Madoff Trustee Denied Cert to Go After Banks
(CN) - The Supreme Court refused Monday to weigh in on the attempt to accuse major banks of aiding and abetting in Bernie Madoff's colossal Ponzi scheme.
Irving Picard, a partner of the Cleveland-based firm Baker Hostetler LLP, serves as a court-appointed bankruptcy trustee in charge of compensating Madoff's victims.
Although he has accused HSBC, UBS, JP Morgan and other banks in court of enabling Madoff's fraud, Picard has not been able to bring his lawsuits off the ground because his position technically calls for him to act as Madoff's representative.
Four years ago, U.S. District Judge Jed Rakoff ruled that Picard could not pursue his lawsuit because "the trustee stands in the shoes of the debtor, not the creditors."
The 2nd Circuit affirmed that decision almost exactly one year ago.
According to an appellate court's summary, Picard alleged that JP Morgan had been "thoroughly complicit" and placed itself "at the very center" of the Ponzi scheme by letting Madoff set up a primary account where customer money was "commingled and ultimately washed."
The Swiss-bank UBS and the Austrian bank Unicredit created feeder funds, Picard said.
HSBC allegedly "engineered a labyrinth of hedge funds, management companies, and service providers that, to unsuspecting outsiders, seemed to compose a formidable system of checks and balances,' yet, in reality, 'it provided different modes for directing money to Madoff while avoiding scrutiny and maximizing fees,'" the 2nd Circuit summarized.
Finding that Picard had standing to make the allegations, however, would require a "long, long reach," according to the ruling.
Without explanation, the Supreme Court rejected Picard's challenge to that decision on Monday.
Picard's spokeswoman Amanda Remus said the trustee and his counsel "respect the decision" and continue their focus on "maximizing recoveries" to victims.
"We continue to move forward with the SIPA Trustee's bankruptcy claims of approximately $3.5 billion, which remain active against these international financial institution defendants - including, but not limited to, UBS and HSBC - that facilitated Madoff's fraud," Remus said in a statement.