http://www.ft.com/cms/s/0/bd20e1e6-048c-11e0-a99c-00144feabdc0.html#axzz17oYpQUvb
Madoff trustee launches $19.6 bn lawsuit
By Brooke Masters in London and Rachel Sanderson in Milan
Published: December 10 2010 18:45 | Last updated: December 10 2010 20:31
The US trustee representing *the victims of
Bernard Madoff, has filed a $19.6 bn lawsuit accusing almost 60 people and institutions, including some of Italy and Austria’s largest banks, of participating in a decades-long “illegal scheme”.
The suit, the largest and most serious civil claim filed in the case, targets Bank Medici, the failed Austrian bank,
Sonja Kohn, its former president, and Bank Austria and UniCredit, its partial owners, for allegedly participating in a “conspiracy” that sent money to Madoff.
Ms Kohn is accused of heading a scheme that funnelled $9.1bn in investment funds to Madoff, who pleaded guilty to running one of the biggest frauds in history, according to the suit filed by Irving Picard.
Mr Picard is seeking the return of investors’ funds and bank fees, plus damages.
In the past two weeks, Mr Picard has sued more than a dozen banks, including HSBC, Citigroup, JPMorgan, UBS and Natixis, seeking money for Madoff’s investors. Most say they plan to fight the claims but Union Bancaire Privée has agreed to pay up to $500m to settle the allegations.
The 154-page complaint against what Mr Picard called the “Medici enterprise” marks the first time he has filed a civil “racketeering” suit, a particularly serious civil claim allowing him to seek triple damages.
The suit, which includes claims of unjust enrichment and conversion of stolen money, was filed on Friday in US bankruptcy court against Ms Kohn, six family members, the three banks and some of their staff.
Alessandro Profumo, UniCredit’s former chief executive, and two of its directors are named as defendants.
“Sonja Kohn went by many names and operated under many guises, creating an *international network of spurious investment entities and masterminding an illegal scheme not only to support the Madoff fraud but also to enrich herself, her family, and the *largest banks in Austria and Italy,” said Timothy S Pfeifer, Mr Picard’s attorney.
A lawyer for the former Bank Medici said the bank, Ms Kohn and other members of its management would fight the “completely wrong allegations”.
In the past, Ms Kohn has denied any involvement in Madoff’s fraud.
UniCredit said: “We intend to defend ourselves vigorously.” The public relations firm representing Mr Profumo, declined to comment and he was not contactable by phone.
At its heart, the lawsuit alleges Ms Kohn had a secret agreement dating back to 1987 with Mr Madoff to faciliate the scheme, and that he destroyed many of the records of it shortly before confessing in December 2008. He is serving a 150-year prison sentence.
None of the defendants in the trustee’s lawsuit has been criminally charged.
Mr Picard further alleges that the funds Ms Kohn oversaw made $536m in withdrawals in the two months before the Ponzi scheme collapsed and that she “directed” her husband to pull all their money out of Bank Medici days before Mr Madoff went to authorities.
According to the lawsuit, Ms Kohn was paid $62m in kickbacks from a special fund at Mr Madoff’s New York brokerage for recruiting investors. She also raked in millions of dollars through her stakes in Bank Medici and other companies set up to market and manage Madoff feeder funds.
The trustee contends that Bank Medici, essentially operated as a branch of Bank Austria, which owned the 25 per cent stake not controlled by Ms Kohn. Feeder funds associated with Bank Medici sent about $4bn to Mr Madoff, the lawsuit said.
The lawsuit alleges that Mr Profumo and Ms Kohn “had a close working relationship” that predated UniCredit’s 2005 purchase of Bank Austria. Ms Kohn also allegedly bragged that she had facilitated the acquisition. UniCredit’s Pioneer investment arm had been investing in a separate Madoff feeder fund since 2000.
UniCredit then moved to “obfuscate” its relationship with Mr Madoff by having the Bank Austria Primeo hedge fund sell its direct investment and move the money into other hedge funds that also invested with Mr Madoff, the complaint said.