Madoff Trustee Can’t Sue Over Foreign Transfers
The trustee liquidating Bernard Madoff’s business can’t sue to recover money transferred by foreign financial firms to investors abroad, a U.S. judge said, cutting off another avenue to compensate victims of the country’s biggest financial fraud.
U.S. District Judge Jed Rakoff in Manhattan ruled that the trustee, Irving Picard, is barred from using a provision of bankruptcy law to force the customers of overseas feeder funds, which pooled their assets for investment in Madoff’s fraud, to return the money to Picard. The ruling was made public today.
The ruling, dated yesterday, is a victory for dozens of European banks, including UniCredit SpA (UCG) and Unicredit Bank Austria AG, which had asked Rakoff to dismiss Picard’s claims. It represents one more legal reversal for Picard, who is seeking to use the money to compensate Madoff’s victims.
In 2012, Rakoff ruled in favor of Milan-based UniCredit, knocking out Picard’s biggest claims against any bank. He dismissed racketeering and other allegations against the bank filed by Picard and blocked his pursuit of most of $59 billion in claims.
In yesterday’s ruling, Rakoff said Picard can’t use U.S. bankruptcy law, which allows trustees to recover certain payments and distribute them to creditors, including fraud victims, to take back money transferred abroad to a foreign holder. Congress didn’t intend U.S. bankruptcy law to be applied abroad because of possible conflicts with other nations’ statutes and resulting international discord, Rakoff said, citing previous court decisions.
Amanda Remus, a Picard spokeswoman, said he and his lawyers are reviewing Rakoff’s ruling. She didn’t immediately comment on whether the trustee plans to appeal or how much money is involved in Picard’s claims.
The U.S. Supreme Court last week rejected an appeal by Picard to hear his case seeking an estimated $30 billion from a different group of banks, including JPMorgan Chase & Co. (JPM), which the trustee alleged helped funnel money into the Ponzi scheme.
Madoff, 76, is serving a 150-year sentence in a federal prison in North Carolina for running a Ponzi scheme that defrauded investors of billions of dollars.
The case is Securities Investor Protection Corp. v. Bernard L. Madoff Investment Securities LLC, 12-mc-00115, U.S. District Court, Southern District of New York (Manhattan).
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