Bloomberg News

Madoff Trustee Can’t Use U.S. Law Abroad, Funds, Banks Argue

September 02, 2011

Sept. 2 (Bloomberg) -- Foreign companies sued for billions of dollars by the liquidator of Bernard L. Madoff’s firm are asking judges to dismiss the cases, saying trustee Irving H. Picard is breaking U.S. law in trying to apply it abroad.

Tensyr Ltd., a Channel Islands company that invested $450 million in a so-called feeder fund to the confidence man, said yesterday in a filing in U.S. Bankruptcy Court in New York that Picard ignored a ruling by the U.S. Supreme Court when he demanded return of $30 million redeemed from the feeder, Fairfield Sentry Ltd.

Italy’s UniCredit SpA asked the New York court to dismiss a racketeering suit seeking $59 billion from it and defendants including Bank Medici AG founder Sonja Kohn.

“The trustee’s extreme positions are irreconcilable with recent decisions of the United States Supreme Court,” Tensyr said. “The Supreme Court recently overruled prior case law and held that United States statutes do not apply extraterritorially.”

The tack taken by Picard’s foreign targets is another challenge to the trustee, who is fighting a July ruling by U.S. District Judge Jed Rakoff in Manhattan that tossed out almost $9 billion of the trustee’s common law claims against HSBC Holdings Plc and feeder funds.

Rakoff said Picard can’t sue parties that allegedly had a duty to detect Madoff’s fraud.

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

Picard’s Position

Picard this week defended his UniCredit suit, saying it wasn’t “extraterritorial” because of communications between the bank and Kohn in New York.

The “illegal scheme ” to funnel money to Madoff originated in New York, he said in a filing. It “gravely injured a New York victim,” the Madoff estate, he said.

In the Tensyr case, Picard defended the use of U.S. law outside the country by saying the fund’s contract with Fairfield Sentry specified New York law should apply to certain disputes, Tensyr said in the filing.

Courts have “roundly” rejected such arguments as “insufficient to establish jurisdiction,” said Tensyr, which Picard says was set up by Walter Noel’s Fairfield Greenwich Group.

Banco Bilbao Vizcaya Argentaria SA asked a judge this week to dismiss a $45 million suit by Picard, saying U.S. bankruptcy law doesn’t empower him to take back money withdrawn from the Ponzi scheme in other countries.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.

The Tensyr case is Picard v. Natixis, 10-05353, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

--Editors: Charles Carter, Fred Strasser

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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