Madoff Trustee Sues Jewish Association
The liquidator of Bernard L. Madoff’s firm sued the Jewish Association for Services for the Aged for $5.2 million in fictitious profit over six years.
Trustee Irving Picard lost his bid to claw back six years of Ponzi proceeds from the New York Mets owners last month, when U.S. District Judge Jed Rakoff cut a $1 billion suit by two- thirds, saying he could take back only two years of withdrawals.
In today’s suit against the Jewish Association, filed in U.S. Bankruptcy Court in New York, Picard said he’s entitled to claim six years of transfers under state and federal laws. The trustee last week asked Rakoff to allow him to appeal the Mets ruling.
“It suggests that he thinks he can get the Rakoff ruling overturned,” said Stephen Lubben, a bankruptcy law professor at Seton Hall University in Newark, New Jersey, who posted comments about last month’s ruling on a blog, Credit Slips.
Picard said in court papers last week that Rakoff’s ruling on his lawsuit against the Mets owners, Fred Wilpon and Saul Katz, “arbitrarily” gave them some of the confidence man’s investors fictitious profits from the Ponzi scheme that “all customers were previously denied” by a higher-court ruling.
According to Rakoff, Picard can’t take back so-called settlement payments made by the Madoff brokerage to its customers. Picard is free to try to take two years of withdrawals, he ruled.
Impact of Ruling
The two-year limit and another aspect of the ruling may cost Picard $6.2 billion in potential recoveries through lawsuits, the trustee has said.
In another case, U.S. District Judge Kimba Wood ruled that Picard’s theories were valid when he sued investor Ezra Merkin, and the trustee may be relying on that decision to sue the association, said Peter Henning, a law professor at Wayne State University in Detroit.
In his complaint against the Jewish charity, Picard said the charity had an account with Madoff in New York, and took out “non-existent profits supposedly earned in the account” over six years that were “other people’s money,” because the con man paid “profit” using new money coming in.
“The trustee is entitled to a judgment against defendant avoiding and preserving the six year transfers,” he says.
David Warren, president of the association, said he was “deeply disappointed” that Picard was taking legal action.
“We will vigorously defend ourselves and will not allow it to distract us from our mission,” he said in a phone interview. The association provides services to the aged in New York.
Warren declined to comment on possible defenses to the suit.
He might try to move the case out of bankruptcy court and into Rakoff’s court, said Henning, the Wayne State professor, who has written articles on the Madoff case. According to Picard, people and companies he has sued in 247 actions are rushing to find new judges.
The case is Picard v. Jewish Association, 11-ap-02773, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
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