnell, director of development, said the group, which has a budget of about $2 million, relies on support from about 60 foundations and the government. “It’s certainly a loss for us to no longer receive that support from Shapiro, but because it was not our lifeline in a sense, we were able to find other sources to cover it,’’ Trunnell said. Other foundations have pulled back or changed their giving recently. Last year, for instance, the Boston Foundation said it would revamp its giving, targeting fewer recipients with larger awards. Paul Bessire, deputy director of the Institute of Contemporary Art, said Boston does not have the equivalent of Chicago’s MacArthur Foundation to lean on during periods of change. But as extraordinary as the Shapiros’ circumstances are, Bessire said funding disruptions are a fact of life for nonprofits. “It doesn’t happen to a major funder like that too often, but it does happen,’’ said Bessire. “So development offices tend to always be out there looking for new and interested funders.’’

Investor to Forfeit $625M for Madoff Victims By Nick McCann Courthouse News Service December 8, 2010 Federal authorities in Manhattan announced the recovery of $625 million from the massive Ponzi scheme masterminded by Bernie Madoff that defrauded investors out of billions. Carl Shapiro, a Boston philanthropist who allegedly made over $1 billion investing with Madoff, agreed to hand over $625 million in a settlement filed in Manhattan's federal court. The money will go to Madoff's victims. Shapiro had a nearly 40-year business relationship with Madoff and his investment company. After authorities exposed Madoff's fraud, they discovered that Shapiro had withdrawn hundreds of millions more than he initially invested, making it obvious that he profited from the Ponzi scheme. While the settlement agreement did not name any wrongdoing on the part of Shapiro, it does not release him from criminal liability. In conjunction with the settlement, the Justice Department announced the appointment of Irving Pickard as special master in the Madoff case. As court-appointed trustee, Pickard will oversee the liquidation of Madoff's money and the process of fairly distributing money to those who Madoff left holding the bag.

Exclusive: FIM Advisers, facing Madoff suits, sees execs quit By Laurence Fletcher Reuters December 9, 2010 Top executives at embattled fund firm FIM Advisers, which is facing legal action from investors duped in Bernard Madoff's $65 billion fraud, have quit to set up on their own, documents obtained by Reuters show. The London-based firm has seen Brendan Robertson, chief investment officer and head of investments, along with Mark Jochems, chief financial officer, exit to set up a consultancy called Genii Solutions, the documents dated December 3 show. Tom Healy, FIM's chief executive and chief operations officer, has also resigned from those roles to co-found Genii, two sources familiar with the matter told Reuters. He continues to serve as FIM's compliance officer, one of the sources said. FIM, headed by Carlo Grosso and Federico Ceretti, was consultant to the Kingate funds, which were among the most significant feeder funds into Madoff, and is facing a U.S. class action lawsuit from investors in Kingate. Genii declined to comment. Grosso and Ceretti did not respond to requests for comment. Kingate Global lost $2.7 billion and Kingate Euro lost 616 million euros ($819.1 million) in Madoff's fraud. Last year FIM came under investigation by Britain's Serious Fraud Office over its role as consultant to the Kingate funds, according to a source close to the SFO. FIM has seen its assets slump from $4.4 billion in March 2008, before Madoff's fraud was revealed, to $652 million at the end of last year. Its remaining funds are now being wound down, one of the sources said. Genii provides services to investors wanting to build a portfolio of hedge funds and is based in the same building as FIM's offices, according to Genii's website and documents seen by Reuters. A lawsuit brought this week by Madoff trustee Irving Picard, who is seeking to recover money for defrauded Madoff investors, said FIM's Grosso and Ceretti were introduced to Madoff by Bank Medici founder Sonja Kohn, who is one of the defendants in the lawsuit. In May FIM was ordered by a British judge to hand over documents to Picard.

Claim launched against Madoff's UK staff Daily Mail (UK) December 9, 2010 The US lawyer seeking redress for the victims of Bernie Madoff's Ponzi scheme has launched an $80m (£51m) claim against former employees of the convicted fraudster's British outpost. Attorney Irving Picard said the UK-based Madoff Securities International Limited (MSIL) was an integral hub of his $65bn Ponzi scheme, with some $600m washing through the Mayfair office between 1983 and 2008. Millions were then funnelled through the London accounts to Madoff and his family, helping pay for a welter of luxury goods and property including a yacht, a lavish home in the south of France and an Aston Martin sports car, according to Picard. Among the former MSIL directors were Madoff's brother Peter, his sons Mark and Andrew and Sonja Kohn, who has been named in several US claims.

Madoff trustees file case in UK High Court By Laura Miller IAFOnline (UK) December 9, 2010 The trustee for the victims of Ponzi scheme fraudster Bernard Madoff has filed an $80m case in London's High Court of Justice against the swindler's UK operations. Irving H. Picard filed the complaint jointly with Stephen J. Akers, liquidator of Madoff Securities International Ltd. (MSIL) against all of the former directors of MSIL, including Madoff's brother, Peter, and sons Mark and Andrew, among former company directors. The $80m complaint includes personal claims brought against company directors and officers for breaching their duties to MSIL by making fraudulent payments to various Madoff-related entities. These include payments for luxury goods and services enjoyed by Madoff and his family, including a yacht, a home in the south of France, and an Aston Martin car, according to the lawyers. They allege more than $27m was channeled out of BLMIS (Bernard L Madoff Investment Securities) through MSIL in sham transactions and "kickbacks". "MSIL was part of Madoff's global shell game. Funds stolen in the Ponzi scheme travelled around the world, but ultimately, ended up in the pockets of Madoff, his family, and confederates" says Picard. "The London operation was a critical piece of the façade of legitimacy that Madoff constructed to conceal BLMIS's lack of actual trading activity." David J. Sheehan, counsel for the trustee and a partner at law firm Baker & Hostetler, says the highly reputable senior members of the London financial community on Madoff's board should have seen through the other fraudulent activites. "All were experienced and sophisticated enough to understand what was happening, he says. "His staff included employees with accounting and trading experience, who clearly had the knowledge to see through the fraud. Yet, all complied with Madoff's schemes and deceptions."

Bernard Madoff trustee to sue UK directors By James Hall The Telepgrah (UK) December 8, 2010 London is to be drawn into the investigation into Bernard Madoff’s £50bn Ponzi scheme, as lawyers prepare to sue all the directors of Madoff Securities International for fraud allegations. Irving Picard, the court-appointed trustee trying to recover money for investors defrauded by Madoff, has filed a lawsuit against Madoff Securities International Ltd, the London branch of the convicted fraudster’s operation. Until now, the London arm of the business had largely avoided being dragged into the scandal, even though £1bn worth of Mr Madoff’s deals passed through the UK in a year. Meanwhile, one of America’s richest philanthropists and his family have agreed to give back $625m to Mr Picard, it was reported last night. Carl Shapiro, who first invested money with Mr Madoff decades ago, has consistently maintained that he, his family and its charitable foundation lost around $545m to the fraudster. However, according to reports that figure was based on the fictitious statements that Mr Madoff sent to clients shortly before his fund collapsed in 2008. Rather, Mr Picard has calculated that Mr Shapiro, 97, and his family gained around $1bn by deducting how much they invested with Mr Madoff from how much they withdrew from his funds. Mr Picard said: “It is a strong example of the progress we are making.” He has also demanded a further $555m from UBS, the Swiss bank. Steven Philippsohn, senior partner at PCB Litigation, said of London becoming embroiled: “The onus will be on Madoff’s trustee to establish that the directors closed their eyes to Madoff’s fraud. The trustee will no doubt claim that the directors should have spotted, but chose to ignore, some fundamental red flags in their business activities.”

Madoff’s UK directors sued for $80m By Steve Dinneen City A.M. (UK) December 9, 2010 THE legal battle over the collapse of Bernard Madoff’s $50bn (£31bn) Ponzi scheme moved to London last night when liquidators of the fraudster’s empire named all the directors of the London subsidiary in a new lawsuit. The complaint against Madoff’s London branch – Madoff Securities International Ltd (MSIL), seeks $80m and names as defendants former MSIL directors: Madoff’s brother Peter, Madoff’s sons Mark and Andrew, Stephen Raven, Leon Flax, Christopher Dale, Philip Toop and Malcolm Stevenson. Raven was lead director. The suit alleges that MSIL was established to conceal lack of actual trading by Madoff's business. Meanwhile, trustees seeking to recoup money from Bernard Madoff’s Ponzi scheme have upped their claim against UBS to $2.5bn. In court papers, trustee Irving Picard claimed the Swiss bank “capitalised on the Ponzi scheme in the face of clear indications of fraud”. UBS denies any wrongdoing, saying it will “take all appropriate steps to demonstrate that the allegations are false and unfounded”.

Trustee in Madoff case sues insurer By Beth Healy Boston Globe December 9, 2010 The trustee in the Madoff bankruptcy case has sued Massachusetts Mutual Life Insurance Co. and several of its subsidiaries over $3 billion in customer money that its hedge fund unit lost by investing with Bernard Madoff. In a statement on the lawsuit Tuesday night, the trustee said the Springfield insurer’s Tremont Group Holdings Inc. and related entities ignored “obvious warning signs’’ of fraud with Madoff and failed to perform any meaningful check of the convicted swindler’s operations or professed investment results. “Tremont blindly relied upon Madoff to drive the funds’ returns and, more importantly, Tremont’s profits,’’ the trustee, Irving Picard, said in the statement about the case, which is under seal in US Bankruptcy Court in Manhattan. Picard is looking to recover fictitious profits, as well as other payments Tremont may have received from Madoff, “to prevent any unjust enrichment’’ by MassMutual, Tremont, and two former Tremont exec utives. He did not say how much money he is looking to recover. Montieth Illingworth, a spokesman for Tremont, said, “Our position is unchanged, which is that we have done nothing wrong.’’ Tremont had been negotiating a settlement with Picard, according to a MassMutual filing with federal securities regulators. “Tremont and the Trustee have been attempting to reach a mutually acceptable settlement of his claims against the funds. There is no guarantee that Tremont will be successful in negotiating such settlement,’’ the filing says. Tremont is a so-called feeder fund that places client funds with hedge funds. The firm had entrusted half its $6 billion in assets with Rye Investment Group, in Rye, N.Y., which in turn placed all its money with Madoff. Rye was among the biggest losers in the Ponzi scheme, losing all of the $3.1 billion it had with Madoff. Tremont lost another $200 million, and MassMutual lost $10 million more it had invested directly with Madoff. Certain Rye funds have filed claims with the trustee, arguing that they should get money back from the insurance fund because they, too, were victims of Madoff. Ever since the scandal unfolded in December 2008, MassMutual has sought to portray Rye as a distant subsidiary, far removed from the corporate parent. But Picard’s office rebutted that argument, saying MassMutual and its related entities “dominated and controlled’’ Tremont after acquiring the firm in 2001 from Sandra Manzke. MassMutual spokesman Mark Cybulski said in a statement: “As we have stated all along, MassMutual acted appropriately and any suggestion otherwise is simply false.’’ The Globe reported last year that MassMutual executives were deeply involved in the decision to purchase Tremont and were warned by a consultant that the firm depended on the returns of a single manager — Bernard Madoff. Picard, in his statement, said that when MassMutual’s Oppenheimer Acquisition Corp. acquired Tremont to expand into hedge funds, it was “fully aware of the major role [Madoff] played in the business they were buying.’’ Oppenheimer also was named as a defendant in the lawsuit, along with Manzke and another former Tremont chief executive, Robert Schulman. Lawyers for Manzke and Schulman could not be reached.

Massachusetts Secretary of State William F. Galvin also has an investigation underway into MassMutual’s hedge fund operation and its relationship to Madoff. His office has shared records with Picard, a spokesman said. In May 2009, Tremont was one of more than 225 former Madoff clients that received letters from Picard demanding “clawbacks,’’ or returns of Madoff gains reaped in the prior six years. With $446 billion in assets under management, MassMutual also is the subject of numerous civil lawsuits brought by Madoff investors.

Madoff Trustee Targets Self-Styled Investor Rights Advocate Manzke FINAlternatives December 9, 2010 The latest suit filed by the trustee for the liquidation of Bernard Madoff’s investment firm seeks $100 million from a self-styled investor rights “watchdog” who allegedly got rich off Madoff’s Ponzi scheme. Irving Picard has filed a complaint against Sandra Manzke, members of her family and Maxam Capital Management, the investment company she formed solely, according to the complaint, to continue “her collaboration with and enrichment through” Bernard L. Madoff Investment Securities (BLMIS). Manzke was the founder and former CEO of Tremont Capital Management. Tremont’s Rye Group lost $3.1 billion in the Madoff scam and Tremont Group Holdings has been named in another complaint. Mass Mutual bought Tremont (through Oppenheim Funds) in 2001, and in 2005 Manzke left to form Maxam Capital. Picard says the Maxam organization, during the three years it existed, funneled $300 million into BLMIS. The complaint charges that while she was publicly advocating for investor rights, Manzke’s own firm was ignoring accepted due diligence procedures. According to Marc D. Powers at Baker & Hostetler, the court-appointed counsel for the trustee, Manzke “used a veneer of industry respectability to lure investors and enrich herself, her family and select colleagues.” Powers says the Maxam defendants’ personal and business relationships with Madoff “put them in a unique position to obtain information concerning BLMIS’s operations” but they choose to remain “willfully ignorant” and “collect lucrative fees. In November of 2008, Manzke sent an email to 500 wealthy individuals, money managers and fund of funds calling on them to protest what she termed the “outrageous” behavior in the hedge fund industry: “While we all recognize the difficulties of the current market environment, I am appalled and disgusted by the activities of a number of hedge-fund managers,” she wrote. “We have managers who have received millions of dollars in incentive fees, walking away and leaving investors with nothing.”

Madoff Trustee Sues Former Tremont Capital CEO Manzke Over `Stolen Money' By Dawn McCarty and Edvard Pettersson Bloomberg December 8, 2010 The trustee liquidating Bernard Madoff’s investment firm sued former Tremont Capital Management Chief Executive Officer Sandra Manzke and Maxam Capital Management seeking more than $100 million. Maxam, which Manzke started after she left Tremont in 2005, invested more than $300 million of investors’ money with Madoff in less than three years, said Irving Picard, the trustee, in a complaint filed today in U.S. Bankruptcy Court in Manhattan. The trustee seeks a return of almost $100 million that Maxam withdrew from Madoff as well as fees the firm received. “Every dollar the Maxam defendants purportedly earned and every dollar they kept to unjustly enrich themselves, their funds or other investors, was other investors’ stolen money,” Picard said in the complaint. The trustee yesterday sued Tremont Group Holdings Inc., which he said was the second-largest Madoff feeder fund group. That complaint, which was filed under seal, also named Manzke, Tremont’s founder, according to a press statement. Manzke didn’t immediately respond to an e-mailed request seeking comment today. Jonathan Cogan, a lawyer who represents Manzke in a separate securities lawsuit against Tremont, didn’t immediately return a call to his office after regular business hours. The case is Irving Picard v. Maxam Absolute Return Fund, 10-ap-5342, U.S. Bankruptcy Court, Southern District of New York (Manhattan.)

Natixis Denies Madoff Trustee Claims By Elena Berton and Maarten Van Tartwijk The Wall Street Journal December 9, 2010 PARIS—French bank Natixis Thursday denied allegations made by a trustee seeking to recover assets for victims of Bernard Madoff's investment fraud. A lawsuit filed late Wednesday is seeking around $1.4 billion from seven U.S. and European banks, including Natixis. The trustee, Irving Picard, said the lawsuits, which were filed under seal, accuse the banks of overlooking warning signals about Mr. Madoff's fraud while receiving transfers of money from his firm through so-called "feeder funds" that invested most or all of their assets with him. The complaints also accuse the banks of helping sustain the fraud by creating derivative investment products linked to the performance of Madoff feeder funds, Mr. Picard said. Natixis said it hasn't yet received the complaint filed by the Bernard L. Madoff Investment Securities LLC trustee, adding that it plans to take all steps to defend itself against the claims. "Natixis has acted in good faith at all times and has not benefited from, nor did it assist in or have knowledge of, the fraud carried out by Bernard Madoff," the bank said in a statement. At the end of last year, Natixis set aside €463 million to cover all of its exposure to Madoff, net of insurance. Mr. Picard, is seeking $425 million from Citigroup Inc. and $400 million from Natixis. He also filed complaints seeking smaller amounts from Merrill Lynch, part of Bank of America Corp., ABN Amro Bank NV, Banco Bilbao Vizcaya Argentaria SA, Nomura Holdings Inc. and Fortis. ABN Amro, which is owned by the Dutch government, is facing a claim of $270 million, while its hedge-fund services unit Prime Fund Solutions (PFS) is being sued for $230 million. A spokesman said that ABN Amro hasn't received the complaint yet but that the bank will "strongly defend" itself. The spokesman also said that the lawsuit isn't likely to impact the planned sale of PFS to Credit Suisse Group, which was delayed earlier this year and is now scheduled to be completed in the second half of 2011. Credit Suisse isn't likely to be hurt either because the sale only involves the clients of PFS, the spokesman said. PFS is a former unit of Fortis Bank Nederland, which is now being merged with ABN Amro. In 2008, Fortis booked a €922 million provision related to its exposure to the Madoff fraud. Citibank has said it will "vigorously defend against these claims by the trustee as they are without merit and entirely untrue," while Nomura and Merrill Lynch declined to comment. Mr. Picard has filed more than 100 lawsuits against Madoff customers and is seeking to recover funds from banks such HSBC Holdings PLC and J.P. Morgan Chase & Co., which all have denied wrongdoing. Mr. Picard has a Dec. 11 deadline under federal bankruptcy law to sue to recover funds. Mr. Madoff's Ponzi scheme was uncovered in December 2008 as the biggest investment fraud in U.S. history, in which investors reportedly lost around $65 billion. Mr. Madoff is serving a 150-year sentence.

Madoff Investors' Group Questions Clawback Suits FINAlternatives December 8, 2010 The Network for Investor Action and Protection, a group set up to assist victims of Bernard Madoff’s Ponzi scheme, is questioning some of the latest suits filed by the trustee overseeing the liquidation of Madoff’s investment business. NIAP President Ron Stein has written the Securities Investor Protection Corporation and Iriving Picard, the trustee in question, to explain why “innocent” investors are being targeted with clawback actions. Picard has filed hundreds of suits in recent weeks, many of them against what he has termed the “net winners” in the Ponzi scheme i.e. investors who withdrew more than they invested. Picard doesn’t claim these investors knew about the fraud, simply that they should return their profits to help reduce the losses of other victims. Picard has approved 15,491 investor claims for a total of $5.8 billion. The lawsuits filed to date are for more than $32 billion. Stein wants to know what will be done with money over and above the $5.8 billion needed by the SIPC to satisfy claims. “The Trustee has said he must sue investors to recover monies to give to so-called net losers,” said Stein. “Having already sued guilty parties for over $32 billion to cover only $5.8 billion in claims, why is it necessary to also sue innocent people, who often are aged, many who are suffering tremendous economic stress and emotional distress, and cannot even afford lawyers?” Picard’s findings suggest the total lost to Madoff’s scheme was just under $20 billion. Picard’s law firm has said any funds recovered by the trustee will be distributed to investors based on the size of their claims. Next, the trustee will settle the $1.7 billion owed to non-investor creditors (including $250 million in fees to the SIPC, which has paid to retain Picard and other professionals trying to recover investor money). It has been suggested that anything left over could be distributed to Madoff investors as profit, but SIPC President Stephen Harbeck told Time magazine this week that the chances of Picard recovering that much money were slim. "There is a big difference between filing a suit, winning a suit and being able to collect on that suit," said Harbeck.

Media Coverage December 9 – 10, 2010

General The Wall Street Journal (Blog) – Amid Madoff Anniversary, a Question of Trust (12.10.10) Reuters – Madoff trustee takes on banks as deadline looms (12.10.10) New York Daily News – Bernie Madoff's victims have until midnight Saturday to recover stolen money (12.10.10) New York Post – Madoff trustee in '24'-like race (12.10.10) The Palm Beach Post – 'Net winners' fair targets: Any 'profit' from Madoff was stolen from later investors (12.9.10) ABC News – Wall Street Speculators Seek To Profit from Madoff Victims' Losses (12.10.10) Carl Shapiro Boston Globe – In settlement, Shapiros are still giving (12.10.10) HSBC Bloomberg – HSBC, Kingate Global Fund Sued in London Over Madoff Fraud (12.10.10) Network for Investor Action and Protection CNBC – Madoff Investors Divided Over Distribution of Recovered Money (12.9.10) Richard Glantz Bloomberg – Madoff Trustee Sues Glantz, Family for $113 Million (12.9.10) Sonja Kohn The Wall Street Journal – Banker Kohn Sued by Picard (12.10.10) The New York Times – Madoff Trustee Seeks $19.6 Billion From Austrian Banker (12.10.10) Financial Times – Trustee accuses Madoff ‘soulmate’ Kohn (12.10.10) NBC.com – Madoff's "Criminal Soul Mate" Should Pay $19 Billion: Trustee (12.10.10) CNNMoney.com – Madoff trustee sues Austria banker for $19.6 billion (12.10.10) Reuters – Austrian banker Kohn key to Madoff crimes –trustee (12.10.10) Associated Press – Madoff trustee wants $19.6B for victims from 'Medici enterprise' (12.10.10)

BBC News – Madoff trustee files lawsuits worth $20bn (12.10.10) CBS News – Madoff Trustee Seeks $19.6B From Austrian Banker (12.10.10) Bloomberg – Madoff Trustee Sues Vienna's Medici Bank, Founder for $59 Billion (12.10.10) Portfolio.com – Sonja Kohn Was Madoff 'Soul Mate' (12.10.10) Forbes (Blog) – Madoff Trustee Sues Austrian Banker for $19.6 Billion And Calls Her A Criminal (12.10.10) The New York Observer – Irving Picard Smacks Austrian Banker With $19.6 B. Madoff Suit (12.10.10)

Amid Madoff Anniversary, a Question of Trust By Mary Pilon The Wall Street Journal (Blog) December 10, 2010 Saturday marks the two year anniversary of the Securities and Exchange Commission arrest of Bernard Madoff, the head of the largest Ponzi scheme in history. And many still wonder: What is it that makes us trust someone? Is it a string of letters after one’s name? Is it how much time we spend with someone? Or, like many said of Madoff, is it feeling like we’re part of something secret and special? More subliminal cues may be at play, according to new research from Ph.D. candidate Li Huang and Professor J. Keith Murnighan of Northwestern University’s Kellogg School of Management. The more traditional view is that we build trust with someone incrementally. But, according to this research, we may be more swayed by unconscious elements than we think. “Sometimes people trust others without engaging in conscious valuation,” Ms. Huang says. “They may rely on cues that give them information that might not be true about a particular person. Tricks can be played on our mind.” Take the Madoff case for example. If you were looking at Madoff as a potential money manager, you might subliminally notice that on his client list are other Madoffs. You would reason that he wouldn’t rip off his own family, and therefore Madoff becomes more trustworthy in your mind, according to the researchers. (Clearly, that can be misleading.) In our process of evaluating the risk of trusting someone, we might be looking at relationships of the person who is trying to win our trust. In their experiment, researchers asked people to create a list of names of people they liked and people they didn’t like. They flashed those names at a rapid pace to subliminally prime their subjects. Then, they asked participants if they would send money to people, with the idea that the person would be asked to send it back. The experiment found that people sent more money to the people whose names they liked and felt that the people they liked would be more likely to return the money to them. No one reported recognizing the names that were flashed before them before the experiment, indicating that the name priming was subliminal. “We develop a relationship scheme over time by interacting with people,” Ms. Huang says. “We think Madoff might have intentionally or inadvertently used this trust process.” On a less sinister scale, we see some of this in marketing. Celebrity endorsements may help us get a positive or negative connotation about a product. The timing of when we have to make a trust decision can also play a role, or even make us more vulnerable to relying on subliminal cues. The Northwestern research adds to a large body of work on trust and subliminal cues, but the idea that someone’s name or network enforces our willingness to trust them isn’t entirely surprising, especially given the wave of Ponzi schemes we’ve seen since the Madoff arrest. Perhaps then, it’s fitting that members of the Madoff family are trying to change their last names.

Madoff trustee takes on banks as deadline looms By Grant McCool Reuters December 10, 2010 (Reuters) - For nearly two years, lawyer and court-appointed trustee Irving Picard has hounded hedge funds, banks and individual investors worldwide to recover money from Bernard Madoff's epic fraud. With $2.6 billion collected in settlements and asset sales, Picard has so far recouped just a fraction of the tens of billions of dollars lost in the biggest financial fraud in history. A recent flurry of new cases against big banks such as UBS AG (UBSN.VX)(UBS.N) and HSBC (HSBA.L) could sweeten the recovery pot, but the companies have vowed to fight the lawsuits. So far, Picard has sued an array of defendants for a total of about $32 billion and is seeking nearly $20 billion from the banks alone. Under the two-year statute of limitations for such lawsuits, he cannot file any more after December 15. When the FBI arrested Madoff on December 11, 2008, U.S. prosecutors estimated that as much as $65 billion flowed through the firm over decades.. The disgraced money manager, now 72, pleaded guilty in March 2009 to running the fraud and is serving a 150-year prison sentence. Picard's lawsuits against the banks accuse them of allowing money to flow through them by way of derivatives into Madoff's international network of feeder funds. He also contends they ignored warning signs that Madoff was running a Ponzi scheme. in which early investors are paid with the money of new clients. "(Picard) has gone after the biggest fish he can find, and he has gone after a couple of smaller fish, but my sense is there are a couple of additional targets that he could have had with more years," said William Prickett, partner of Seyfarth Shaw LLP in Boston, who has represented some wealthy individuals and nonprofit organizations in the Madoff matter. Bank defendants include JPMorgan Chase & Co (JPM.N), Citigroup Inc's Citibank (C.N), Natixis (CNAT.PA), Fortis (FTS.TO), ABN AMRO Bank NV, Banco Bilbao Vizcaya Argentaria, Nomura (8604.T) and Merrill Lynch, owned by Bank of America (BAC.N) since January 1, 2009. Some defendants have denied wrongdoing and vowed to fight the charges. A few settlements have been reached, including one on Monday with private Swiss bank Union Bancaire Privee and a related Cayman Islands-based fund, M-Invest Limited, which agreed to forfeit $500 million. Some of the complaints in U.S. Bankruptcy Court in New York were filed under seal, so specifics of the allegations are not available. COURT CHALLENGES As the liquidator of Bernard L. Madoff Investment Securities LLC to recover money and return it to swindled investors, Picard is short more than 40 percent of the money needed to pay the claims of former Madoff customers he has so far approved. The amount of approved claims was worth $5.8 billion as of Friday, compared with the $2.6 billion recovered so far plus $766.5 million that the Securities Investor Protection Corp has committed to cover them, according to figures on the website www.madofftrustee.com. SIPC is the entity established by Congress to help investors of brokerages that fail. Investors are also challenging the trustee in court over his method of calculating the so-called "net winners" -- clients who took out more than they deposited. Some of them lost their life savings, but Picard

is still suing them in so-called clawback lawsuits, because according to his calculations, they made more over the years than they lost. Madoff victims complain that Picard is undervaluing their losses, and an appeal of his methods is pending. "Why is it necessary to also sue innocent people, who often are aged, many who are suffering tremendous economic stress and emotional distress, and cannot even afford lawyers?" said Ron Stein, president of the Network for Investor Action and Protection advocacy group. Picard declined to comment beyond a series of press statements outlining the higher-profile complaints. The lawsuits against those he says knew or should have known about the fraud include cases against Madoff's wife, brother, two sons, a niece and extended family. Picard sued five of Madoff's grandchildren to get millions purportedly transferred from a firm account to them. Most defendants Picard alleges helped further the fraud are in the United States, Britain, Switzerland, the British Virgin Islands or Cayman Islands. Some investors have welcomed Picard's most recent lawsuits. Others will not be satisfied unless the trustee also sues the U.S. Securities and Exchange Commission, the market regulator that missed red flags waved about Madoff. "The victims believe that Picard also has the obligation to pursue the SEC for complicity," Ronnie Sue Ambrosino, coordinator of Madoff Victims Coalition, said in a statement. "Mr. Picard has proven that he can win many uphill, even preposterous battles," she wrote. "It is my fear, however, that he will miss his deadline to file suit against the SEC." Among the trustee's successes have been a $625 million forfeiture announced on Tuesday from Madoff associate Carl Shapiro; the $500 million Union Bancaire Privee and M-Invest Limited settlement; and a $220 million payment by the family of longtime Madoff friend and client Norman Levy. Picard has said he is negotiating with some other defendants, including Fred Wilpon, owner of the New York Mets Major League Baseball team. But at least in the case of the Madoff family, that appears not to be so. "We have been in touch with each defendant and their counsel, seeking a prompt settlement of these claims and an out-of-court resolution," Picard said. "However, as these attempts have not reached a satisfactory conclusion, we are moving ahead with litigation."

Bernie Madoff's victims have until midnight Saturday to recover stolen money By Corky Siemaszko New York Daily News December 10, 2010 Time is running out for the New York lawyer trying to recover the billions Bernie Madoff stole from investors. Irving Picard has until 12 a.m. Saturday to identify and sue the rest of Madoff's alleged enablers before the statute of limitations kicks in. In the hours before the deadline, Picard filed one of his biggest lawsuits yet in Manhattan federal bankruptcy court - a $19.6 billion suit against Austrian banker Sonja Kohn. "For more than twenty years, Kohn masterminded a vast illegal scheme to exploit her privileged relationship with Madoff to feed over $9.1 billion of other people's money into his Ponzi scheme," the lawsuit against the Medici Bank founder said. Some of the "other people" are reportedly Russian mobsters. Kohn, an ultra Orthodox Jew who lived in Monsey for a time, has been keeping a low profile in Vienna even since her buddy Bernie got busted two years ago. Despite the blizzard of lawsuits Picard has filed in recent days, not all of Madoff's victims are happy with his performance. So far Picard has recouped just $2.6 billion of the estimated $65 billion the Ponzi king swindled from investors. "Of course I don't think he's done enough," Leslie Latto, whose mother lost her life savings, wrote in an e-mail. "I sometimes wonder if Irving Picard has ties to the Madoff family." Diane Peskin, who lost $3.2 million, said Picard should have sued the federal Securities and Exchange Commission in addition to the big banks, hedge funds and high rollers who played along with Madoff. "I think the SEC was aware of what was going on and is culpable," said Peskin. Burt Ross, who lost $5 million, said there's no way Picard can satisfy everybody who put in a claim. The figures in their statements were often fiction. "Solomon couldn't come up with a solution to this," said Ross, a former mayor of Fort Lee, N.J. Seven international banks, including New York-based Citi and Merrill Lynch, were among the latest targets of the court-appointed trustee. Picard alleged in bankruptcy court the financial institutions, which received funds from Madoff's investment firm, either knew or should have known fraud was involved. The largest claims are $425 million against Citi and $400 million against Paris-based Natixis. Madoff is serving a 150-year prison sentence after pleading guilty in March 2009 to running the decades-long investment fraud.

Madoff trustee in '24'-like race New York Post December 10, 2010 It's down to the wire for Irving Picard, the trustee liquidating Bernard Madoff's firm who for almost two years has hounded hedge funds, banks and individual investors worldwide to recover money from the convicted Ponzi schemer's epic fraud. In the latest filing late yesterday, Picard sued Richard Glantz and his family for $113 million, saying Glantz, a California lawyer, and his late father ran feeder funds for Madoff. Members of the Sufi faith, a mystical form of Islam, and groups on both US coasts, entrusted millions of dollars to Glantz. Under a statute of limitations, Picard cannot file any more suits after Saturday. With $2.6 billion collected in settlements and asset sales, the trustee has so far recouped just a fraction of the tens of billions of dollars lost in the biggest financial fraud in history. A recent flurry of new cases against big banks such as UBS and HSBC could sweeten the recovery pot, but the companies have vowed to fight the lawsuits. So far, Picard has sued an array of defendants for a total of about $32 billion, including nearly $20 billion from the banks alone. When the FBI arrested Madoff on Dec. 11, 2008, US prosecutors estimated that as much as $65 billion flowed through the firm over decades. The disgraced money manager, now 72, pleaded guilty in March 2009 to running the fraud and is serving a 150-year prison sentence. Picard's lawsuits against the banks accuse them of allowing money to flow through them by way of derivatives into Madoff's international network of feeder funds. Harvey Miller, lead bankruptcy lawyer for Lehman Brothers Holdings, said lawsuits against banks "are in a gray area" because it's "not clear a financial institution has fiduciary duties to investigate fraud and go out and report it." Bank defendants include JPMorgan Chase, Citibank, Natixis, Fortis, ABN AMRO Bank, Banco Bilbao Vizcaya Argentaria, Nomura and Merrill Lynch.

'Net winners' fair targets: Any 'profit' from Madoff was stolen from later investors By Jac Wilder VerSteeg The Palm Beach Post December 9, 2010 Clawback is an ugly word for an ugly necessity. As The Post's Jane Musgrave reported this week, some people whose accounts vanished when Bernie Madoff's Ponzi scheme collapsed are being sued for money they withdrew before the façade crumbled two years ago. Money recovered from such clawbacks, which affect people who withdrew more than they invested, is to be distributed to thousands of victims - many of them in this area - who lost money. Irving H. Picard, the court-appointed trustee overseeing the liquidation of Bernard L. Madoff Investments Securities LLC, also has sued financial institutions he says facilitated the fraud, including seven sued Wednesday for a collective $1 billion. Mr. Picard also is going after individuals such as Palm Beacher/longtime Madoff friend Carl Shapiro and son-in-law Robert Jaffe, who agreed this week to a deal in which the family will return $625 million. Mr. Picard reportedly is seeking a clawback in the $48 million range from the Wilpon family, owners of the New York Mets baseball team. Some clawback targets call the tactic unfair, but the theory underlying the attempt to recover money from "net winners" is sound. Any "profit" from money invested in Madoff accounts actually was stolen from later investors. If bank robbers stole money from one bank and deposited it in another, the receiving bank wouldn't get to keep the loot. The Madoff scheme is more complicated because it also involves paper profits from Madoff's phony investments. Victims, many of whom did not benefit as spectacularly as Mr. Shapiro and Mr. Jaffe, counted on paper profits when planning retirements, making out wills and donating to charities. Having to refund their "profit" on top of losing their accounts seems cruel. But other victims actually lost investments in addition to paper profits. The recovered "profits," once distributed, won't make them whole but will mitigate their losses. Mr. Picard has indicated that the clawbacks should not leave Madoff victims destitute. He established a "hardship" designation for people of advanced age, people who had to return to work from retirement and people who withdrew money from Madoff accounts to pay taxes on the phantom profits. Mr. Picard also should exempt charities that are innocent and have no way to repay donations from Madoff victims. Both "net winners" and "net losers" can pursue lawsuits against financial institutions, advisers, regulators and Madoff associates they think were complicit or irresponsibly facilitated Madoff's Ponzi scheme. But Mr. Picard's main concern necessarily is in recovering something for the "net losers." The "net winners" weren't better investors. They were just luckier. Sometimes "justice" and "fairness" don't mean making everybody whole. They mean distributing the pain equitably. The clawback portion of the Madoff fallout is one of those sad examples.

Wall Street Speculators Seek To Profit from Madoff Victims' Losses By Anna Schecter and Brian Ross ABC News December 10, 2010 For many of the victims of Bernard Madoff's Ponzi scheme, there is now a quick way to get some return on their lost investment. More than 2,300 Madoff victims have had their claims to recover lost funds approved by a bankruptcy trustee, and now a handful of Wall Street bottom feeder firms are offering to buy those claims for 30 cents on the dollar. An investor who lost $100,000 would receive a check for $30,000. The firms are betting that the Madoff investors, many of them old or infirm, are tired of waiting to get their money back – and that the firms could reap huge profits because lawsuits brought by the trustee against banks and others to recover Madoff funds will, in time, actually lead to a much more generous return. "We have bought up tens of millions of dollars in Madoff claims from dozens of victims," said Adam Moskowitz, president of Woodbury, New York–based ASM Capital. "Payments are made within one to three business days," reads an ASM Capital offering sent to the victims last week. Among those considering taking the offer is 61-year old Richard Friedman, a New Jersey accountant, who lost his life savings in the Madoff scam. "Do I want to wait maybe five years to get some money or get less up front right now to meet my everyday expenses?" Friedman asked. "Very often with bankruptcy cases you only get 10 cents on the dollar." But in the case of Madoff, a flurry of lawsuits asking for more than $55 billion has raised the possibility that the bankruptcy trustees could return close to 100 cents on the dollar for the currently approved claims, which now total $5.8 billion. The latest suit, filed Friday against Austrian banker Sonja Kohn and others, was for the largest sum yet: $19.6 billion. Picard alleges that the "Medici Enterprise," run by Kohn, who headed Bank Medici, "masterminded a vast illegal scheme" that fed $9.1 billion of investors' money to Mr. Madoff, starting when they met in New York in the mid-1980s. The total amount of approved claims by victims is expected to grow to about $18 billion dollars, according to a person involved in the process. The lawyers for the bankruptcy trustee have been instructed not to publicly speculate on how much money they might recover because it could affect the market in Madoff deft. "I'm reluctant to give you percentages or anything like that because then people start relying on that," said Stephen Harbeck, president of the Securities Investment Protection Corporation (SIPC), an industry insurance fund. The court-appointed bankruptcy trustee, Irving Picard, declined to comment. He and his law firm, Baker & Hostetler, are billing about $2 million dollars a week for their work in tracking down the missing Madoff money. The legal fees are paid by SIPC. To date, the trustee has collected over $2 billion from settlements, mostly with big investors who took out more money than they originally put in.

One of Madoff's biggest and wealthiest investors, 97-year old Carl Shapiro, agreed this week, with his family, to return $625 million to the victims' fund. The trustee is currently in negotiations with the estate of Jeffry Picower, who allegedly took out $7 billion more than he originally invested. Picower died last year. About 16,400 claims have been filed by people seeking restitution, but so far the bankruptcy trustee has approved only 2,355. Most claims were rejected, according to Harbeck, because the investors had apparently taken more money out of their Madoff investment account than they originally put in. According to Harbeck, the trustee has no choice but to ignore the victims' account statements and their supposed profits over the years and pay attention only to how much cash was put in, and how much was taken out. "We don't let Bernie Madoff decide who wins or who loses in this matter," said Harbeck of SIPC. "He made up these statements out of thin air and the only realistic measure of how to measure the claims is on a net basis of money in versus money out." Many of the victims are furious with that method of deciding claims, including Richard Friedman of New Jersey whose 85-year old mother, Shirley, has now been sued by the bankruptcy trustee for money she took out over 17 years. "She's in poor health, she doesn't have a lot of money left, and we're very concerned that with this law suit it could literally put her out on the street," said Friedman. Friedman said the plight of his mother may affect his decision to take the offer of $.30 on the dollar for his own account, from which he did not withdraw more than he put in. "Now that my mother could be completely wiped out, it would give me the money to be able to take care of her," Friedman said. "What am I going to do? I'm sort of being forced against the wall." The bankruptcy trustee and SIPC say investors have the option of applying for "hardship" status in such cases. "No one is seeking to get blood from a stone," said Harbeck. "There are people out there who took out money to live on over a period of time, they don't have the financial wherewithal to pay it back, even if they did receive unwittingly money stolen from others." Nevertheless, Friedman's mother is one of hundreds of Madoff victims who have been sued by Picard in recent weeks for "clawback" money. The clawback deadline for Picard's suits is Saturday December 11 at midnight.

In settlement, Shapiros are still giving By Steven Syre Boston Globe December 10, 2010 Here is today’s $625 million question: Did Carl Shapiro’s huge settlement with the federal government make things right? Shapiro, one of Boston’s truly great philanthropists, and his family agreed to write a check for that staggering sum this week. They are returning so many millions that had supposedly been earned from investments made by Bernard Madoff, who actually swindled the money from other clients. Whether $625 million is the right amount, and is this the fair way to settle the matter, are hard questions to answer for two reasons. First, many details about Madoff and the Shapiro investments remain unknown. Second, any story about vast amounts of public charity and stolen money mixed together is bound to make your moral compass spin. The most important thing we still don’t know: How much of the Shapiro fortune was money that Madoff pilfered in the infamous Ponzi scheme that blew up in 2008? The $625 million payment is merely a negotiated settlement of a legal dispute. Here’s how they reached that number: Irving Picard, a trustee who represents the interests of Madoff victims, had argued the Shapiros took a little more than $1 billion out of their Madoff account during the last six years of the scam. Shapiro countered his family had kicked in another $500 million to Madoff that Picard hadn’t counted. That netted out to about $550 million. Another party to the dispute, the Justice Department, received $75 million, bringing the total to $625 million. One important footnote: Picard made it clear he would not pursue money already donated to nonprofit institutions, a sum that runs into the many of millions in the case of the Shapiros. As neat as figures sound, a settlement based on the movement of money over the six years prior to Madoff’s arrest leaves a lot of financial history untouched. Shapiro, now 97, first made a fortune selling his Kay Windsor dress business in 1971 for $21 million and gave a good deal of the money to Madoff. Over decades, those accounts grew much larger, at least on paper. Picard stops following the trail backward at 2002. Shapiro says he was hoodwinked by Madoff all along, and no one investigating the case has alleged otherwise. But I have a hard time reconciling the idea that a smart businessman with relentless focus on detail could be completely snowed by his friend for so long. All along the way, some of Greater Boston’s most famous hospitals, museums, and universities have had their hands in Shapiro’s pockets, and the city is undoubtedly a better place for it. On a quick drive yesterday, I passed Shapiro buildings at Brigham and Women’s Hospital and Beth Israel Deaconess Medical Center. I stopped off at the Museum of Fine Arts to see its spectacular new wing, built in part with millions from the Shapiros. I drove to Boston Medical Center, where the nearly complete nine-story Shapiro ambulatory center will open in the spring. That’s only a sampling. Don’t ask me whose money really paid for it all. I don’t know. The $625 million settlement isn’t perfect. But it’s a worthy act by a family that spent much of its fortune — presumed or otherwise — to help others. The Shapiros stand apart from investment advisers who recklessly sent their clients’ money to Madoff and now hide under rocks when called on to take responsibility.

HSBC, Kingate Global Fund Sued in London Over Madoff Fraud By Lindsay Fortado Bloomberg December 10, 2010 HSBC Holdings Plc and Kingate Management Ltd. were sued in London by Irving Picard, the trustee liquidating Bernard Madoff’s investment firm in New York. The lawsuits, filed today at the High Court, follow cases filed by Picard against HSBC and Kingate in New York bankruptcy court. Picard sued HSBC earlier this week for $9 billion over claims it aided Madoff’s fraud through a network of feeder funds in Europe, the Caribbean and Central America. The trustee sued two Kingate “feeder funds” in April, arguing that he can retrieve $255 million in fake profit the funds withdrew from Madoff’s business within 90 days before his arrest in December 2008. Picard, facing a deadline to file claims to retrieve money for victims of Madoff’s fraud, is filing lawsuits in London for the first time. Picard and the liquidators of Bernard Madoff Securities International Ltd., the U.K. arm of the convicted con man’s investment firm, sued the unit’s former directors, seeking at least $80 million, on Dec. 8. Picard won a court order in London in May forcing investment firm FIM Advisers LLP to hand over additional documents about whether it knew about Madoff’s Ponzi scheme. FIM managed the Kingate Global and Kingate Euro hedge funds, now in liquidation in Bermuda, which funneled more than $1.7 billion to Madoff. Madoff, 72, pleaded guilty in March 2009 to using money from new investors to pay off old ones in a Ponzi scheme, sparking investigations and dozens of lawsuits. U.K. prosecutors dropped a criminal probe into Madoff’s London unit in February after they found “insufficient evidence” to charge anyone. Madoff is serving 150 years in prison for the fraud that destroyed his New York-based firm, which collapsed in December 2008. Picard hired Taylor Wessing LLP, a London-based firm, last week to file lawsuits in the U.K. and British Commonwealth countries recovering assets for Madoff creditors. Adrian Russell, a spokesman for HSBC, declined to immediately comment. Federico Ceretti and Carlo Grosso, who head FIM Advisers, didn’t immediately respond to a call seeking comment. Kevin McCue, a spokesman for Picard, didn’t immediately respond to a request for comment. The cases are Irving H. Picard (as Trustee for the Liquidation of Bernard L. Madoff Investment Securities LLC) v. Kingate Management Ltd. & 11 ors, case no. 10-1478, and Irving H. Picard v. HSBC Plc, case no. 10-1479, High Court of Justice, Queen’s Bench Division (London.)

Madoff Investors Divided Over Distribution of Recovered Money By Mary Thompson CNBC December 9, 2010 Standing on a windy hill in Spencertown, N.Y. Allan Goldstein looked out over the snow covered fields to the home he was forced to sell. "My grandaughter wanted to get married here," he said, shivering in the cold. "But it didn't work out." Two years ago, Goldstein was forced to sell the home and the 59 acres adjoining it after his life savings evaporated. The money was lost in Bernie Madoff's massive Ponzi scheme, and today the former textiles executive lives with his wife in Great Barrington, Mass., in a vacation home owned by his daughter and son-in-law. Despite the fact he and his wife now live off a vastly reduced income made up of Social Security, gifts from his sister and the genorousity of his family and friends, the 78 year old considers himself lucky. "There are so many more Madoff victims that are hurting more than I am," he said. Howard Seigel feels lucky too. Like Goldstein, he lost money with Madoff, and like Goldstein, he was forced to sell a home. But the two investors differ over what should be done with the money recovered by Madoff Trustee Irving Picard. This issue of how to distribute the funds is now dividing a victims community initially united by their common losses. "The trustee is doing a good job," Siegel said. Goldstein thinks he needs to do more. Appointed by the Securities Investor Proctection Corporation (SIPC) to approve the claims of, recover money for, and distribute funds to Madoff victims, Picard's position on valuing their claims with a method known as "net equity" is the focus of a legal challenge. Picard's position is that victims with legitimate claims should only receive the amount of money they originally invested with Madoff, less any money they took out. It is a view being challenged by about one hundred Madoff investors in the 2nd Circuit Court of Appeals in New York. These investors feel their claims should be calculated using the amount they held with Madoff, as of their last statement of November 30, 2008. Those statements reflecting the false profits Madoff claimed to be have made for investors during his more than a decade long scam. Goldstein is part of this group. He is also one of a number of Madoff investors who have already received money from the trustee. Deemed a hardship case, Goldstein says the payout was small compared to his original investment, because he had already withdrawn funds. He believes he is owed more because the Securities and Exchange Commission failed to do its job in monitoring Madoff, and he should not have to pay for the government's negligence. If Picard cannot return the amounts listed on the a victims last statement, Goldstein believes at the very least, SIPC should allow for higher payouts than what Picard's distributing. "Your account should be adjusted for a minimal return on investment," he said. "And/or the money put in should be adjusted for inflation."

A lawyer and retired CPA, Seigel feels differently. The Palm Beach Gardens, Fla. resident believes Picard's interpretation is correct. "Its of critical importance to the vast majority of investors that this position be affirmed," he said. As an indirect Madoff investor, Siegel cannot file any claims with Picard. Seigel invested his IRA with a firm called Ivy Asset Management which in turn placed it in a hedge fund called the Beacon Fund. The Beacon Fund was a feeder fund for Madoff. Picard is only considering claims from what he has determined to be Madoff clients. In this case Picard considers the client to be the hedge fund, not Siegel. So, if Siegel does end up receiving any money, it will be a fraction of what the hedge fund receives and most likely a fraction of what he orginally invested in Madoff, even though he never withdrew any money from his account. "I think we are the true little guys," he said, referrring to the thousands of investors who lost money investing in Madoff through feeder funds. He fears if investors like Goldstein get their way, the money he believes should go to people like himself who never withdrew any funds, will be watered down. "The trustee has an example of that on the trustee's website which basically says the amounts will be cut by two thirds to those who haven't withdrawn their money," he said. Just how much money ends up going to Madoff investors remains in flux. As of December 9, Picard had recovered roughly $2.6 billion dollars and had filed suit seeking to recover $15 billion dollars more. The amount of claims Picard had determined to be legitimate totalled about $5.8 billion. It is unclear, and many believe unlikely, his lawsuits will be effective in bridging the $3.2 billion dollar gap between the recovered funds and approved claims. And even if it does, as the currrent divide suggests, many investors will still feel short changed. As for Goldstein and Siegel, while they have differences, they are united in their feelings about who bears most of the blame for their losses. It's not Madoff, who is serving a 150 year sentence for orchestrating a $60 billion dollars Ponzi sheme. Goldstein and Seigel both lay the blame at the feet of the SEC. They say in failing to conduct the most basic supervisory actions with Madoff, its the SEC that cost them and thousands of others, billions.

Madoff Trustee Sues Glantz, Family for $113 Million By Bob Van Voris Bloomberg December 9, 2010 Dec. 9 (Bloomberg) -- The trustee liquidating Bernard Madoff’s investment firm sued Richard Glantz and his family for $113 million, alleging Glantz and his late father ran feeder funds for Madoff’s Ponzi scheme. Trustee Irving Picard said in a complaint filed today that since 1992 Glantz and his father, Edward, “created and managed entities that pooled many millions of dollars of investor funds so that they could be funneled into” Bernard L. Madoff Investment Securities LLC. Richard Glantz, a lawyer who worked for the U.S. Securities and Exchange Commission, and Edward Glantz, a certified public accountant, knew or should have known about the fraudulent nature of Madoff’s operation, Picard said in the complaint filed in U.S. Bankruptcy Court in Manhattan. In an earlier case, the men and the entities they managed were investigated by the SEC, enjoined in 1993 from violating securities laws and forced to return money to investors, according to the complaint. Millions of dollars of that money that should have been returned “were almost immediately reinvested directly” with Madoff, who rewarded the men with fraudulent side payments for referring investors, according to the filing. Richard Glantz didn’t return a voice-mail message left at his San Rafael, California, office after regular business hours. Family Foundation The complaint seeks to recover $113 million in transfers from Madoff’s firms to the Glantzes, the Glantz Family Foundation Inc. and more than two dozen other defendants and entities. Madoff, 72, is serving a 150-year sentence in federal prison in North Carolina after admitting he directed the biggest Ponzi scheme in history. Madoff’s New York-based firm was forced into bankruptcy after his arrest in December 2008. At the time of his arrest, Madoff’s account statements reflected 4,900 accounts with $65 billion in nonexistent balances. Investors lost about $20 billion in principal. The case is Picard v Glantz, 10-5394, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

Banker Kohn Sued by Picard By Chad Bray and Michael Rothfeld The Wall Street Journal December 10, 2010 The trustee overseeing the bankruptcy of Bernard Madoff's investment firm sued Austrian banker Sonja Kohn for $19.6 billion on Friday, the largest lawsuit he's launched to date to recover money for victims of Mr. Madoff's decades-long fraud. The complaint, filed by Irving Picard in federal bankruptcy court in Manhattan, alleges Ms. Kohn, the principal shareholder of Bank Medici AG, had a 23-year "criminal relationship" with Mr. Madoff in which more than $9.1 billion was funneled in his Ponzi scheme. However, Mr. Picard said he is seeking to recover $19.6 billion, or the entire amount of the principal he claims investors lost in Mr. Madoff's scheme. “The Ponzi scheme could not have continued for as long as it did" if not for Ms. Kohn propping it up, said the lawsuit, which also names relatives and other entities related to Ms. Kohn. Friday's lawsuit is the latest in an avalanche of complaints Mr. Picard has filed in the run-up to a Saturday deadline for "clawback" lawsuits aimed at recovering funds lost through Mr. Madoff's Ponzi scheme. "In Sonja Kohn, Madoff found a criminal soul mate, whose greed and dishonest inventiveness equaled his own," Mr. Picard said in a statement. "Given the scope of Madoff's Ponzi scheme, the deceptive nature of the defendants, and the deliberately Byzantine structure of the Medici Enterprise, we believe that even more information regarding the full scope of this criminal enterprise will be revealed through discovery." Mr. Picard alleged 22 counts of civil racketeering, conspiracy, and fraud against Ms. Kohn and others. A lawyer for Ms. Kohn didn't immediately return a request for comment on Friday. Ms. Kohn allegedly meet Mr. Madoff through Cohmad Securities Corp. co-founder Maurice "Sonny" Cohn while she was working as a retail stock broker at Merrill Lynch & Co. in New York in the mid-1980s, Mr. Picard said. Cohmad is a brokerage that operated out of Mr. Madoff's Manhattan office. Mr. Picard accused Ms. Kohn of feeding billions of dollars through so-called feeder funds in exchange for "secret kickbacks" from Mr. Madoff that totaled at least $62 million. Mr. Madoff allegedly paid her a flat fee, which was usually over $6.5 million a year, and kept it secret from others within his firm, Mr. Picard said. The payments were allegedly made through a network of sham companies and disguised as a payment for "market research" that was never used by Mr. Madoff under the heading "BLM Special," Mr. Picard said. That was the label, Mr. Picard said, that Mr. Madoff used when making payments from the investment firm "for gifts to family members, forgiven loans to friends, payments of personal expenses and charitable contributions." She was paid both by Mr. Madoff and by investors seeking to invest with Mr. Madoff, Mr. Picard said. As the scheme fell apart in late 2008, Ms. Kohn allegedly conspired to protect herself and her family, causing one of the funds to withdraw $536 million in the fall 2008, including $423 million on Nov. 4, 2008, Mr. Picard said in the lawsuit. Just days before Mr. Madoff was arrested in December 2008, Ms. Kohn directed her husband to withdraw all of their personal assets from any member of the Medici Enterprise that had potential exposure, according to the lawsuit.

After Mr. Madoff's arrest, Ms. Kohn denied to Austrian authorities that she was close to Mr. Madoff, Mr. Picard said. However, she held herself out to potential investors as Mr. Madoff's close friend and "intimated that their special relationship yield special returns on investments" with his firm, Mr. Picard said. In November, Cohmad Securities, Maurice Cohn and his daughter, Marcia, reached a settlement with the Securities and Exchange Commission regarding their relationship with Mr. Madoff. The SEC accused them of negligence in making statements to potential Madoff investors as well as not keeping accurate books and records. They didn't admit or deny wrongdoing as part of the settlement. A separate lawsuit filed by Mr. Picard last year is pending. They have denied wrongdoing. A lawyer for Cohmad and Mr. Cohn declined comment declined comment, saying he hadn't had a chance to review the complaint against Ms. Kohn. Separately, Mr. Picard said on Friday that he had settlements totaling $80 million with a number of charities and nonprofit organizations, resolving claims related to their withdrawals from Mr. Madoff's scheme.

Madoff Trustee Seeks $19.6 Billion From Austrian Banker By Peter Lattman and Diana Henriques The New York Times December 10, 2010 The trustee seeking money for victims of Bernard L. Madoff’s fraud has sued Sonja Kohn, an Austrian banker, seeking $19.6 billion in damages and accusing her of masterminding a 23-year conspiracy that played a central role in financing the gigantic Ponzi scheme. Amid an avalanche of lawsuits filed in recent weeks as the trustee nears a Saturday deadline to file claims, the complaint against Ms. Kohn stands out for its stark allegations of criminal behavior and the size of the financial recovery sought. “In Sonja Kohn, Madoff found a criminal soul mate, whose greed and dishonest inventiveness equaled his own,” the trustee, Irving L. Picard, said. A lawyer for Ms. Kohn in Vienna did not immediately respond to a request for comment. Ms. Kohn led what the trustee’s complaint called the Medici Enterprise, a labyrinth of European banks, hedge funds, asset management firms, offshore trusts and shell companies. In the lawsuit, filed on Friday in Federal Bankruptcy Court in Manhattan, the trustee contended that billions of dollars of other people’s money poured into Mr. Madoff’s fraud through these conduits — and tens of millions poured out in the form of fees and “kickbacks” to Ms. Kohn from Mr. Madoff. The 157-page complaint claimed that about half the fraud’s stolen funds — $9.1 billion out of an estimated $19.6 billion — was directly attributable to Ms. Kohn, her family members and their elaborate portfolio of so-called feeder funds. The amount makes “these actors arguably the single most critical building block — the ’sine qua non’ — of the Ponzi scheme,” said Timothy S. Pfeifer, a counsel at Baker & Hostetler, the trustee’s law firm. The lawsuit is the first brought by Mr. Picard to include allegations that defendants violated the Racketeer Influenced and Corrupt Organizations Act, a federal law originally enacted to combat organized crime. Better known as RICO, the statute is a powerful tool that provides a means for corralling far-flung but interconnected entities into a single lawsuit. It also permits the recovery of triple damages. With a bouffant red wig and a combative personality, Ms. Kohn, now 62 years old, stood out in the discreet world of European private banking. Well connected in financial and government circles in Austria, she cultivated relationships well beyond her Mitteleuropean base, speaking at least four languages and possessing a gold-plated Rolodex of socialites, industrialists and financiers. Based in Vienna, Ms. Kohn traveled frequently to the Continent’s financial centers in Zurich, Milan and London and more recently developed a base in the offshore hedge fund centers in the Caribbean. Like other major figures in Mr. Madoff’s circle, Ms. Kohn promised clients she could gain access to his funds while rival bankers could not, and frequently boasted of her close personal friendship with him. “She characterized herself as ‘Austria’s woman on Wall Street’ and the gateway to Madoff,” the complaint said. Mr. Picard has until Saturday — the second anniversary of Mr. Madoff’s arrest — to file claims against any entity that withdrew cash profits from the Ponzi scheme or that may have played a role in facilitating the fraud. In the last two weeks, he has filed actions against three of the world’s largest banks — UBS, JPMorgan Chase and HSBC , accusing them of ignoring clear signs of fraud in their dealings with Mr. Madoff and his various feeder funds.

All three banks deny the charges and say they will vigorously fight the accusations in court. Including the lawsuit against Ms. Kohn, Mr. Picard has filed actions seeking to recover more than $50 billion for eligible victims. Thus far, he’s recovered about $2.6 billion through settlements and asset sales. Ms. Kohn, a Vienna native, first met Mr. Madoff in 1985 when she was living in Monsey, N.Y., and working as a stock broker at Merrill Lynch. She was introduced to Mr. Madoff through an executive at Cohmad Securities, a Madoff-related brokerage firm that has also been sued by Mr. Picard. The lawsuit claims that Ms. Kohn knew from the beginning that Mr. Madoff was a fraud, and that she received secret kickbacks from him in exchange for feeding him cash from other investors. It contends that she had a secret agreement with Mr. Madoff in which he paid her a flat fee — usually more than $6.5 million annually — to solicit investors. “By 1990, the Berlin Wall had come down and Kohn identified new opportunities to solicit investors for [Madoff] from Eastern and Central Europe, particularly her ancestral home Austria,” the complaint said. In 1993, Ms. Kohn left New York and returned to Austria to tap the rich vein of European wealth for her New York business associate, Mr. Madoff. “No Ponzi scheme can survive without a constant influx of fresh capital” and Ms. Kohn’s enterprise “provided a flood of cash for Madoff,” the trustee asserted in the complaint. In 1994, Ms. Kohn formed Bank Medici, an Austrian bank that the trustee contends was nothing more than a conduit set up for the sole purpose of funneling money to Mr. Madoff through several so-called feeder funds. Those funds, including Harley International, the Herald Fund and Optimal Multiadvisors, delivered strong returns to the insurance companies and pension funds that invested in them. Bank Medici was 25 percent owned by Bank Austria and was effectively a “de facto” branch of the country’s largest bank, the trustee claims. The association with Bank Austria gave Ms. Kohn and Bank Medici an imprimatur of legitimacy when recruiting investors. Both Bank Austria and its now owner, UniCredit, Italy’s largest bank, are named as defendants in this lawsuit an in an earlier complaint the trustee filed against HSBC, the London-based global bank. In a statement, UniCredit said: “It is our policy not to comment on pending legal matters. Our attorneys are reviewing the matter and we will manage this through the normal course legal process. We intend to defend ourselves vigorously.” According to the complaint, Mr. Madoff paid Ms. Kohn at least $62 million in kickbacks — and likely many times that amount — in exchange for help in signing up investors whose cash could sustain his Ponzi scheme. The complaint also asserted that Mr. Madoff kept secret records of his dealings with Ms. Kohn , hiding them from other people at his firm and destroying them before his confession and arrest two years ago. Some former employees kept copies of the records, which listed the specific accounts that Mr. Madoff attributed to Ms. Kohn, it said. The trustee claimed that Ms. Kohn took great pains to distance herself and her family from the Ponzi scheme. Neither she nor her relatives ever established a direct account with Mr. Madoff, according to the complaint. As the Ponzi scheme neared collapse in the fall of 2008, the feeder funds controlled by Ms. Kohn began making large withdrawals from Mr. Madoff, the trustee said, including a single $423 million transfer just one month before federal agents arrested Mr. Madoff.

In the months before the fraud’s collapse, Ms. Kohn and her husband planned to move to Switzerland with stolen proceeds, the complaint said. In Europe Ms. Kohn lived lavishly, with regular stays at Claridge’s, the five-star London hotel. She also spent a considerable amount of time in Switzerland, a common hunting ground for private bankers. But Ms. Kohn also was able to penetrate successfully another close-knit milieu there, newly rich Russian oligarchs. After she went into hiding following Mr. Madoff’s fall, other bankers suggested it was because she feared retribution by her Russian clients. The complaint says that since Mr. Madoff’s arrest, Ms. Kohn has not traveled to New York. Several members of her family, including her husband, her mother, a son, a daughter and two sons-in-law were also named as defendants in the lawsuit. According to the complaint, several of them invoked their Fifth Amendment rights more than 100 times during depositions with the trustee’s lawyers last year.

Trustee accuses Madoff ‘soulmate’ Kohn By Brooke Masters Financial Times December 10, 2010 Within weeks of Bernard Madoff’s arrest in December 2008, public attention turned to Bank Medici, a small Vienna-based institution that appeared to have channelled billions of dollars into what turned out to be a giant Ponzi scheme. Sonja Kohn, the former broker who ran and owned most of the bank, responded with a public letter saying that she was as much a victim as everyone else. “Reading that some voices believe that I should have known better makes the pain even more unbearable,” she wrote back then, just weeks before the Austrian government seized Bank Medici and pulled its banking licence. On Friday, the US bankruptcy trustee responsible for recovering money for Mr Madoff’s victims presented a totally different explanation. He charged in a $19.6bn lawsuit against Ms Kohn and nearly 60 other people and institutions that she “masterminded a vast illegal scheme” that channelled $9.1bn to Mr Madoff over the course of two decades. The lawsuit alleges that Ms Kohn was the centre of a 23-year conspiracy that netted her at least $62m in “kickbacks” and involved some of the largest banks in Italy and Austria. It alleges that she and others engaged in 8,000 specific acts to further the scheme, including money laundering and wire and mail fraud. “In Sonja Kohn, Madoff found a criminal soulmate, whose greed and dishonest inventiveness equalled his own,” Irving Picard, the trustee, said in a statement. Ms Kohn’s US and Austrian lawyers did not reply to phone calls and there was no answer at the Vienna business that is the successor to Bank Medici. Neither she nor any of the other people and institutions named as defendants in the lawsuit have been criminally charged. Mr Madoff is serving a 150-year prison sentence for the scheme which caused $19.6bn in investor losses. Sonja Kohn was born in 1948 and married Erwin Kohn in 1970. They established a series of businesses and moved to Milan. In 1983, they moved to Monsey, a suburb of New York City, and she embraced Orthodox Judaism. According to Mr Picard’s 154-page lawsuit, Ms Kohn started work as a broker at Merrill Lynch in 1985 and was introduced to Mr Madoff that same year by Maurice “Sonny” Cohn. Mr Cohn, without admitting or denying wrongdoing, settled with US regulators last month over his role in the Madoff enterprise but is fighting a separate lawsuit from Mr Picard. Mr Madoff allegedly kept secret records of which clients were attributable to Ms Kohn and personally approved payments to her companies under a special code that the trustee said was used for “gifts to family members, forgiven loans to friends, payment of personal expenses, and charitable contributions”. The lawsuit alleges that he destroyed records of his secret agreement with Ms Kohn before confessing to authorities in December 2008, but adds that former employees kept copies, however. The employee who processed Mr Madoff’s payments to Ms Kohn was allegedly instructed not to tell anyone that she was being paid and not to mail cheques to her. Instead, Ms Kohn or an emissary would pick them up at Mr Madoff’s New York or London office.

She allegedly recruited her first Madoff client in 1989, a Chicago business contact of her husband. By the time of Mr Madoff’s arrest, she was responsible for 30 of Mr Madoff’s accounts, including a series of hedge funds managed and marketed by her associates, the complaint said. Together, they accounted for more than $9bn. In the early 1990s, Ms Kohn began introducing wealthy central and eastern European investors to Mr Madoff. The complaint alleges one such meeting in 1991, in which Mr Madoff greeted Ms Kohn with “a big hug and a kiss”. Ms Kohn got to know Gerhard Randa, head of Bank Austria, and, together with the bank, she established her first Madoff feeder fund, known as Primeo, in 1993, the complaint said. About the same time, she moved back to Vienna and bought 90 per cent of the company that eventually became Bank Medici from Bank Austria, the complaint said. In 2003, Bank Medici gained a banking licence but the lawsuit said it essentially operated as a branch of Bank Austria – the larger institution managed all its accounts and portfolios and provided staff on a rotating basis, the complaint said. Bank Austria increased its stake in Medici to 25 per cent. The lawsuit claims it received $31m in fees from the smaller bank. Over the next few years, Ms Kohn’s businesses opened outposts in Italy, Germany, Gibraltar and the Cayman Islands and launched several more Madoff feeder funds, the complaint said, including six that together sent almost $4bn to the Madoff enterprise. When UniCredit bought Bank Austria in 2005, Ms Kohn claimed credit for facilitating the acquisition. UniCredit was not immediately available for comment but it said earlier in the week “we intend to defend ourselves vigorously” against another claim filed by Mr Picard against the bank on December 6. The trustee’s lawsuit also alleges that Ms Kohn misled clients about Bank Medici’s relationship to Madoff and told Austrian authorities she was not close to him. The lawsuit says phone and meeting records show they were in regular contact. In the two months before Mr Madoff’s arrest, a Medici feeder fund called Herald pulled $536m out of the Madoff operation, including $423m on November 8, the complaint said. Days before Mr Madoff confessed, Ms Kohn “directed” her husband to withdraw all their personal assets from Bank Medici and other entities with connections to Mr Madoff. In February 2009, after the Austrian government seized Bank Medici, the complaint alleges that a Gibraltar company associated with Ms Kohn “laundered” almost $300,000 to her husband, who resides in Switzerland. Bank Medici announced it would return its banking licence in March 2009. It now does business as 20-20 Medici. No one answered the phone there on Friday.

Madoff's "Criminal Soul Mate" Should Pay $19 Billion: Trustee By Jonathan Dienst NBC.com December 10, 2010 An Austrian banker was Bernie Madoff's "criminal soul mate" and helped mastermind a criminal scheme to help support Madoff's fraud. That according to the Madoff Trustee who filed suit against Sonja Kohn, members of Medici Enterprise and others seeking more than $19 billion in restitution and damages. Trustee Irving Picard said Kohn knew Madoff was a fraud. She oversaw banks, money management firms and front companies which amounted to a "network of spurious investment entities" as she sought investors for Madoff. Picard said Kohn and her entities and associates solicited $9 billion from investors to Madoff and enriched themselves in the process. In a release, the Trustee said she masterminded "an illegal scheme not only to support the Madoff fraud, but also to enrich herself, her family and the largest banks in Austria and Italy." Bank Austria and Bank Medici were named in the suit. Picard said Bank Medici was formed in part to seek investors in Madoff's Ponzi scheme. And he said Bank Austria gave Kohn and Bank Medici its "imprimatur of legitimacy" that was needed to solicit investors. Numerous feeder funds linked to Kohn were also named. Attempts to reach Ms. Kohn through a Bank Austria spokesman were unsuccessful. The spokesman, Raftl Matthias, did not immediately return a call and email for comment. The 157-page lawsuit alleges Kohn was so entrenched in the Madoff fraud that she attempted to launder stolen proceeds to try to hide the scheme. And just before Madoff confessed, Kohn ordered more than $500 million withdrawn from Madoff's accounts, the lawsuit alleges. Picard alleged Kohns actions were so egregious that he filed the suit invoking the Racketeer Influenced and Corrupt Organizations Act (RICO). "Although the illegal scheme is distinct from Madoff's Ponzi scheme, they are symbiotic," the lawsuit states. "without Kohn's illegal scheme, Madoff's Ponzi scheme could not have continued for as long as it did." Kohn, who is 62 and from Vienna, had lived in New York and knew Madoff for more than 20 years. Picard said Madoff paid her millions to help solicit investors into the Ponzi scheme. This lawsuit comes amid rapid-fire lawsuits in the last week as Picard faces a Saturday deadline to file civil complaints. Picard recently filed suits against Citibank, UBS, JP Morgan Chase and other banks and related feeder funds alleging they too aided the fraud by looking the other way in order to collect millions in fees. The banks have denied any wrongdoing. The $19 billion lawsuit against Kohn is the largest suit filed so far. It alleges she even took $62 million in kickbacks paid directly from Madoff investor accounts in order to enrich herself and her family. Picard alleges Madoff destroyed all records relating to the illegal payments to Kohn before he turned himself in to the FBI.

Madoff trustee sues Austria banker for $19.6 billion By Aaron Smith CNNMoney.com December 10, 2010 NEW YORK (CNNMoney.com) -- The court-appointed trustee in the recovery of assets stolen by Bernard Madoff has accused an Austrian banker of being a key player in the Ponzi scheme, suing her for $19.6 billion. Trustee Irving Picard filed suit Friday in U.S. Bankruptcy Court in New York against Sonja Kohn, principal shareholder of Bank Medici, along with Bank Austria and UniCredit, owners of a 25% share in Medici, and six members of Kohn's family. "In Sonja Kohn, Madoff found a criminal soul mate, whose greed and dishonest inventiveness equaled his own," said Picard, in a prepared statement. "Given the scope of Madoff's Ponzi scheme, the deceptive nature of the defendants, and the deliberately Byzantine structure of the Medici Enterprise, we believe that even more information regarding the full scope of this criminal enterprise will be revealed through discovery." The suit accused Kohn of being the "mastermind" in the so-called Medici Enterprise, which served an "indispensable role in facilitating his Ponzi scheme" over a 23-year "criminal relationship." The trustee also accused Kohn and co-conspirators of violating federal Racketeer Influenced and Corrupt Organizations Act, or RICO, which is typically used against the Mafia and other criminal organizations. The complaint accused Kohn and her co-conspirators of a "pattern of racketeering activity comprised of, among other things, money laundering, mail and wire fraud, and financial institution fraud." An effort to reach Kohn's attorney in Vienna was not immediately successful. Bank Austria and UniCredit representatives were not immediately available for comment. The trustee said that more than $9 billion of the stolen money was "directly attributable" to Kohn and her enterprise. "The total amount lost in the Ponzi scheme is approximately $19.6 billion, making these actors arguably the single most critical building block -- the sine qua non -- of the Ponzi scheme," said Timothy Pfeifer, the court-appointed counsel from the firm Baker & Hostetler, in a prepared statement. The trustee said the Madoff and Kohn first met in New York in 1985 and from that point on, he "paid her to feed money into the Ponzi scheme." Kohn allegedly established Bank Medici in Austria for the express purpose of serving "as a mechanism to solicit investors for the Ponzi scheme," the trustee said. The complaint alleges Kohn and her family funneled at least $62 billion through Madoff's firm and into private accounts. The trustee has filed a wave of lawsuits ahead of the second anniversary of Madoff's arrest on Dec. 11, 2008. Madoff pleaded guilty in March, 2009 in federal court for orchestrating the largest Ponzi scheme in history. He was sentenced to 150 years and is incarcerated at a medium security federal prison in North Carolina.

Austrian banker Kohn key to Madoff crimes –trustee By Grant McCool Reuters December 10, 2010 (Reuters) - Austrian banker Sonja Kohn was a "criminal soul mate" of Bernard Madoff for 23 years, running an international network of banks and funds to help perpetrate the biggest fraud in financial history, a court-appointed trustee charged on Friday. Irving Picard, the lawyer recovering money for the victims of Madoff's decades-long multibillion-dollar fraud, sued Kohn and the bank she founded, Bank Medici, as well as Unicredit bank, Bank Austria and 53 other defendants for $19.6 billion. Separate lawyers representing Kohn and Bank Medici, now known as 2020 Medici, were not immediately available to comment. "In Sonja Kohn, Madoff found a criminal soul mate, whose greed and dishonest inventiveness equaled his own," Picard said in a statement after filing the lawsuit in U.S. Bankruptcy Court in New York. "Given the scope of Madoff's Ponzi scheme, the deceptive nature of the defendants, and the deliberately Byzantine structure of the Medici Enterprise, we believe that even more information regarding the full scope of this criminal enterprise will be revealed." Madoff, 72, is serving a 150-year prison sentence after pleading guilty in March 2009 to orchestrating a massive Ponzi scheme, one in which early investors were paid with the money of new clients and almost no actual trading took place. Madoff maintained that he acted alone, but criminal charges have been filed in the United States against seven others. The amount sought by Picard in the Kohn lawsuit was the largest in his bid to collect Madoff money to repay thousands of swindled investors who have made claims in the same court. It was also the first to cite racketeering claims. The liquidator of Bernard L. Madoff Investment Securities LLC (BLMIS) has filed a blizzard of suits in recent weeks to meet a mid-December legal deadline, the second anniversary of Madoff's arrest. Picard and his team of lawyers said that Madoff kept records of the BLMIS accounts for which he secretly paid Kohn and may have tried to destroy them before he was caught. The 161-page complaint claimed that about half of the overall Ponzi scheme's stolen money -- $9.1 billion out of an estimated $19.6 billion -- was directly attributable to Kohn, her relatives and a labyrinth of feeder funds and banks in Austria, Italy and elsewhere. Previous estimates of the amount of the fraud have varied from as much as $65 billion to $21.2 billion. "The total amount lost in the Ponzi scheme is approximately $19.6 billion, making these actors arguably the single most critical building block," Timothy Pfeifer, counsel at Baker & Hostetler LLP with Picard, said in the same statement. The case is Irving Picard v Sonja Kohn et al, U.S. Bankruptcy Court for the Southern District of New York, No. 10-5411.

Madoff trustee wants $19.6B for victims from 'Medici enterprise' By Larry Neumeister Associated Press December 10, 2010 NEW YORK — The trustee seeking to recover money for investors who lost billions of dollars in jailed financier Bernard Madoff's fraud said Friday that he has filed civil racketeering charges against an Austrian banker and 55 other defendants, demanding they give up nearly $20 billion as a penalty for their "criminal relationship" with Madoff. Court-appointed trustee Irving Picard used tough language to portray a 23-year relationship between banker Sonja Kohn and Madoff, saying she and others engaged in money laundering, mail and wire fraud and financial institution fraud. He also accused her of accepting secret kickbacks from Madoff. Picard also announced Friday that he reached settlements with a number of charities and nonprofit organizations to recover more than $80 million and resolve civil claims against charities that withdrew more money than they deposited with Madoff. Picard filed a lawsuit in U.S. Bankruptcy Court in Manhattan against members of what he labeled the "Medici Enterprise." He called Kohn the scheme's mastermind. A message for comment sent to a Kohn spokeswoman was not immediately returned. "In Sonja Kohn, Madoff found a criminal soul mate, whose greed and dishonest inventiveness equaled his own," Picard said as he asked for $19.6 million in damages. Timothy Pfeifer, Picard's court-appointed counsel, said Kohn used multiple names and guises in creating an "international network of spurious investment entities and masterminding an illegal scheme not only to support the Madoff fraud, but also to enrich herself, her family and the largest banks in Austria and Italy." Charged in the complaint along with Kohn, the principal shareholder of Bank Medici, were six members of her family, along with various trusts and companies in New York, Austria, Italy, Gibraltar and elsewhere. Those companies included UniCredit and Bank Austria. Picard alleged in the civil complaint that Kohn channeled more than $9 billion into Madoff's Ponzi scheme while she and her family siphoned at least $62 million from Madoff's accounts into their private accounts. He claims she used an elaborate network of sham entities in New York and elsewhere that existed solely to receive secret kickbacks from Madoff. "The total amount lost in the Ponzi scheme is approximately $19.6 billion, making these actors arguably the single most critical building block — the 'sine qua non' — of the Ponzi scheme," Pfeifer said. Pfeifer said Kohn demonstrated her "intimate knowledge of Madoff's fraud" by acting suspiciously in the days and weeks before Madoff's December 2008 arrest. He said she and her family used a network of trusts and nominee companies to launder the stolen proceeds of her scheme and to conceal it. Picard said Madoff kept records of the accounts for which he secretly paid Kohn and appears to have tried to destroy the records before he confessed the fraud to his sons hours before his arrest. He said Kohn solicited at least 30 direct accounts for Madoff. "To potential investors, Kohn held herself out as a close friend of Madoff and intimated that this relationship would yield special returns for investors she referred," said David Sheehan, one of Picard's lawyers.

Sheehan said Kohn began the scheme almost immediately after meeting Madoff in the mid-1980s. He said the scheme was a secret even within Madoff's private investment business. He added Kohn took calculated measures to distance herself and her family from the fraud. Regarding the settlement with charities, Picard said he is pleased that some nonprofit organizations came forward to negotiate. "Through these settlements, these admirable groups can continue with their good works and social programs. By settling, these charities remove the uncertainty generated by either potential claims or litigation, and, importantly, their donors can continue to contribute with confidence to their favorite charities," he said.

Madoff trustee files lawsuits worth $20bn BBC News December 10, 2010 The trustee charged with recovering funds for the victims of Bernard Madoff's multi-billion dollar fraud scheme has filed lawsuits seeking nearly $20bn (£12.6bn) in damages. Irving Picard has charged nearly 60 people, including a key shareholder in Austria's Medici Bank. Mr Picard accused Sonja Kohn of "masterminding an illegal scheme" to help Madoff defraud investors. Earlier this week, Mr Picard sued HSBC bank for $9bn. It said it would defend itself "vigorously" against the claims. Similar suits have been filed against JP Morgan Chase and UBS banks. 'Family enrichment' The latest string of lawsuits comes just days before the two-year mandate of the trustee expires. Mr Picard said Ms Kohn had "exploited her privileged relationship with Madoff to feed over $9.1bn of other people's money into his Ponzi scheme" for more than 20 years. "The illegal scheme enriched Kohn, her family and scores of other individuals and entities, including the largest banks in Austria and Italy," he said. Madoff admitted last year defrauding thousands of investors through a Ponzi scheme, which paid out using new investors' money rather than from any profits. The scheme, which had been running since the early 1990s, unravelled when Madoff's investors tried to withdraw about $7bn at the height of the economic downturn. Madoff could not produce the money. Madoff is serving 150 years for the fraud.

Madoff Trustee Seeks $19.6B From Austrian Banker By David Morgan CBS News December 10, 2010 As Saturday's deadline looms to file claims in the recovery of assets from Bernard Madoff's massive fraud, the trustee seeking money for the swindler's victims has sued an Austrian banker, claiming she masterminded a 23-year conspiracy that facilitated Madoff's Ponzi scheme and funneled billions of dollars into her "deliberately Byzantine" network of European banks. The trustee, Irving Picard, is seeking $19.6 billion in damages from Sonja Kohn, whom his lawsuit names as the "mastermind" of Medici Enterprise. The New York Times reports that the 157-page complaint filed today in Federal Bankruptcy Court in Manhattan is the first by Picard to invoke the Racketeer Influenced and Corrupt Organizations (RICO) Act. Picard describes a European "labyrinth" of banks, hedge funds, asset management firms, shell companies and offshore trusts, which absorbed billions of dollars from Madoff. "Sham entities" established and controlled by Kohn, in New York and Europe, "had or have no legitimate business purpose and existed or exist only to receive stolen Customer Property from Madoff," the complaint states. The complaint also says Kohn received tens of millions of dollars in "kickbacks" and referral fees from Madoff, and that about half of the funds Picard is suing to recover — $9.1 billion out of $19.6 billion — is directly linked to Kohn and her family members. "Sonja Kohn went by many names and operated under many guises, creating an international network of spurious investment entities and masterminding an illegal scheme not only to support the Madoff fraud, but also to enrich herself, her family, and the largest banks in Austria and Italy," Timothy Pfeifer of Baker & Hostetler, an attorney representing Picard, told the Times In addition to Kohn of Vienna's Bank Medici, the suit names more than 50 other defendants, including UniCredit and Bank Austria. To date Picard has sought more than $50 billion for eligible victims, and has so far recovered about $2.6 billion, through settlements and asset sales, according to the Times.

Madoff Trustee Sues Vienna's Medici Bank, Founder for $59 Billion By Bob Van Voris and Dawn McCarty Bloomberg December 10, 2010 The trustee liquidating Bernard L. Madoff’s company sued Bank Medici AG and its founder, Sonja Kohn, calling her the con man’s “criminal soul mate” and demanding $58.8 billion for victims of his fraud. Kohn used a relationship with Madoff that began in 1985 to help build the Vienna-based bank, feeding more than $9.1 billion of investor money into his company, trustee Irving H. Picard said today in a complaint in U.S. Bankruptcy Court in New York. “The illegal scheme enriched Kohn, her family, and scores of other individuals and entities, including the largest banks in Austria and Italy, at the expense of the BLMIS estate and on the backs of Madoff’s victims,” Picard said in the complaint, referring to Bernard L. Madoff Investment Securities. The lawsuit names Kohn, Bank Medici and more than two dozen other parties and is seeking $19.6 billion trebled to $58.8 billion under the Racketeer Influenced and Corrupt Organizations Act. Madoff, confessed architect of the biggest Ponzi scheme in history, is serving a 150-year prison term. The case is Picard v. Kohn, 10-5411, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

Sonja Kohn Was Madoff 'Soul Mate' By Steve Rosenbush Portfolio.com December 10, 2010 Bernie Madoff found the perfect partner in crime with Austrian banker Sonja Kohn, says Irving Picard, who is seeking to recover funds stolen in the epic Ponzi scheme. Now Picard, the trustee of the Madoff estate, wants her to fork over $19.6 billion. Kohn, 62, actually bares more than a passing resemblance to Madoff in a red fright wig, jeweled spectacles and fire-engine red lipstick. Picard, who has sued numerous banks in recent weeks as a two-year deadline approaches on Saturday, hit Kohn on Friday with the $19.6 billion suit. Picard, who is charged with recovering as much money as possible from winners in Madoff's Ponzi scheme, says Kohn knew from the start when she joined forces with the now-infamous New York financier 23 years ago that the enterprise was a fraud, raising funds in U.S. and European financial centers to keep Madoff's machine running with a critical steady stream of fresh cash, without which a Ponzi scheme instantly dies. Picard focused on her ability to innovate—in the world of crime. “In Sonja Kohn, Madoff found a criminal soul mate, whose greed and dishonest inventiveness equaled his own,” he wrote. The comments can be in the New York Times, which features an unforgettable photo of Kohn. Kohn, who looks like she might fit the role of a villain in a James Bond movie, brings to mind a classic line from Goldfinger: Man has climbed Mount Everest, gone to the bottom of the ocean. He has fired rockets to the moon. Split the atom. Achieved miracles in every field of human endeavor... except crime! The sheer scale and scope of her theft, abetted by friends and family members, were innovation enough, according to Picard. Picard dubbed her efforts the Medici Enterprise. “These actors (were) arguably the single most critical building block—the ’sine qua non’of the Ponzi scheme,” Timothy S. Pfeifer, a lawyer at Baker & Hostetler, the trustee’s law firm, said in the New York Times.

Madoff Trustee Sues Austrian Banker for $19.6 Billion And Calls Her A Criminal By Nathan Vardi Forbes (Blog) December 10, 2010 On the eve of the second anniversary of the revelation that Bernard Madoff had committed the biggest Ponzi scheme in history, the court-appointed trustee of Madoff’s investment firm filed his biggest, and perhaps last, lawsuit. Irving Picard filed a massive civil racketeering lawsuit on Friday seeking $19.6 billion in damages against Austrian banker Sonja Kohn and her Bank Medici, along with UniCredit, Bank Austria and others. Those damaged could potentially be trebled under the racketeering law to a staggering $59 billion. Picard, who has been working closely with federal prosecutors, said in a press release that Kohn masterminded a “23-year criminal relationship with Bernard Madoff” and that Kohn, Bank Medici and the other banks sued in the lawsuit played an “indispensible role in facilitating the Ponzi scheme.” Picard claims that more than $9 billion of the Ponzi scheme’s stolen money is directly attributable to Kohn and the banks with which she conspired. “In Sonja Kohn, Madoff found a criminal soul mate, whose greed and dishonest inventiveness equaled his own,” Picard said in a statement that contained the harshest words Picard has used in his two-year quest to recover funds for some of Madoff’s victims. “We believe that even more information regarding the full scope of this criminal enterprise will be revealed.” Amid the stunning accusations, Picard claims that Madoff kept records of accounts at his Bernard L. Madoff Investment Securities that were used to secretly pay at least $62 million of kickbacks to Kohn. Picard also claimed that Madoff, who has maintained that he acted alone, destroyed his records attributable to Kohn before he confessed to running a Ponzi scheme on December 11, 2008, but that certain former employees kept copies of the records. The 157-page complaint, filed in Manhattan’s federal bankruptcy court, describes Kohn, a 62-year-old Orthodox Jewish grandmother, as being a central player in the Madoff scam ever since the two met in New York around 1985. Picard says she established Bank Medici in Austria as a mechanism for shoveling investor money into the Ponzi scheme. According to the court filing, Kohn helped funnel $9.1 billion of investor cash into the fraud through feeder funds and that her supposed banking operation was legitimized by its relationship with Bank Austria, a unit of big financial firm UniCredit, which received at least $31 million and 25% of Bank Medici. In recent days Picard has sued big banks like JPMorgan Chase & Co., HSBC and UBS in multi-billion dollar lawsuits. The banks deny any wrongdoing and JPMorgan accused Picard of acting irresponsibly in an effort to generate headlines. Picard has been rushing to the courthouse to file lawsuits and beat a Saturday deadline. This latest lawsuit is bad news for UniCredit, which is Italy’s biggest bank.

Irving Picard Smacks Austrian Banker With $19.6 B. Madoff Suit By Mike Taylor The New York Observer December 10, 2010 As the deadline approaches for Madoff crusader Irving Picard to file lawsuits against any potential malefactor he can think of, the trustee is going for the gusto. He's suing Austrian banker Sonja Kohn for $19.6 billion and calling her Madoff's "criminal soul mate, whose greed and dishonest inventiveness equaled his own." Ouch. The resemblance, in The Observer's opinion, isn't purely ideological. Is it just us, or does Ms. Kohn look a lot like Bernie Madoff wearing a wig? Anyway, here are the details, courtesy The New York Times: Ms. Kohn led what the trustee's complaint called the Medici Enterprise, a labyrinth of European banks, hedge funds, asset management firms, offshore trusts and shell companies. In the lawsuit, filed on Friday in Federal Bankruptcy Court in Manhattan, the trustee contended that billions of dollars of other people's money poured into Mr. Madoff's fraud through these conduits - and tens of millions poured out in the form of fees and "kickbacks" to Ms. Kohn from Mr. Madoff. The 157-page complaint claimed that about half the fraud's stolen funds - $9.1 billion out of an estimated $19.6 billion - was directly attributable to Ms. Kohn, her family members and their elaborate portfolio of so-called feeder funds.

Media Coverage December 15 – 16, 2010

General The Economist – An affair to remember (12.16.10) Forbes – Madoff Feeder Funds Lose Their Immunity (12.16.10)

An affair to remember The Economist December 16, 2010 IRVING PICARD, the court-appointed trustee overseeing the Madoff estate’s bankruptcy, has earned his year-end break. December 11th, the second anniversary of Bernie Madoff’s arrest for perpetrating the largest financial fraud in history, was also the deadline for lawsuits to help recoup investors’ losses. Mr Picard has been furiously busy, firing off dozens of lawsuits seeking a total of around $50 billion for investors who lost money in Mr Madoff’s Ponzi scheme. Mr Picard’s deep-pocketed targets include some of Wall Street’s top brass, among them JPMorgan Chase, UBS, HSBC, Citigroup and Merrill Lynch (now part of Bank of America). The lawsuits charge them with either failing to spot the fraud or, in some cases, knowingly facilitating it. One $9 billion lawsuit asserts that HSBC twice hired KPMG, an accounting firm, to probe Mr Madoff, but that the bank failed to act when concerns were raised. Another suit takes aim at Medici Bank, an Austrian bank run by Sonja Kohn, whom Mr Picard describes as Mr Madoff’s “criminal soul mate”. The banks and Ms Kohn deny any wrongdoing, but investors’ losses could still fall substantially if banks choose to settle. Mr Picard has already recovered around $2.5 billion, including some $470m in a settlement with Union Bancaire Privée, a Swiss bank which sent clients in Mr Madoff’s direction. Investigators are still trying to work out who else at Mr Madoff’s firm might have had a hand in the affair. Mr Madoff, who was sentenced in 2009 to 150 years in prison, has adamantly maintained he acted alone. That has not spared others from suspicion. On December 11th one of his two sons, Mark, committed suicide after two years of investigations into his knowledge of the fraud (which he denied) and more of Mr Picard’s lawsuits, the latest of which targeted his children. Even as they wait to recover their money, the victims also run the risk of settling too soon. Some distressed-debt firms are offering to buy claims from them at a reduced rate. Cash-strapped investors may find this offer appealing, but could regret it if Mr Picard recovers lots of assets later. Nobody wants to be swindled twice.

Madoff Feeder Funds Lose Their Immunity By Seth Lipner Forbes December 16, 2010 This week was very good for investors both in and out of New York. It was a very bad week for the funds that fed money to--and fed off of--Bernie Madoff. The boon to investors came about when a New York court finally slew a big bogeyman--the perverse doctrine known as the "Martin Act Preemption." The damaging legal doctrine, which was created by federal courts in New York, had been used by many a securities-industry scoundrel to secure dismissal of claims for negligence, breach of fiduciary duty and breach of contract. The Martin Act--New York's "blue sky" law--is intended to protect investors from misconduct by those who sell securities. The statute, enacted in 1921, was designed to give the Attorney General broad powers to prosecute deception in the sale of securities. Indisputably a good thing. But incredible as it may seem, many courts misinterpreted the Martin Act in recent years, holding that it barred suits by investors where seller wrongdoing did not rise to the level of intentional fraud. The cases held that common-law claims for things like breach of fiduciary duty, breach of contract and negligence were preempted by the statute. End of story, end of case. Instead of protecting investors, because fraud is hard to plead and prove, New York's blue sky statute had been transformed into a law that was protecting wrongdoers. No other state has securities laws that do that. Of course, no other state is home to Wall Street. Most states have adopted the Uniform Securities Act, which expressly gives investors a private right of action, often with a right to seek attorneys' fees. Under the Uniform Securities Act proof of fraudulent intent is not required; claims of negligence, including failure to conduct or exercise due diligence, are perfectly viable in these other states. Except when New York law shows up. Martin Act preemption cases say that the exemption applies whenever the bad conduct was "within or from New York," even if the victim was located outside the state. Thus New York's investor-unfriendly rule was extended to other states. Additionally, clever investment firms routinely put "New York choice-of-law" clauses in their customer contracts, thereby doubling the exportation of the odious preemption doctrine. Once New York law was invoked, investment advisors could seek immunity from private law suits by citing Martin Act preemption, regardless of the investor-protection laws in the jurisdiction. It was crazy, but it worked; it was working particularly well for the Madoff feeder funds (and their sponsors, accountants and auditors). Until last week, that is. In 2009 and 2010 federal courts in New York had dismissed negligence-based class actions against Madoff feeder-funds like Tremont's Rye Funds and Family Management's FM Low Volatility Fund. These courts held that without proof of scienter--guilty knowledge of Madoff's fraud--these firms could not be held liable, even if they ignored obvious red flags. The feeders were winning the cases. Preemption was their best friend. This summer one federal court did get it right. In Anwar v. Fairfield Greenwich, (Fairfield was another Madoff feeder fund), U.S. District Judge Marrero ruled that there was no preemption. He showed that the Martin Act itself does not require (or even mention) preemption, and after examining the legislative history of the Act, he wrote that it does not support the concept of preemption either. Then Marrero studied the history of courts' embrace of preemption. He said he could find no good rationale for using New York's blue sky law as a device to preempt traditional common-law claims.

Judge Marrero believed few courts had grasped the preemption concept--cases he describes as "easy to misconstrue"--and he showed how preemption, in his words, "quickly went viral." The judge's opinion lamented the doctrine's unfortunate history, summing it all up by saying, "Reading the Martin Act as broadly preempting common law represents a distortion of [the act's] role as a consumer protection law." But Judge Marrero was a lone federal judge, lost in a sea of misguided colleagues and dismissals of potentially meritorious negligence cases. Even after he wrote his long and earned opinion, Judge Sand in the Southern District dismissed negligence and breach of contract claims against a Madoff feeder named Ivy. Then last week came. In Guaranty Assurance v. JP Morgan, the Appellate Division First Department in New York adopted Judge Marrero's views. Helped by an amicus brief filed by New York Attorney General Andrew Cuomo, the court held that nothing in the Martin Act preempted claims of negligence, breach of fiduciary duty or breach of contract. In a rare event, the state court told the federal courts they were plain wrong. The federal courts will have no choice but to reverse themselves and adopt this better view. The Martin Act preemption has fallen, and the cases against Madoff feeder funds are alive and well. For investors nationwide, it was a very good week. Seth E. Lipner is professor of law at the Zicklin School of Business, Baruch College, CUNY. He is also a member of Deutsch & Lipner, a law firm in Garden City, N.Y. that represents investors in arbitration. Professor Lipner is a member of the Forbes.com Investor Team.