The liquidator of Bernard Madoff’s firm, who is suing New York Attorney General Eric Schneiderman to stop a $410 million settlement with Ponzi scheme investor J. Ezra Merkin, said the judge should ignore the fact that the trustee hasn’t yet proved his claim to the money. Proof can come later, after the attorney general has been stopped at least temporarily, he said in a federal court filing in Manhattan yesterday.
Schneiderman plans to distribute the Merkin money to fraud victims whom trustee Irving Picard wouldn’t compensate. He has argued in filings that Picard is both too early to stop the deal, as he first must prove the money belongs to the con man’s bankrupt estate, and too late to stop it after a three-year delay. In a Jan. 25 memorandum to U.S. District Judge Jed Rakoff the AG cited the legal principle that plaintiffs must be vigilant and not wait an “unreasonable” time while efforts are expended by other parties with claims against the alleged offender.
Picard in his response cited appeals court judges who ruled this week that U.S. Senator Frank Lautenberg’s charitable foundation can’t continue a $9 million lawsuit against Bernard Madoff’s brother Peter, even though Picard hasn’t proved that money belongs to the bankrupt estate either, he said. Moreover, he wasn’t too late to stop Schneiderman because the process of taking money from an alleged conspirator in the fraud isn’t “a race to the courthouse,” he said. As trustee, Picard has argued that only he has the right to sue such alleged distribute the money to victims whom he has screened.