Bloomberg News

California AG Asserts Right to Sue Madoff Investor Estate

March 01, 2012

California Attorney General Kamala Harris told a judge she is entitled to pursue a lawsuit against the estate of a former Bernard Madoff investor for allegedly violating state laws, and the court should bar interference in the “people’s action” by the Madoff trustee.

Harris, who has a state enforcement proceeding against the estate of Stanley Chais, made the statements in a bankruptcy court filing in Manhattan yesterday in response to a lawsuit by trustee Irving Picard, who said he alone has the right to claw back money stolen from Madoff customers. Her legal action is independent of Picard’s and makes no attempt to recover money belonging to the Madoff brokerage trustee, she said.

“While the trustee’s desire to maximize the amount of money available to the victims of Bernard Madoff is laudable, his attempt to interfere with the people’s action in order to achieve that goal finds no support in the Bankruptcy Code, and thus, must be rejected,” she said.

Picard is fighting to establish his sole right to sue former Madoff investors who allegedly profited from the Ponzi scheme. Some parties say he is usurping their rights. His settlement with the Jeffry Picower estate has been challenged by former Madoff investors who say they don’t benefit from the agreement and should be allowed to sue the estate themselves.

Harris seeks to pursue a 2009 complaint in Los Angeles County Superior Court that alleges Chais passed himself off as an “investment wizard” and collected almost $270 million in fees between 1995 and 2008 for “doing nothing more than funneling all of his investors’ capital into an epic Ponzi scheme” without their knowledge or authorization. She is seeking to recover illegal profits and other penalties.

The case is Picard v. Hall, 12-01001, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

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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