Union Bancaire Settles as Madoff Trustee Sues Ponzi Scheme`s `Net Winners'
Union Bancaire Privee, a private Swiss bank accused of profiting from Bernard Madoff’s fraud, agreed to pay as much as $500 million to settle claims by the trustee liquidating the con man’s bankrupt investment firm.
Under the settlement, which must be approved by a bankruptcy judge, UBP will pay $470 million to benefit Madoff’s victims. The deal provides for an additional payment of as much as $30 million, according to court papers.
“The UBP settlement agreement is the largest feeder fund bank cash settlement to date and the first major international bank settlement,” Irving Picard, the New York lawyer appointed as trustee, said yesterday in a statement.
The settlement brings to $2 billion Picard’s recoveries for creditors of Bernard L. Madoff Investment Securities LLC. The agreement follows Picard’s filing of a $9 billion claim against HSBC Holdings Plc, Europe’s biggest lender, on Dec. 5. In the suit, Picard claimed the bank was aware of concerns that Madoff’s investment business was fraudulent and didn’t take steps to protect investors.
The Union Bancaire agreement releases claims against it and a related company, M-Invest Ltd., a Cayman Islands corporation it set up to invest money with Madoff. Union Bancaire and M-Invest don’t admit any liability in the settlement, according to the agreement.
Picard reached the settlement before filing a suit that would have claimed $1 billion from Union Bancaire and M-Invest, he said in court papers filed in U.S. Bankruptcy Court in Manhattan.
“Although UBP strongly denies that it had any liability to the trustee, it has agreed to the settlement in order to protect its clients and definitively close this chapter,” the bank said yesterday in an e-mailed statement.
Madoff, 72, is serving a 150-year sentence in a federal prison in North Carolina after admitting he directed the biggest Ponzi scheme in history.
At the time of his arrest, Madoff’s account statements reflected 4,900 accounts with $65 billion in nonexistent balances.
Including the HSBC suit, Picard is seeking a total of more than $33 billion from Madoff and his family, former employees, banks, feeder funds and investors alleged to have profited from the fraud. That amount is more than the estimated $20 billion in principal lost by Madoff investors.
Picard faces a Dec. 11 deadline to file claims against parties alleged to have profited from Madoff’s fraud.
HSBC said in a statement that Picard’s allegations are “unfounded” and that it will defend itself against them in court.
Last month, Picard sued UBS AG for at least $2 billion and JPMorgan Chase & Co. for $6.4 billion, claiming both firms aided Madoff’s fraud. UBS and JPMorgan said they bear no responsibility for Madoff’s crimes.
Picard has sued hundreds of so-called “net-winner” investors who withdrew more money from their Madoff accounts than they invested.
“Why go after the innocent victims?” asked Ron Stein, president of the Network for Investor Action and Protection, which was founded by former Madoff investors. Stein, who has relatives who lost money to Madoff, said the net winners have in fact been losers in Picard’s oversight of the Madoff case.
Many in the group are people who had to withdraw from their accounts to pay taxes or to meet living expenses, Stein said.
The net winner designation comes from a decision by Picard, endorsed by U.S. Bankruptcy Judge Burton Lifland, who is overseeing the case, to consider only invested principal, not the phony profits reflected in statements Madoff sent to customers, in determining claims. That decision is on appeal.
New York Mets
Among the wealthier net winners in the Madoff case are Sterling Equities Inc., owner of the New York Mets baseball team, the firm’s chief executive officer, Jeff Wilpon, and Mets LP.
Picard reported that Mets LP invested $522.7 million in two accounts with Madoff and withdrew $570.5 million during an unspecified period.
In an e-mail yesterday, Picard declined to discuss how much money he is seeking in court claims or how much he expects to recover for former Madoff investors. Picard said it is “premature to discuss whether there will be any surplus and, if so, how it will be distributed.”
The case is Securities Investor Protection Corp. v. Bernard L. Madoff Investment Securities Inc., 08-01789, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
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