Long-time Madoff employee to plead guilty: prosecutors

NEW YORK, Wed Sep 12, 2012 – One of Bernard Madoff’s longest-serving employees is expected to plead guilty to criminal charges in the multibillion-dollar Ponzi scheme, U.S. prosecutors said, the latest among a dozen former employees to face charges.

Irwin Lipkin, a former controller of Bernard L. Madoff Investment Securities LLC, will appear in Manhattan federal court on Thursday, prosecutors said in a letter to the judge.

He will plead guilty to charges of conspiracy to commit securities fraud and falsifying documents, prosecutors told U.S. District Judge Laura Taylor Swain in the letter, which was dated Tuesday, Sept. 11.

The letter said Lipkin, 74, created “false financial records t hat were provided to BLMIS investors,” false filings with the U.S. Securities and Exchange Commission and false statements required under a federal law that sets standards for pension plans.

Lipkin’s lawyer, David Richman, was not immediately available to comment. The charges carry a maximum possible prison term of 10 years.

Lipkin’s son, Eric Lipkin, another former Madoff employee, pleaded guilty in 2011 to criminal charges of bank fraud and charges that he reported people were Madoff employees so they could receive retirement benefits.

Irwin Lipkin joined Madoff’s firm in 1964, according to court records. Court papers showed that he continued to draw a salary from the firm even after he stopped working there in 1999.

Madoff, 74, was charged in December 2008 with a decades-long fraud that the government originally estimated at as much as $64.5 billion. He pleaded guilty in March 2009 and is serving a 150-year prison sentence.

The trustee leading the search for money to return to Madoff’s victims says Madoff defrauded customers of about $20 billion. The trustee, Irving Picard, so far has won $9.1 billion in recoveries and settlement agreements.

AIG not on the hook for policyholders’ Madoff claims: U.S. court

NEW YORK, Wed Aug 15, 2012 – American International Group Inc. does not have to cover insurance claims from two former Bernard Madoff clients who sought compensation for their losses under their homeowner’s policy, a federal appeals court ruled on Wednesday.

The 2nd U.S. Circuit Court of Appeals rejected an appeal from Robert and Harlene Horowitz, who had sought up to $30,000 in coverage under a fraud safeguard provision in their homeowner’s policy with AIG. The two California residents had sought to make their lawsuit a class action on behalf of other AIG policyholders.

The Horowitzes said they lost $8.5 million from their Madoff account when the money manager’s Ponzi scheme was uncovered in 2008, reflecting the amount on their final account statement. But AIG denied they suffered any direct loss under the terms of their insurance policy.

The Horowitzes had deposited $4.3 million in their Madoff account over nearly 10 years and withdrawn about $4.5 million over the same period, leaving them with $226,000 more than they invested, according to Wednesday’s ruling. The $8.5 million claim was the indirect loss of potential returns on their initial investment, a scenario that was explicitly excluded from coverage under their policy, AIG argued.

In September 2010, U.S. District Judge Paul Crotty in Manhattan agreed with AIG and dismissed the lawsuit. The plaintiffs appealed to the 2nd Circuit, which backed Crotty’s ruling.

“The policy expressly excludes coverage for indirect losses — a term that includes the inability to realize income from the money, securities or other property that would have been realized but for the fraud,” the appeals court wrote.

AIG could not immediately be reached for comment. A lawyer for the plaintiffs was also not immediately available.

Madoff is serving a 150-year prison sentence after admitting to running what prosecutors called a $65 billion Ponzi scheme.

Madoff trustee now seeks $255 million from family

NEW YORK, Mon May 7, 2012 – Members of Bernard Madoff’s family were hit with an expanded $255.3 million lawsuit, saying they should have caught the patriarch’s Ponzi scheme and must return the benefits to victims.

Irving Picard, the trustee seeking money for Madoff’s victims, said family members who worked at Bernard L. Madoff Investment Securities LLC were “completely derelict” in ensuring that the investment firm’s operations were legal.

The lawsuit adds three former spouses of Madoff’s sons as defendants. Picard said they were unjustly enriched by the scheme through their marriages, and that “equity and good conscience” required that they forfeit money to victims, whom he believes are owed $20 billion overall.

Picard filed his complaint late Friday with the U.S. bankruptcy court in Manhattan, one month after winning court approval to add the spouses. The case has grown from $226.4 million in November, and $198.7 million in October 2009.

The family defendants are Madoff’s brother Peter, who was the Madoff firm’s chief compliance officer; son Andrew, who was co-director of trading; the estate of son Mark, who was also co-director of trading and committed suicide in December 2010; and niece Shana, a compliance officer.

The spouse defendants are Deborah Madoff, who began divorce proceedings against Andrew Madoff in 2008; Stephanie Mack, Mark Madoff’s widow; and Susan Elkin, who divorced Mark Madoff in 2000.

NY Mets owners in $162 million Madoff settlement

NEW YORK,| Mon Mar 19, 2012 – Owners of the New York Mets baseball team have agreed to pay $162 million to settle a lawsuit by the trustee seeking money for victims of Bernard Madoff’s fraud, just before a trial was scheduled to begin.

The settlement was announced in Manhattan federal court by U.S. District Judge Jed Rakoff on Monday. Payments by the team are expected to occur over several years.

Irving Picard, the court-appointed trustee, had accused Mets owners Fred Wilpon and Saul Katz of ignoring warning signs that Madoff was running a fraud during their 25 years of investing with him.

The owners countered that they did not know Madoff was running a Ponzi scheme.

On March 5, Rakoff had ruled that the owners must repay as much as $83.3 million of fictitious profit from Madoff’s firm. The trial was expected to consider whether they should return an additional $303 million.

A hearing to consider final approval of the settlement is set for April 13. Picard and the Mets owners will work on details with former New York Governor Mario Cuomo, who has been mediating the dispute.

Former Madoff trader to plead guilty next week to fraud charges

NEW YORK ― A former trader at Bernard Madoff Investment Securities is expected to plead guilty next week to defrauding Madoff’s customers by helping falsify records and fake trades starting in the early 1970s, federal prosecutors said in a letter Wednesday.

David Kugel, a former supervisory trader in the proprietary trading operations at Madoff’s investment fund, will appear in Manhattan federal court on Monday, according to a letter sent to U.S. District Judge Laura Taylor Swain.

Kugel has been cooperating with the government in its investigation of Madoff and the fallout from what prosecutors said was a decades-long $65 billion Ponzi scheme, prosecutors said. His guilty plea comes as part of his deal with federal prosecutors in exchange for his cooperation, according to the letter.

He is being charged with taking part in a conspiracy to commit securities fraud, falsify broker-dealer records and create records of fake trades used to dupe clients of the fund’s investment advisory business, prosecutors said.

Kugel also faces charges of bank fraud, securities fraud and falsifying records of an investment adviser and broker-dealer, prosecutors said.

Prosecutors said that Kugel began participating in the fraud starting in the early 1970s. That’s several decades before Madoff admitted to have begun running his Ponzi scheme, which, he said during his guilty plea, started in the 1990s. An attorney for Kugel did not immediately return a request for comment Wednesday.

Kugel was one of several former Madoff employees sued by the trustee liquidating Madoff’s investment management firm in 2010, seeking to recoup $70 million they allegedly withdrew improperly.

Madoff is serving a 150-year sentence in a North Carolina federal prison after admitting in 2009 to having run a decades-long Ponzi scheme.

Merkin funds win dismissal of Madoff lawsuits alleging fraud

NEW YORK ― Three hedge funds run by New York financier and philanthropist Ezra Merkin won dismissal of civil lawsuits accusing them of being part of swindler Bernard Madoff’s massive fraud.

In an order dated Friday and made public on Monday, U.S. District Judge Deborah Batts in Manhattan threw out lawsuits alleging fraud and misrepresentation by the Ascot Fund, the Gabriel Fund and the Ariel Fund.

“No misrepresentation was made when defendants relied on Madoff, as a third-party manager, to follow the investment strategies that aligned with the stated investment strategies of the funds,” the judge’s order said.

Batts also said allegations that the funds should have recognized “red flags” alerting them to Madoff’s fraud “are unavailing given the opposing considerations of Madoff’s immense reputation and deep deception.”

Merkin had been general partner of Ascot and Gabriel. He was the sole shareholder and director of Gabriel, which in turn was the investment adviser to the Ariel Fund. Another defendant was BDO Seidman LLP, the auditor of the Ascot Fund.

The plaintiffs included New York Law School, Croscill Inc, a pension plan and others who sued in 2008 on behalf of investors in the three hedge funds.

Madoff, 73, was arrested in December 2008 and pleaded guilty in March 2009 to running a multibillion-dollar fraud. He is serving a 150-year prison term.

U.S. judge rejects an HSBC settlement in Madoff Ponzi case

NEW YORK ― A Manhattan federal judge rejected HSBC Holdings Plc.’s  proposed $62.5 million settlement with investors in an Irish fund that lost money in Bernard Madoff’s Ponzi scheme.

In a ruling on Wednesday, U.S. District Judge Richard Berman said the accord announced June 7 “is not fair, reasonable or adequate — even at this preliminary stage” to investors in Thema International Fund Plc.

HSBC said it had acted as a custodian to the fund, and provided administration and other services. It was sued in January 2009, one month after Madoff’s fraud was uncovered.

Berman said the accord had several “obvious deficiencies.” Among these were inadequate disclosure of legal costs, and the setting aside of a $10 million “reserve” for legal fees and expenses for investors to pursue claims against non-settling defendants outside the United States.

The judge said he would consider a revised accord, and “generally favors the voluntary settlement of matters before it, including the settlement of purported class actions.”

“We are disappointed that the Court did not grant preliminary approval at this time,” Frank Bottini, a lawyer for lead plaintiff Neville Seymour Davis, said in an e-mail.

“We are optimistic that we can address the Court’s concerns and that the settlement will eventually be approved,” he said.

Rob Sherman, an HSBC spokesman, had no immediate comment.

HSBC in June estimated that Thema investors lost about $312 million. It also said various funds it serviced transferred a net $4.3 billion to Madoff’s firm during the period it serviced those funds.

Irving Picard, the trustee seeking money for Madoff victims, accused HSBC in a separate lawsuit of ignoring “red flags” about Madoff’s fraud.

A different federal judge, Jed Rakoff, in July voided about $6.6 billion of Picard’s claims against HSBC, saying the trustee lacked authority to bring them.

Madoff, 73, pleaded guilty to running his Ponzi scheme in March 2009, and is serving a 150-year prison sentence.

UBS wins review of Madoff trustee’s $2.6 billion suits

NEW YORK ― UBS AG won review by a Manhattan federal judge of $2.6 billion of lawsuits brought by the trustee liquidating Bernard Madoff’s firm, at least the fourth time a bank has obtained access to that court.

U.S. District Judge Colleen McMahon agreed to accept the two UBS lawsuits, which accused the Swiss bank and various “feeder funds” that steered money to Madoff of profiting from and covering up his Ponzi scheme.

Her decision is a setback to the trustee, Irving Picard, who has filed roughly 1,050 lawsuits seeking more than $103 billion for Madoff’s victims, and has been trying to pursue his cases in bankruptcy court.

But banks and some other targets of Picard’s lawsuits have said the trustee is raising issues that cannot be addressed by a bankruptcy judge, and should be handled in a federal district court, a higher tribunal. District courts also allow for trial by jury, while a bankruptcy court does not.

A spokeswoman for Picard did not immediately return a request for comment.

McMahon has also agreed to handle Picard’s $19.9 billion lawsuit against JPMorgan Chase & Co.

Another federal judge, Jed Rakoff, is considering whether Picard can invoke racketeering law in a $58.8 billion lawsuit against Italy’s UniCredit SpA, Austria’s Bank Medici AG and its founder Sonja Kohn, and other defendants.

Rakoff is also reviewing some issues in Picard’s $9 billion lawsuit against HSBC Holdings Plc, as well as his $1 billion lawsuit against Fred Wilpon and Saul Katz, owners of the New York Mets baseball team.

UBS had in a June 21 court filing questioned Picard’s standing to raise some claims, and said his common law claims were preempted under a 1998 federal law concerning class-action lawsuits, the Securities Litigation Uniform Standards Act.

Madoff trustee readies amended JPMorgan $6.4 billion suit

NEW YORK ― The trustee seeking money for Bernard Madoff’s victims plans to amend by June 24 his $6.4 billion suit against JPMorgan Chase & Co., once the imprisoned Ponzi schemer’s main bank.

In a June 14 letter to U.S. District Judge Colleen McMahon in Manhattan, the trustee Irving Picard did not identify the planned changes, but said they will make the current complaint “a nullity.”

JPMorgan asked on June 3 to dismiss that complaint.

Picard also asked for an extended timetable to pursue his case, prompting a sharp response from the judge.

“Why must I wait until June 24 for a new complaint?” McMahon handwrote on the letter on Thursday. “I set an expedited schedule for a reason. I will OK this schedule, but will not add ONE day to it in the future.”

JPMorgan spokeswoman Jennifer Zuccarelli declined to comment. A spokeswoman for Picard was not immediately available for comment.

In a complaint made public in February, Picard accused the second-largest U.S. bank of being “thoroughly complicit” in Madoff’s fraud and ignoring red flags.JPMorgan countered that Picard never alleged facts to show the bank knew a Ponzi scheme was taking place.

Madoff was arrested on Dec. 11, 2008, and after pleading guilty is serving a 150-year prison sentence.

McMahon had scheduled a July 28 hearing to consider JPMorgan’s motion to dismiss the case. The new schedule suggests the hearing will be delayed at least into September.

The case is one of at least three that has been moved to federal district court, where juries can hear cases, from bankruptcy court, where Picard had originally sued.

U.S. District Judge Jed Rakoff is reviewing some issues in Picard’s $9 billion case against HSBC Holdings Plc.

He is also considering whether the trustee can invoke racketeering law in a $58.8 billion lawsuit against Italy’s UniCredit SpA, Austria’s Bank Medici AG and its founder Sonja Kohn, and other defendants.

In plea bargaining, former Madoff employee admits falsifying records

NEW YORK ― A former employee at convicted financier Bernard Madoff’s firm admitted to adding fake employees to the payroll, part of a plea deal on Monday to bank fraud and other charges.

The former payroll manager, Eric Lipkin, told U.S. District Judge Laura Taylor Swain in New York that in 22 years of employment in the investment advisory arm of Bernard L. Madoff Investment Securities LLC, he conspired with others to falsify records and deceive authorities.

Madoff, 73, and eight others have been criminally charged with running a multibillion-dollar Ponzi scheme that collapsed in December 2008, shaking up regulators who missed years of warning signs of the fraud.

Madoff is serving a 150-year prison sentence after pleading guilty in March 2009 for what is considered the biggest investment fraud in history. A Ponzi scheme is one in which early investors are paid with the money of new clients.

Lipkin told the judge that from at least 1986, “I created false payroll records.” As one example, he said that in 2008 he was instructed by the firm’s operations manager, Daniel Bonventre, to put Bonventre’s son on the payroll even though he did not work at the firm.

Bonventre has also been charged and is free on bail pending trial.

Under Lipkin’s plea agreement, he will cooperating with the office of the Manhattan U.S. Attorney and the FBI in its investigation of the Madoff fraud.

Lipkin, 37, also said in Manhattan federal court that he created false reports to be sent to the Depository Trust Co. (now called the Depository Trust & Clearing Corp) clearing house for buyers and sellers of securities.

“I knew these documents were false because they were created by me,” said Lipkin, who was released on bail of $2.5 million after the plea proceeding.

Lipkin said the false reports were given to auditors to mislead them.

Lipkin pleaded guilty to charges of conspiracy and falsifying books and records to commit bank fraud. The most serious charge of bank fraud carries a maximum possible 30-year prison sentence.