Citigroup Inc. (C)’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 (BBVA), 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.”
Picard is seeking $425 million from Citigroup and $16 million from Charlotte, North Carolina-based Bank of America.
‘Take All Steps’
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.
“BBVA at no moment had any knowledge or indication of the fraud,” a spokesman for Bilbao, Spain-based bank, said today in an e-mailed statement.
Arien Bikker, an ABN Amro spokesman, declined to comment. 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.
‘Spigot of New Money’
“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 (UBSN) 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.
The claim against UBS, for at least $555 million, was filed in U.S. Bankruptcy Court in New York and was the second suit against the bank by Picard. 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.
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.
On Dec. 5, Picard sued HSBC Holdings Plc (HSBA) for $9 billion, alleging Europe’s biggest lender enabled Madoff’s fraud. Last week, the trustee sued JPMorgan Chase & Co. (JPM) for $6.4 billion over claims the New York-based bank aided and abetted the fraud.
Madoff, 72, who pleaded guilty, is serving a 150-year sentence in federal prison in North Carolina.
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.)
To contact the editor responsible for this story: David E. Rovella at email@example.com.