Bloomberg News

ABN Amro Wins Review of $267 Million Madoff Trustee Suit

October 11, 2011

(Updates with lawsuit in second paragraph.)

Oct. 11 (Bloomberg) -- ABN Amro Bank NV, the bank run by a Dutch government agency, persuaded a U.S. district judge to take over a $267 million lawsuit brought by the liquidator of Bernard Madoff’s firm.

The trustee, Irving Picard, sued ABN Amro’s Irish affiliates in bankruptcy court, demanding the return of funds they allegedly got from swap transactions with Rye Select Broad Market XL Portfolio Ltd. Picard, who wants $400 million from Rye, said it made leveraged investments with Madoff. U.S. District Judge Jed Rakoff said the case resembled others he’s now considering, according to a court filing today.

More than 60 related lawsuits await Rakoff’s attention, court documents show. Those and others may be affected by his rulings on whether Picard can recoup funds protected by so- called safe-harbor law that governs securities transactions, or take back money paid by the Madoff brokerage to its customers.

A recent U.S. Supreme Court ruling in the Anna Nicole Smith case “precludes a bankruptcy court from exercising jurisdiction over the causes of action here,” Amsterdam-based ABN Amro said in a Sept. 30 filing as it asked Rakoff to take its case.

ABN Amro said it plans to rely on the safe harbor in defending itself against Picard’s suits. The bank also said it will argue that money it took out of the Madoff firm was payment for a debt owed by the Madoff brokerage, and that Picard erred in expecting the bank to have detected the fraud.

Cayman Islands

Picard also may have gone too far by applying U.S. law to ABN Amro and Cayman Islands-based Rye, the Dutch bank said.

Rakoff cut Picard’s $1 billion suit against the owners of the New York Mets baseball team by two thirds last month, saying the trustee could try to reclaim only two years of withdrawals from Madoff’s Ponzi scheme. Since then, Rye and Safra National Bank of New York have cited the Mets ruling in their requests to Rakoff to rule on their cases.

Picard has asked Rakoff to let him the appeal the Mets ruling to the federal circuit court in New York, saying it would cost him about $6.2 billion in so-called clawbacks of two kinds.

Picard said in July that he had raised more than $8.6 billion for Madoff investors who lost money, or almost half of the $17.3 billion in principal lost by Madoff customers who filed claims. That includes more than $5 billion tied up in court challenges.

The case is Picard v. ABN Amro Bank (Ireland), 11-cv-06877, U.S. District Court, Southern District of New York (Manhattan).

--With assistance from Bob Van Voris and William Rochelle in New York. Editors: Andrew Dunn, Mary Romano

To contact the reporters 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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