NYC judge tosses Madoff trustee’s $19B bank claim
Wednesday, November 2, 2011
NEW YORK (AP) — A federal judge Tuesday rejected a $19 billion claim a trustee recovering money for Wall Street swindler Bernard Madoff’s investors demanded from JPMorgan Chase, a bank used by the disgraced financier. The ruling also eliminated most of a $2 billion claim against UBS AG.
U.S. District Judge Colleen McMahon said trustee Irving Picard did not have standing to bring common law claims against the financial institutions.
Picard claimed JPMorgan knew about Madoff’s multi-decade fraud and UBS aided and abetted the scheme, which resulted in billions of dollars of losses to thousands of Madoff’s clients. He said UBS should not have sponsored two so-called feeder funds that invested heavily with Madoff because UBS was aware that Madoff was likely involved in fraud.
McMahon said she believes Picard had gone beyond his reach because neither U.S. bankruptcy laws nor Congress intended to give someone in his position the ability to pursue claims that would have to be brought by the creditors themselves.
She compared her findings to a parking garage that might sue a customer who scratches the car of another customer to recover money for the injured party. She said the parking garage could not bring such a lawsuit against a stranger who scratched the car in traffic before it was parked in the garage.
In the same way, she said Picard cannot pursue damages against banks that he alleges enabled the fraud before it was discovered. Instead, she said, Picard can only try to recover money that existed at the time the fraud was discovered.
Amanda Remus, a spokeswoman for Picard, said Picard will appeal the decision.
“The trustee and his counsel remain confident in the cases brought against JPMorgan Chase and UBS and related entities as well as in the trustee’s standing to pursue all the claims in connection with those cases,” she said. “Most notably, today’s decision did not reach any determination with regard to the Trustee’s allegations of wrongdoing by JPMorgan Chase and UBS and related entities.”
Jennifer Zuccarelli, a JPMorgan Chase & Co. spokeswoman, said the bank was pleased. UBS spokeswoman Karina Byrne said UBS also was pleased.
Madoff pleaded guilty to fraud in 2009 and is serving a 150-year prison sentence in Butner, N.C.