Bloomberg News

UBS Says Madoff Trustee Disclosure May Endanger Employees

March 11, 2011

UBS AG (UBSN), sued for $2.6 billion by the trustee liquidating Bernard L. Madoff’s defunct firm, said publicly identifying employees who aren’t central to the lawsuits might put them in danger.

Trustee Irving H. Picard, who has filed 1,000 lawsuits seeking $100 billion for investors in the Ponzi scheme, responded to media demands for disclosure first by unsealing complaints and then moving to reveal blanked-out names. Six current and former UBS employees who mostly “happened to” write e-mails or internal documents would probably be “tarnished, or worse” in news coverage, the Zurich-based bank said in a filing yesterday in U.S. Bankruptcy Court in Manhattan.

“The Madoff fraud has thrown a blanket of stigma upon anyone associated with the scandal,” UBS said. “The revelation of the Madoff fraud has already been connected to the suicide of two individuals reportedly involved in dealings with Bernard Madoff,” it said, citing Mark Madoff, the conman’s son, and Thierry Magon de la Villehuchet, chief executive officer of Access International Advisors.

UBS was responding to a March 4 court order to “show cause” why Picard shouldn’t publish unredacted complaints. The instruction followed a judge’s conference with lawyers for WNBC-TV, NBC News, CNBC and New York Times Co. where “concerns were raised” about the redactions, according to the order signed by U.S. Bankruptcy Judge Burton Lifland.

Public ‘Curiosity’

If named, the currently anonymous UBS employees’ phone numbers and addresses may be located, they may be threatened or harmed, and their careers may suffer, said UBS, Switzerland’s biggest bank.

While the public has a right to monitor the courts, “curiosity as to the role of innocent bystanders referenced in litigation is not reason enough to favor a presumption of access,” the bank said.

Picard sued UBS twice, claiming it aided the Madoff fraud partly by setting up feeder funds that invested in the Ponzi scheme and agreeing “to look the other way” at irregularities. UBS said the claims were “unfounded and without merit.”

Citigroup Inc. (C:US), sued by the trustee for $425 million, said Picard’s move toward total disclosure would affect 12 current and former employees not involved in the case, who couldn’t defend themselves.

‘No Interest’

“None of these individuals is a public figure, none is named as a defendant, and none is alleged to have known of Madoff’s scheme,” the New York-based bank said in a court filing yesterday. “That identifying information is of no relevance and of no public interest, and disclosure would violate the legitimate privacy interests of these non-party employees.”

Citigroup said Picard’s claims that it assisted in the fraud, based on transactions with two trading partners entered into at their request, were “completely false.”

The UBS case is Picard v. UBS AG, 10-ap-4285, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

To contact the reporter on this story: Linda Sandler in New York at lsandler@bloomberg.net.

To contact the editor responsible for this David E. Rovella at drovella@bloomberg.net.


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