(Updates with details from ruling from eighth paragraph.)
Nov. 25 (Bloomberg) -- A U.K. court froze the assets of Bernard Madoff associate Sonja Kohn, the former chairwoman of Bank Medici AG, who a judge said made at least $56 million introducing clients to the convicted fraudster.
Liquidators of Madoff’s estate are pursuing Kohn and the directors of Madoff Securities International Ltd., the company’s English unit, for the return of assets.
Kohn met Madoff in the 1980s and introduced him to investors who put billions of dollars into his Ponzi fraud. She is accused of billing Madoff companies for research, analysis and consulting services while in reality the payments were “secret kickbacks” for introducing money into the scheme, Judge Julian Flaux said in a ruling today.
“It seems to me what emerges is a sufficiently arguable case of deliberate wrongdoing, the issuing of sham invoices and the disguising of the true nature of the payments of millions of dollars made to the Kohn defendants,” he said.
Irving Picard, the liquidator of Madoff’s U.S. operations, sued Kohn and the former directors of Madoff’s U.K. unit for a total of $80 million in December 2010.
Madoff pleaded guilty in 2009 to using money from new investors to pay off old ones in a Ponzi scheme, sparking investigations and dozens of lawsuits. He is serving 150 years in prison in North Carolina for the fraud that destroyed his New York-based firm, which collapsed in December 2008.
“Mrs. Kohn was a victim of the fraud as an investor, business person and human being,” Clemens Trauttenberg, a lawyer for Kohn in Vienna, said in an e-mail.
Flaux also ruled Picard didn’t have jurisdiction to sue Kohn and her companies in the U.K. She can still be sued in the U.S. or Austria.
“This is a further defeat for Mr. Irving Picard in that his precipitous actions in the United Kingdom have not been admitted to the United Kingdom courts,” Trauttenberg said.
While it isn’t alleged that Kohn and her companies were “parties to or otherwise complicit in Mr. Madoff’s fraud,” Flaux was critical of Kohn for not explaining why her invoices contained false information. This “cries out for a proper explanation from Mrs. Kohn which, bluntly, has not, in my judgment, been provided by the evidence she has put before court,” Flaux said.
Kohn will also have to disclose information about her assets, the judge ruled.
The case is Madoff Securities International Ltd. v. Stephen Ernest John Raven, 10-1468, High Court of Justice, Queen’s Bench Division (London)
--Editor: Anthony Aarons, Zoe Schneeweis
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