Madoff U.K. Trustee Seeks $80 Million in Suit Against Ex-Directors, Family
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 in a London court seeking at least $80 million.
The suit, filed today, alleges the U.K. office acted “as a cover” for the New York firm’s fraud, the liquidators said in a joint statement with Irving Picard, the U.S. trustee of Madoff’s business and the other plaintiff in the suit. The defendants include Madoff’s brother, his two sons and five directors including Stephen Raven, the former chief executive officer of the European unit, the liquidators said.
The directors breached their duties “by making fraudulent payments to various Madoff-related entities, including payments for luxury goods and services enjoyed by Bernard Madoff and the Madoff family, including a yacht, a home in the south of France, and an Aston Martin car,” the liquidators at Grant Thornton LLP said in a statement.
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.
More than $910 million was transferred between the London unit and Bernard L. Madoff Investment Securities LLC in New York between from the time of the office’s founding in 1983 until firm’s collapse in December 2008, according to the statement.
‘Facade of Legitimacy’
Raven’s lawyer, Nicola Finnerty, declined to immediately comment. Charles Spada, a lawyer for Madoff’s brother, Peter, declined to comment. Martin Flumenbaum, a lawyer who represented Madoff’s sons Andrew and Mark in earlier cases, didn’t immediately respond to messages seeking comment.
“The London operation was a critical piece of the facade of legitimacy that Madoff constructed to conceal BLMIS’s lack of actual trading,” Picard said. “Madoff represented to his customers that BLMIS conducted trades on the over-the-counter market, after hours, and substantiated this misrepresentation by periodically transferring tens of millions of dollars to MSIL.”
Sonja Kohn, the former chairman of Bank Medici AG in Austria, was also sued for funneling more than $27 million to the London unit “in sham transactions purported to be payments for research and other services, but which were actually kickbacks,” according to the statement.
Calls to a Kohn spokesman and a lawyer that previously represented her weren’t immediately returned.
‘Onus’ on Picard
“The onus will be on Madoff’s trustee to establish that the directors closed their eyes to Madoff’s fraud,” said Steven Philippsohn, the head of law firm PCB Litigation in London. “The trustee will no doubt claim that the directors should have spotted, but chose to ignore, some fundamental red flags in their business activity.”
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.
The case is Madoff Securities International Ltd. v. Stephen Ernest John Raven, 10-1468, High Court of Justice, Queen’s Bench Division (London).
To contact the reporters on this story: Lindsay Fortado in London at lfortado@bloomberg.net.
To contact the editor responsible for this story: Anthony Aarons at aaarons@bloomberg.net.
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