Bloomberg News

Madoff Trustee’s Suit Against UniCredit to Be Reviewed by Judge

June 01, 2011

June 1 (Bloomberg) -- A federal district judge in New York said he will review part of a $58.8 billion lawsuit brought against UniCredit SpA and other defendants by the bankruptcy trustee liquidating Bernard L. Madoff’s firm.

U.S. District Judge Jed Rakoff said yesterday in Manhattan that he will explain in a June 3 order what issues he will consider. UniCredit, based in Milan, asked the judge on May 10 to decide whether the racketeering law invoked by trustee Irving Picard applies outside the U.S.

Picard’s fees are an issue in the UniCredit case, said Rakoff, who yesterday asked the trustee’s lawyers why four of them were in court. Picard personally has been paid $3.6 million in fees since Madoff’s 2008 arrest, while his law firm, Baker & Hostetler LLP, has collected $145.6 million, plus $3.4 million in expenses, according to a May 16 bankruptcy court filing.

Picard named UniCredit in a December bankruptcy-court suit against Bank Medici AG, its founder, Sonja Kohn, and dozens of other parties in Austria and Italy. He sought $19.6 billion for the conman’s investors, invoking the Racketeer Influenced and Corrupt Organizations Act to triple the amount. The claim is the largest of more than 1,000 filed by Picard.

Tests ‘Upended’

A recent Supreme Court ruling “upended” historical tests for applying U.S. law in other countries, the Italian bank said. That casts doubt on whether Picard can use RICO to reach “an alleged enterprise existing almost wholly outside of the United States and expressly directing its alleged conduct to persons living abroad,” UniCredit said in its court filing.

According to Picard’s suit, Kohn ran a scheme centered on Bank Medici, parts of which overlapped with Madoff’s own fraudulent enterprise, delivering $9.1 billion into the Ponzi scheme. The participants funneled $4 billion of the total through feeder funds, he said.

Kohn and UniCredit are fighting the suit.

The case is Picard v. Kohn, 10-5411, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

--Editors: Stephen Farr, Michael Hytha.

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

To contact the editor responsible for this story: John Pickering at jpickering@bloomberg.net.


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