Madoff trustee goes after UBS

(CNS): The trustee on the liquidation of Bernie Madoff’s investment firm is looking to recover some $2billion from UBS AG and related entities as a result of their participation in the Madoff Ponzi scheme. Irving H. Picard, the Trustee for the liquidation of Bernard L. Madoff Investment Securities LLC announced yesterday that a complaint had been filed in the United States Bankruptcy Court Southern District of New York alleging 23 counts of financial fraud and misconduct against UBS and others for their collaboration in the fraud. The Trustee seeks to recover the money to redistribute to BLMIS victims with valid claims, Picard said ina release.

“The recoveries sought include BLMIS related redemptions, UBS’s fees, as well as all damages, including but not limited to compensatory and punitive damages caused by the Defendants’ misconduct, and the disgorgement of all funds by which the Defendants were unjustly enriched at the expense of BLMIS’s customers,” Picard stated.

According to the complaint, UBS actively assisted the Madoff Ponzi scheme, by, among other things, serving as the sponsor, custodian and administrator of various affiliated international feeder funds, including Luxalpha SICAV and Groupement Financier Ltd. As purported sponsor of Luxalpha, UBS lent an aura of legitimacy to it, but at the same time, disavowed any liability through indemnity agreements that were not disclosed to the public.

Even though UBS’s due diligence revealed indicia of fraud, UBS made Madoff the sub custodian of the assets of Luxalpha and Groupement Financier, enabling Madoff to run an operation with no checks and balances. As administrator of these funds, UBS allowed Madoff to be the only source of information for valuing the funds.

The full complaint was filed with the Bankruptcy Court under seal and only a redacted version is currently available in the public domain.

“We have battled with UBS regarding disclosure of information about the bank’s knowledge of Madoff. Unfortunately, they are still trying to shield this information from the public by designating all of their information as confidential. We intend to move to have that designation removed and the complaint made public as soon as possible,” said Picard.

“As we allege in the complaint, Madoff’s scheme could not have been accomplished unless UBS had agreed not only to look the other way, but also to pretend that they were truly ensuring the existence of assets and trades when in fact they were not and never did,” said David J. Sheehan, counsel for the Trustee and a partner at Baker & Hostetler LLP, the appointed counsel for Picard.

As further alleged, UBS knowingly set up an operation that accommodated Madoff, even though UBS was well aware of indicia of fraud surrounding BLMIS. “Without UBS’s serving as promoter, custodian, manager and administrator for the Feeder Funds, BLMIS would have been deprived of more than a billion dollars in investments, and Madoff’s fraud would have been diminished in both scope and duration.”