UBS Accused of Aiding in Madoff's Fraud
UBS is facing a $2 billion lawsuit from the trustee charged with recouping money for Bernard Madoff’s victims, who claims the firm “lent an aura of legitimacy” to Madoff’s Ponzi scheme. So reports the Wall Street Journal.
Irving Picard filed 23 counts of financial fraud and misconduct against UBS and related entities in a New York bankruptcy court on Wednesday, claiming UBS actively participated in the scam. The firm denies any wrongdoing.
The suit was filed in redacted form because UBS has designated as “confidential” information related to its dealings with Madoff. Picard has accused UBS of “trying to shield this information from the public.”
Picard issued a statement saying he intends to file a court application to have the confidential designation removed “and the complaint made public as soon as possible,” Bloomberg reports.
Picard says the bank’s involvement gave legitimacy to several global feeder funds by acting as their sponsor, custodian and administrator. He says UBS sidestepped legal responsibility for the actions of those funds by employing undisclosed indemnity agreements.
Picard claims UBS had inklings that fraud was taking place but still installed Madoff as the sub-custodian of the feeder funds, giving him the power to value the funds, the Journal reports.
David Sheehan, Picard’s counsel, says Madoff's scheme would not have been as successful if UBS had not “agreed not only to look the other way, but also to pretend that they were truly ensuring the existence of assets and trades when in fact they were not and never did.”
UBS on Wednesday called the allegations "completely unfounded and without merit,"
Picard is looking to recover redemptions and fees, as well as damages and disgorgement from UBS, according to Bloomberg.
The lawsuit also names the bank’s UBS (Luxembourg) SA unit and feeder funds including LuxAlpha Sicav and Groupement Financier. LuxAlpha lost 95% of its approximately $1.4 billion in assets and was dissolved four months after Madoff’s arrest in December 2008. LuxAlpha liquidators are also suing UBS and Ernst & Young, the fund’s auditor, for the return of lost assets, Bloomberg reports.
Picard alleges Luxalpha, Groupement Financier and other European feeder funds withdrew more than $1.1 billion from the Madoff funds in the six years before Madoff’s arrest; $796 million was withdrawn in the final 90 days, the New York Times reports.
Meanwhile, bail was set last week at $5 million for Madoff’s former secretary, Annette Bongiorno, who is accused of helping conceal the fraud, the Associated Press reports.
Bongiorno was arrested in Florida earlier this month and is charged with conspiracy and securities fraud. She was released under house arrest after friends and relatives posted her bail, the New York Daily News reports.
Prosecutors claim Bongiorno helped Madoff defraud his wealthy clients for decades. It is also alleged she withdrew more than $14 million for herself.
Bongiorno denies any wrongdoing, the AP reports.
By Kathleen Laverty
(News summaries based on original reports in other publications are prepared by the FundFire staff and are not created, sponsored, approved or endorsed by the publications to which the original reports are attributed.)