Bloomberg News

Madoff Class-Action Lawsuit Is Blocked by U.S. Bankruptcy Judge

June 21, 2012

A U.S. bankruptcy judge barred a class-action lawsuit filed in Florida against the estate of former Bernard Madoff investor Jeffry Picower.

The Madoff brokerage trustee, Irving Picard, settled a lawsuit against the Picower estate for $7.2 billion in 2010, after alleging Picower knew of and profited from Madoff’s fraud. Pamela Goldman and a related partnership asked U.S. Bankruptcy Judge Burton Lifland in Manhattan to let their suit go forward, even after similar actions had been barred by Lifland and other judges on appeal, the judge said yesterday in an order filed in court.

“This court has sole jurisdiction over the administration and distribution of estate assets to customers,” he said.

The judge’s ruling on the Florida class action may help Picard, who has been fighting to preserve his sole right to sue to recover money for the con man’s customers. Customers who have little prospect of being paid by Picard, and other parties, say he is interfering with their rights.

Joshua Angel, a lawyer for Goldman, didn’t immediately return a call seeking comment on the ruling.

Picower, one of the largest of Madoff’s investors, may have suspected the con man was running a Ponzi scheme, according to Picard. Picower drowned in 2009, and his estate forfeited the money to the U.S. and Picard.

California Suit

This month, Picard accused California Attorney General Kamala Harris of breaking the law by suing to recoup $270 million in illegal profits from Stanley Chais’s estate in competition with himself. Harris has said her suit isn’t barred under bankruptcy law, because she is exercising her policing power under state law.

Picard sued Chais and related entities in 2009, demanding the return of $1 billion allegedly withdrawn fraudulently from the Ponzi scheme. The money manager died in 2010.

Most of the $9 billion that Picard says he has raised from settlements is tied up in court challenges, and unavailable for distribution to customers who lost money.

Madoff, 72, is serving 150 years in prison after pleading guilty to orchestrating the fraud that destroyed his New York- based firm, which collapsed in December 2008. Picard and his law firm, Baker & Hostetler LLP, have charged about $273 million for liquidating the estate, while returning just $330 million to customers.

The Lifland ruling is on the docket of the main case: Securities Investor Protection Corp. v. Bernard L. Madoff Investment Securities LLC, 08-ap-1789, 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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