Bloomberg News

UBS Suits by Madoff Trustee May Be Handled by District Judge

July 07, 2011

(Updates with Picard deadline in third paragraph.)

July 7 (Bloomberg) -- A U.S. district judge said she will review lawsuits against UBS AG by the liquidator of Bernard Madoff’s defunct firm, and will probably take the case out of bankruptcy court to rule on it herself.

Trustee Irving Picard sued UBS twice, demanding $2.6 billion and alleging the Zurich-based bank aided Madoff’s fraud by setting up so-called feeder funds and agreeing “to look the other way” at irregularities. U.S. District Judge Colleen McMahon, who is handling Picard’s $19 billion suit against JPMorgan Chase & Co., said the UBS case is related and raises similar issues of whether Picard has a right to sue.

In a note to lawyers filed today in court, McMahon gave Picard until July 11 at 5 p.m. to explain on paper how she is mistaken.

McMahon said in May that a bankruptcy judge isn’t entitled to decide whether Picard has the right to sue New York-based JPMorgan on behalf of the con man’s customers, and she would handle that case.

JPMorgan argued that Picard was hired to liquidate the Madoff firm, and wasn’t empowered by law to mount a class-action suit to recover money on behalf of Madoff customers. Picard, defending his suit, “misses the point,” the judge said. The trustee last month trebled the amount of money he demanded from the second-biggest U.S. bank.

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

--Editors: Mary Romano, Stephen Farr.

To contact the reporters on this story: Linda Sandler in New York at lsandler@bloomberg.net; Chris Dolmetsch in New York at cdolmetsch@bloomberg.net.

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net.


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