Madoff Trustee Sues HSBC for $9B

Picard goes after another big bank

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    NEWSLETTERS

    Irving Picard, the trustee in charge of Bernie Madoff?s seized assists, is suing Madoff?s primary bank - JP Morgan. Picard alleges the bank ignored warning signs of the infamous ponzi scheme, and its eventual implosion. The bank responded to the suit, saying they have become a target because of their ?deep pockets.?The trustee is also looking to Madoff?s investors, many of who unknowingly took out more money over the years than their initial investment.Chief investigative reporter Jonathan Dienst brings us more on the story. (Published Friday, Dec 3, 2010)

    HSBC prolonged disgraced financier Bernard Madoff's ability to burn investors by "engineering a labyrinth" of international sources of funding for his epic Ponzi scheme, a court-appointed trustee alleged Sunday.

    Trustee Irving Picard announced a lawsuit in federal bankruptcy court in Manhattan that seeks to recover $9 billion in illicit earnings and damages from the Britain-based bank.

    The suit alleges that HSBC ignored warnings from its own accountants that Madoff's phenomenal investment record was suspect.

    "Had HSBC and (its executives) reacted appropriately to such warnings and other obvious badges of fraud outlined in the complaint, the Madoff Ponzi scheme would have collapsed years, billions of dollars, and countless victims sooner," Picard said in a statement. "The defendants were willfully and deliberately blind to the fraud, even after learning about numerous red flags surrounding Madoff."

    A HSBC spokeswoman declined comment late Sunday.

    Madoff, 72, is serving a 150-year sentence in a federal prison in North Carolina after admitting that he ran his scheme for at least two decades, using his secretive investment advisory service to cheat thousands of individuals, charities, celebrities and institutional investors. Losses are estimated in the tens of billions, making it the biggest investment fraud in U.S. history.

    The complaint against HSBC, affiliates and executives alleges they helped funnel more than $8.9 billion to Madoff through a dozen so-called feeder funds based in Europe, the Caribbean and Central America.

    "The defendants engineered a labyrinth of hedge funds, management companies and service providers that, to unsuspecting outsiders, seemed to compose a formidable system of checks and balances," said Oren Warshavsky, a lawyer for Picard. "Yet the purpose of this complex architecture was just the opposite: the defendants wanted to provide different modes for directing money to Madoff in order to avoid scrutiny and generate more fees."

    Picard, appointed in 2008 to unravel the fraud and help victims recover losses, has filed similar complaints in recent weeks demanding billions of dollars from UBS AG and JP Morgan Chase. Both deny any wrongdoing.