Now in Legal Rebels:
Posted Jul 29, 2011 12:17 pm CDT
The bankruptcy trustee recovering funds for victims of Bernard Madoff saw victory before being hit with a big setback yesterday.
Trustee Irving Picard reached a $1 billion settlement with Madoff feeder fund Tremont Group Holdings Inc., only to learn hours later of an adverse ruling in a different case. The New York Times, the Wall Street Journal (sub. req.) and Thomson Reuters News & Insight have stories.
The ruling (PDF) by U.S. District Judge Jed Rakoff bars Picard from pursuing $8.6 billion in common law fraud claims against several banking defendants, including London-based bank HSBC. The ruling does allow about $2 billion in claims under bankruptcy law, however, the Wall Street Journal says.
Rakoff found that Picard didn’t have standing to assert common law claims brought on behalf of Madoff’s customers, rather than Madoff’s now defunct company, Thomson Reuters explains. And Picard can’t sue on behalf of Madoff’s former company because of its own wrongdoing and the doctrine of in pari delicto.
The ruling is likely to be cited by defense lawyers in Picard’s $60 billion suit against Unicredit and other defendants that is before Rakoff, Thomson Reuters says. If his reasoning is upheld on appeal, “Picard’s audacious attempt to hold the banks responsible for failing to end Madoff’s Ponzi scheme is doomed,” the story says.