Madoff trustee asks court to reinstate bank claims
By Joseph Ax | November 22, 2012 7:49 AM EST
A lawyer for the trustee seeking money for Bernard Madoff's victims asked an appeals court on Wednesday to restore nearly $30 billion in claims against JPMorgan Chase & Co and other banks, saying it would force those who furthered the fraud to "pay their fair share."
In arguments before the 2nd U.S. Circuit Court of Appeals, the trustee's lawyer sought to overturn lower court rulings that only Madoff victims themselves -- not the trustee -- could sue third parties such as banks for damages.
The trustee has said JPMorgan, Madoff's main bank for two decades, and other banks ignored numerous warning signs about Madoff's business -- allegations the banks have denied.
Oren Warshavsky, a lawyer for trustee Irving Picard, told the appeals court that federal law empowers Picard to pursue claims on behalf of Madoff customers. He said the banks' failure to detect that the money manager was running a Ponzi scheme exacerbated the victims' losses.
"Anybody who suffered by virtue of this fraud, their suffering was increased each time it was extended," Warshavsky said. "Those that helped propagate it should pay their fair share."
Lawyers for the banks said only the victims of a purported fraud themselves can pursue fraud claims.
"A trustee has no standing generally to sue third parties on behalf of creditors," said John Savarese, a lawyer for JPMorgan.
The Madoff fraud was revealed in December 2008, when the financier ran out of money to meet redemption requests from his customers. Madoff, 74, is serving a 150-year prison sentence.
The trustee was appointed to liquidate Madoff's firm, Bernard L. Madoff Investment Securities LLC, and hunt for recoveries for the swindler's victims. As part of his efforts, Picard sued various banks or "feeder funds" that did business with Madoff, saying they ignored red flags about the fraud, often to win more fees or commissions.
In a setback for the trustee, U.S. District Judge Colleen McMahon in Manhattan last November tossed all but $425 million of Picard's $19.9 billion lawsuit against JPMorgan. Her decision followed a similar ruling in July 2011 from U.S. District Judge Jed Rakoff, who dismissed $8.6 billion of Picard's claims against HSBC Holdings Plc and the Italian bank UniCredit SpA.
Picard has recovered more than $9.2 billion for former Madoff customers. The Rakoff and McMahon rulings wiped out close to one-third of the trustee's more than $103 billion of claims against banks and other defendants. Individual Madoff customers also have sued banks.
(Reporting by Joseph Ax; Editing by Martha Graybow and Dan Grebler)
Most Popular Slideshows
- Prince William & Kate Middleton Caught Flirting In A Countryside Dinner Date [PHOTOS]
- Prince William & Kate Middleton Boards London Train in Casual Disguise, Royal Couple’s Incognito Plan A Huge Hit [PHOTOS]
- Angelina Jolie & Brad Pitt Heads to Malta For New Movie After A Whirlwind French Wedding [PHOTOS]
- 2014 US Open: Hottest Male Tennis Players To Watch [PHOTOS]
Join the Conversation
- Tourre on stand says email in SEC case 'not accurate'
- Syrian authorities blocking access to needy in Homs - Red Cross
- Faith in European Union at low ebb, EU poll says
- Former UBS banker gets 18 months, $1 million fine, for muni bid-rigging scheme
- U.S. judge halts challenges to Detroit's bankruptcy bid
- Pricey iPhone 6 on Release Date Likely but with 3X Retina Resolution & Mobile Payment Service – Reports
- 5.5-Inch iPhone 6 is iPhone Air on Sept 19 Release Date: 5 Things to Consider Before Buying
- Google Nexus 8 Confirmed as HTC T1 aka Volantis/Flounder with Freshly-Leaked Specs & Features – Reports
- PlayStation 4 Killing Xbox One Costing Microsoft Millions But It's Fine
- Europe, US Next on ISIS’ Hit List, Says Saudi King; Seized ISIS Laptop Reveals Terrifying Bio-Warfare Plans
- iPhone 6 On Release Date To Feature Qualcomm MDM9625M LTE, 1GB RAM, Mobile Payment Deal With AMEX, 1334x750 Display
- Google Can Kill Samsung with Android KitKat and Android One: Here's How