The British liquidators of Bernard Madoff’s phoney fund management business will fight in a New York court tomorrow for the right to seize the convicted fraudster’s US assets.
Grant Thornton, which is liquidating Madoff’s London operations, faces a battle with Irving Picard, the trustee liquidating Madoff’s US business, and a group of American victims of the $65 billion (£40 billion) Ponzi scheme.
The victims are furious that Grant Thornton has already seized - in Palm Beach, Florida - a $235,000 vintage Aston Martin owned by Peter Madoff, Bernard Madoff’s brother.
At a hearing tomorrow morning in the US Bankruptcy Court for the Southern District of New York, Judge Burton Lifland will hear Grant Thornton’s request to become a “foreign main proceeding”, which would allow the liquidator to take US assets without being held up by legal actions.
Madoff used Madoff Securities International (MSI) in London as a proprietary trading operation, owned 88 per cent by the fraudster, with the rest held by family members. MSI did not handle client money.
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Funds from MSI were used to pay for the lavish lifestyles of Madoff and his family, including two wire payments to cover the cost of the 1964 Aston Martin. The UK liquidators want to be free to recover assets in the US paid for by the UK business.
However, in documents filed with the court in Manhattan last week, Mr Picard argued that Grant Thornton should be forced to discuss its seizure plans with him. If he does not approve of the plans, the UK liquidator should be required to seek bankruptcy court approval, Mr Picard said.
A group of victims of the Ponzi scheme, represented by Matthew Gluck of the law firm Milberg, also objected to Grant Thornton’s request to become a foreign main proceeding. In a court filing, they said that MSI was not separate from Bernard L Madoff Investment Securities, the 71-year-old’s main business.
“When a foreign entity is operating as part of a fraudulent scheme, courts do not consider its physical location when determining its center of main interests,” the victims’ filing said.
The victims want asset seizures to be left to Mr Picard in order to avoid duplication and unnecessary expense. Any money recovered from the sale of Madoff’s assets will be used to compensate victims of the scheme.
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They argued in the filing that Grant Thornton’s use of two law firms to seize the Aston Martin last week did “not demonstrate a sensitivity to efficiency and cost reduction”.
Madoff was convicted on 11 counts of fraud in March after admitting that for at least 20 years he used new customers’ investments to pay returns to existing clients. He is due to be sentenced on June 29.
A fortune based on fraud
1960 Bernard Madoff founds the Wall Street firm Bernard L. Madoff Investment Securities
1990s Madoff starts running part of his company as an elaborate Ponzi scheme, fabricating returns
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1999 Harry Markopolos, a financial analyst, tells the Securities and Exchange Commission (SEC) he thinks that it is mathematically impossible to achieve the gains the company claims to deliver
Nov 2008 Madoff Securities International in London makes two fund transfers to Bernard Madoff Investment Securities of about $164 million
Dec 10, 2008 Madoff tells his sons that the asset management unit of his company is a Ponzi scheme
Dec 11, 2008 He is charged with securities fraud after his sons report him to the police
Mar 12, 2009 He pleads guilty to 11 charges, including securities fraud, money laundering, perjury and making false filings with the SEC