The Swiss bank UBS has been accused of helping the infamous fraudster Bernard Madoff cheat investors and is being sued, among others, for more than two billion dollars in a New York court.
REUTERS - The trustee seeking to recover money for defrauded Bernard Madoff investors has sued UBS AG and others for more than $2 billion, accusing them of collaborating in the imprisoned swindler’s massive Ponzi scheme.
UBS was accused of assisting Madoff’s fraud by sponsoring foreign feeder funds that sent client money to the once-respected money manager, lending them “an aura of legitimacy” while shielding itself from liability through secret side agreements.
Despite identifying red flags at Bernard L. Madoff Investment Securities LLC, the Swiss bank and feeder funds “chose to enable Madoff’s fraud for their own gain,” collecting at least $80 million in fees, court-appointed trustee Irving Picard said in a 107-page complaint.
“Madoff’s scheme could not have been accomplished unless the UBS defendants had agreed to look the other way and to pretend that they were truly ensuring the existence of assets and trades,” the complaint said. “In fact they were not and never did.”
The complaint alleges 23 counts of fraudulent transfers and other misconduct. UBS had no immediate comment. The other defendants either did not return calls and emails or could not be reached.
Madoff’s estimated $65 billion Ponzi scheme was uncovered on Dec. 11, 2008, and cost thousands of former clients all or most of their savings.
Madoff, 72, pleaded guilty in March 2009 to running a multi-decade fraud. He is serving a 150-year sentence in a North Carolina federal prison.
Prosecutors have also filed criminal charges against seven people connected to Madoff. In addition to Madoff, two others have entered guilty pleas.
Picard, a partner at Baker & Hostetler LLP in New York, is liquidating Madoff’s investment business. He has filed at least 20 “clawback” lawsuits to recover $17.5 billion from feeder funds that steered money to Madoff’s firm, friends, family members and others.
He filed his complaint against UBS under seal with the U.S. Bankruptcy Court in Manhattan on Tuesday. He made an edited version available to the public on Wednesday.
Picard accused UBS of working with co-defendant Access International Advisors LLC and associated individuals “to extend the Ponzi scheme to European investors.”
Access was once led by Thierry Magon de la Villehuchet, a French executive found dead in an apparent suicide in New York less than two weeks after Madoff’s fraud was uncovered. He was reported to have been distraught over losing up to $1.4 billion of client money.
Other defendants include the feeder funds Luxalpha SICAV, with offices in Luxembourg, and Groupement Financier Ltd, with offices in the British Virgin Islands.
The complaint said these firms withdrew $796 million in the 90 days before his firm was forced into bankruptcy after the fraud was revealed, and $1.12 billion in the prior six years.
It is unclear whether Picard plans to pursue lawsuits against other European banks.
In March, a Luxembourg court rejected efforts by former Madoff clients to file direct claims against UBS, saying they must instead seek recovery through Madoff’s liquidators.
That ruling signaled that investors who claim to have lost nearly $1 billion through Herald, a fund affiliated with a Luxembourg unit of British bank HSBC Holdings Plc, might have to pursue the same path.
HSBC was not immediately available for comment.
Picard said he has through Sept. 30 recovered $1.5 billion for former Madoff clients. He is also reviewing which clients are entitled to recover, and through Nov. 19 has accepted 2,305, or 15 percent, of the 15,105 claims he has reviewed.
Date created : 2010-11-24