May 16 (Bloomberg) -- ABN Amro Bank NV and investment funds sued by the liquidator of Bernard Madoff’s brokerage succeeded in moving their cases to a district judge who may cut the amount of money the Madoff trustee can try to reclaim.
U.S. District Judge Jed S. Rakoff in Manhattan said yesterday he would take a group of suits out of bankruptcy court, mostly to convey decisions he already made in trustee Irving Picard’s cases against HSBC Holdings Plc and the New York Mets owners, including high standards Picard must meet to show money wasn’t withdrawn in good faith.
A second group of cases involves individuals’ tax issues, which Rakoff has also decided, he said in one of two orders filed yesterday in U.S. District Court in Manhattan. Rakoff, who let the Mets owners move their dispute with Picard to his court, received more than 400 requests during the week ended April 2 from companies sued by the trustee, ranging from Merrill Lynch to the former spouses of Madoff’s sons.
In the HSBC case, Rakoff threw out almost $9 billion in damages demanded by Picard. He also cut the Mets suit by two-thirds from $1 billion, before the team owners settled with Picard. Ruling against investor James Greiff, however, Rakoff said Picard can try to take back withdrawals from the Ponzi scheme even if U.S. tax law mandated the withdrawals.
The massive transfer of cases has undercut U.S. Bankruptcy Judge Burton Lifland’s power to reverse some fraudulent transfers and limited Picard’s ability to collect money to pay victims of Madoff’s $52 billion Ponzi scheme, the largest in U.S. history. This month, Rakoff sent 84 lawsuits against investors back to bankruptcy court, limiting the trustee to trying to take back two years of fake Ponzi profits rather than six years of payouts.
Rakoff, with U.S. District Judge Colleen McMahon, has thrown out $90 billion of Picard’s claims against banks. Picard, who has charged about $270 million for his firm’s Madoff work, is appealing rulings related to about $30 billion of the claims, including against HSBC and JPMorgan Chase & Co.
Madoff is serving a 150-year prison sentence.
The ABN Amro opinion is in the case: Picard v. Primeo Fund, 12-mc-00115, U.S. District Court, Southern District (Manhattan.) The Mets case is Picard v. Katz, 11-cv-03605, U.S. District Court, Southern District of New York (Manhattan). The order on the tax issues is on the same docket.
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