Trustee in Madoff fraud loses court ruling
From Business Day
The trustee seeking money for victims of Bernard L. Madoff’s multibillion-dollar Ponzi scheme was barred on Monday from blocking a $410 million settlement resolving New York State’s claims against a hedge fund manager, J. Ezra Merkin, who was accused of secretly steering client money to Mr. Madoff.
The trustee, Irving H. Picard, had contended that the settlement with New York’s attorney general, Eric T. Schneiderman, interfered with his exclusive right to seek money for Mr. Madoff’s victims.
But Judge Jed S. Rakoff in Federal District Court in Manhattan said Mr. Picard had waited far too long to intervene after the attorney general’s office first moved against Mr. Merkin.
Mr. Picard, “having for more than three years issued empty threats to seek a halt to the attorney general’s suit, has lost his right to complain,” Judge Rakoff wrote.
Mr. Schneiderman announced the settlement with Mr. Merkin last June, and it remains one of the largest settlements with any individual over activities linked to Mr. Madoff and his firm, Bernard L. Madoff Investment Securities.
The attorney general accused Mr. Merkin of “recklessly” feeding $2.4 billion from his investors to Mr. Madoff, while falsely claiming that he had been actively managing the money.
Mr. Picard had sought more than $500 million from Mr. Merkin and his funds. But his move in August to block the Merkin settlement came more than three years after Mr. Schneiderman’s predecessor, Andrew M. Cuomo, now New York’s governor, brought his own lawsuit against Mr. Merkin in April 2009, claiming violations of state law.
“The trustee unreasonably and inexcusably slept on his rights,” Judge Rakoff wrote, adding that the prejudice to the defendants, to investors in the Merkin funds and to the New York Supreme Court “cannot be overstated.”
Amanda Remus, a spokeswoman for Mr. Picard, said the trustee considered the decision “incorrect and contrary to law,” and planned to appeal it.
Mr. Madoff, 74, pleaded guilty to fraud in March 2009 and is serving a 150-year sentence in a North Carolina federal prison.
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Note: As of April 1, 2013, the Securities Investor Protection Act (SIPA) Trustee has recovered or entered into agreements to recover approximately $9.317 billion, representing more than 53 percent of the estimated $17.5 billion in principal lost in the Ponzi scheme by Bernard L. Madoff Investment Securities LLC (BLMIS) customers who filed claims. This recovery far exceeds any prior restitution effort related to Ponzi schemes both in terms of dollar value and percentage of stolen funds recovered.
