Madoff Trustee Using ‘Novel’ Arguments, Unicredit Says in Bid to Move Suit
By Linda Sandler - May 11, 2011 10:58 AM ET
UniCredit SpA (UCG), a defendant in a $58.8 billion lawsuit by the trustee liquidating Bernard L. Madoff’s firm, asked a judge to consider whether the racketeering law invoked by the trustee applies outside the U.S.
Trustee Irving Picard named the Italian bank in a December bankruptcy-court suit against Bank Medici AG, its founder, Sonja Kohn, and dozens of other parties in Austria and Italy. He sought $19.6 billion for the conman’s investors, invoking the Racketeer Influenced and Corrupt Organizations Act to triple the amount. The claim is the largest of more than 1,000 filed by Picard.
A district-court judge must address “the viability of the unprecedented Rico claims asserted here,” Milan-based UniCredit said in a court filing yesterday, referring to the case as an “Everest” among molehills. “The exorbitant claims will require significant interpretation of what even the trustee must concede is non-bankruptcy federal law.”
A U.S. District Court judge in Manhattan temporarily took the case, along with one against HSBC Holdings Plc (HSBA), to decide whether Picard can bring common-law claims such as unjust enrichment and can sue on behalf of customers, since his job is to liquidate the Madoff firm. UniCredit urged the judge to focus on Rico as well.
Supreme Court
A recent Supreme Court ruling “upended” historical tests for extraterritorial application of U.S. law, UniCredit said. That casts doubt on whether Picard can use Rico to reach “an alleged enterprise existing almost wholly outside of the United States and expressly directing its alleged conduct to persons living abroad,” the bank said in its court filing.
According to Picard’s suit, Kohn ran a scheme centered on Bank Medici, parts of which overlapped with Madoff’s own fraudulent enterprise, delivering $9.1 billion into the Ponzi scheme. The participants funneled $4 billion of the total through feeder funds, he said.
Shortly before Madoff confessed, in December 2008, Kohn withdrew $536 million from Madoff’s firm and took steps to hide her connection to the money manager, according to Picard.
Kohn and UniCredit are fighting the suit.
The case is Picard v. Kohn, 10-5411, 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.
