Oct. 21 (Bloomberg) -- Andrew Madoff’s request to appeal a $198 million lawsuit by the liquidator of Bernard Madoff’s firm was “not warranted” and the case should go to trial, the trustee said.
Trustee Irving Picard won a court ruling last month permitting him to pursue most claims in a 2009 lawsuit alleging that the Madoffs treated the now-defunct firm, Bernard L. Madoff Investment Securities LLC, as their “family piggy bank.” The con man’s son, Andrew, asked a district judge to allow an appeal, saying the suit would result in a “massive expansion of liability” for bank and corporate managers who might be blamed for wrongdoing they hadn’t detected.
“Andrew Madoff seeks to mire this case in pre-trial motion practice by moving for leave to appeal the bankruptcy court’s well reasoned decision,” Picard said in a filing yesterday in U.S. Bankruptcy Court in New York.
Madoff family members were “ultimate” insiders at the Madoff firm, not employees at a big investment firm where a rogue trader might go undiscovered for a while, Picard said in the filing.
Andrew Madoff filed notice of his appeal request on behalf of himself and as executor of his late brother Mark’s estate in U.S. Bankruptcy Court in Manhattan on Oct. 6.
In his lawsuit, Picard said that Madoff family members profited from the fraud, including Bernard’s brother Peter Madoff, sons Andrew and Mark Madoff and niece Shana Madoff Swanson, all of whom held senior positions at the Madoff firm.
Instead of preventing the crime, they took $198 million in investor money from the New York-based money-management firm to finance a business venture and pay for restaurants, vacations and clothing, as well as to buy cars, boats and vacation homes, he said.
Picard didn’t try to prove in his complaint that the family “engaged in any kind of securities fraud, dishonesty, or deception,” only that they were derelict in their duty and misused company funds, he said in yesterday’s filing.
“Those claims are unrelated to any investment advice or decisions; they arise from the defendants’ derelictions of duty and faithless service as the senior supervisory and compliance officials at a firm where a massive fraud was perpetrated on their watch,” he said.
U.S. Bankruptcy Judge Burton Lifland dismissed some claims in the case while allowing Picard to file a new complaint.
Peter Madoff was chief compliance officer at New York-based Madoff Securities. Andrew and Mark were co-directors of trading, and Shana Madoff was compliance director.
Mark Madoff killed himself in December. In a memoir published this week, his widow, Stephanie Madoff Mack, said her husband was innocent of wrongdoing. She blamed his suicide on Bernard Madoff.
Martin Flumenbaum, a lawyer for Andrew Madoff and Mark Madoff’s estate, has said the Madoff sons didn’t know of their father’s scheme and contacted prosecutors after their father told them of his fraud. Bernard Madoff is serving a 150-year prison term.
In refusing to dismiss Picard’s suit, Lifland said last month that the family’s failure to stop the fraud was “unsurprising given their close familial relationship with Madoff and proximity” to his firm. Picard’s suit contains “some correctable pleading deficiencies” that need to be amended in a new complaint, he said.
The case is Picard v. Madoff, 09-1503, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
To contact the reporter on this story: Linda Sandler in New York at firstname.lastname@example.org.
To contact the editor responsible for this story: John Pickering at email@example.com.