Bloomberg News

Banco Bilbao Says Madoff Trustee Lacks Power Outside U.S.

August 30, 2011

(Updates with excerpt from filing in second paragraph.)

Aug. 30 (Bloomberg) -- Banco Bilbao Vizcaya Argentaria SA asked a judge to dismiss a $45 million lawsuit brought by the liquidator of Bernard Madoff’s firm, saying U.S. bankruptcy law doesn’t empower him to take back money withdrawn from the Ponzi scheme in other countries.

“The statute is silent as to its extraterritorial application and cannot be used by the trustee to recover transfers made” outside the U.S., the bank said in a U.S. Bankruptcy Court filing yesterday.

Trustee Irving Picard sued Banco Bilbao in December, accusing it of withdrawing money from Fairfield Sentry Ltd., a so-called feeder fund to the scheme, while being “armed” with information about possible fraud at Madoff’s firm. The Spanish bank said it lost more than $700 million investing with feeders including Fairfield, which “deceived” it, and it didn’t know of the fraud.

Picard’s application of U.S. law to foreign companies faces its biggest challenge by UniCredit SpA, which has asked a federal district judge to dismiss U.S. racketeering claims seeking $59 billion against it and other defendants. Banco Bilbao said the U.S. law cited by Picard to justify clawbacks gives no “indication” of extraterritorial reach, and therefore the statute has none.

Picard’s “cookie cutter” complaint also didn’t have enough facts for a plausible claim, Banco Bilbao said.

“The trustee flagrantly mischaracterizes the relationship between BBVA and the Fairfield defendants,” it said. “The court will search the BBVA complaint in vain for a single fact indicating that BBVA had actual knowledge of any fact” that warned of fraud.

Amanda Remus, a Picard spokeswoman, didn’t immediately respond to an e-mail seeking comment before regular business hours.

The case is Picard v. Banco Bilbao, 10-05351, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

--Editors: Andrew Dunn, Glenn Holdcraft

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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