The trustee in the Bernard Madoff case, Irving Picard, wants another opportunity to sue defendants including Credit Suisse Group AG (ADR) (NYSE:CS), Royal Bank of Canada (NYSE:RY) (TSE:RY) and Credit Agricole SA (EPA:ACA) (OTCMKTS:CRARY).
Citing two rulings handed down by the U.S. District Court in Manhattan, Picard is seeking another chance for himself and his team of lawyers to re-sue the banks.
Legal landscape substantially altered
Bernard Madoff, one of the most notorious financial criminals in living memory, orchestrated a Ponzi scheme in which investors lost over $17 billion. He was sentenced to 150 years in prison in June 2009.
The trustee winding down Bernard Madoff’s investment firm said two rulings handed down by the U.S. District Court in Manhattan earlier this year have ‘substantially altered the legal landscape’. He indicated that the recent rulings changed the burdens he must meet to recover money from certain institutions that profited from Madoff’s fraud and hence is seeking another chance for himself and his team of lawyers.
Citing the April ruling, Picard pointed out that the district court ruled that a greater burden rests on the trustee in the litigation – he must not only show that the money was fraudulently paid out by Madoff, but also that the defendants didn’t receive the money in good faith. This would imply that the trustee has to show that the defendants intentionally ignored red flags.
In a motion on Thursday, the trustee indicated that the above ‘good-faith decision’ set forth for the first time in the history of the Securities Investor Protection Act the pleading burdens that would require a trustee to show particularized facts to support claims that the banks were complicit in the Ponzi scheme, or at least that they turned a blind eye.
Madoff trustee Picard: Banks could be affected
The U.S. District Court in Manhattan put severe new limits on Picard’s ability to recover money from some banks. While its April ruling indicated that the trustee must show that banks intentionally ignored red flags about Madoff’s operation, in July the court ruled that the trustee must show that foreign entities received money from Madoff in the U.S.
In an omnibus motion for leave to replead, Picard and team said the district court in two separate rulings had reset the standard for what the trustee would have to prove in his cases against banks, including Credit Suisse Group AG (ADR) (NYSE:CS), Royal Bank of Canada (NYSE:RY) (TSE:RY), Credit Agricole SA (EPA:ACA) (OTCMKTS:CRARY), Intesa Sanpaolo SpA (BIT:ISP) (OTCMKTS:ISNPY), Banco Bilbao Vizcaya Argentaria SA (ADR) (NYSE:BBVA) (BME:BBVA).
Not surprisingly, as the trustee seeks a way to keep the suits in the Madoff wind-down alive, the defendants in those suits are scrambling to have the cases against them thrown out.