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December 15, 2008 1:32 PM

Lawyers Flock to Madoff's Massive Wall Street Fraud

Posted by Brian Baxter

The ramifications from the arrest of Bernard "Bernie" Madoff, former chairman and CEO of New York-based Bernard L. Madoff Investment Securities (BMIS), continued to unravel over the weekend as investigators worked to unwind the hedge-fund-cum-Ponzi-scheme and as individuals and institutions sought to assess their exposure.

As reported by The Am Law Daily on Friday, Madoff has retained Ira "Ike" Sorkin, cohead of the securities litigation and white-collar defense practice at Dickstein Shapiro, to represent him in the criminal case, which so far only includes one securities fraud charge. Sorkin is being assisted by Dickstein Shapiro litigation partners Daniel Horwitz and Mauro Wolfe.

Also on Friday, U.S. district court judge Louis Stanton in Manhattan appointed Lee Richards III of New York's Richards Kibbe & Orbe to be receiver for BMIS. The firm's funds were frozen as regulators worked to unwind details of an estimated $50 billion fraud that some claim could be the largest in Wall Street's history.

Two European banking giants detailed their exposure over the weekend. Madrid-based Grupo Santander said that its Geneva-based Optimal Investment Services funds had roughly $3.1 billion invested in Madoff's firm. Paris-based BNP Paribas estimated its potential exposure at in excess of $460 million with private Swiss bank Reichmuth putting its potential losses at $325 million. Japan's Nomura Holdings announced that it also stands to lose approximately $302 million. (The growing scandal even had some commentators wondering whether Madoff's downfall means the end of hedge funds.)

U.S. Attorney for the District of Columbia Jeffrey Taylor and acting assistant U.S. attorney of the criminal division Matthew Friedrich will speak at a Justice Department press conference this afternoon in Washington, D.C. Assistant U.S. attorney Marc Litt in Manhattan is serving as the line prosecutor in the Madoff case.

Other lawyers retained as the scandal unfolds:

Individuals

Bernie Madoff's sons, Mark and Andrew, who reportedly blew the whistle on their father last week, have retained Paul, Weiss, Rifkind, Wharton & Garrison senior litigation partner Martin Flumenbaum.

Frank DiPascali, an official with BMIS, has retained Marc Mukasey, head of the white-collar defense and special investigations practice at Bracewell & Giuliani. (Mukasey is the son of current U.S. Attorney General Michael Mukasey.)

According to The Wall Street Journal, wealthy investors like Boston Properties chairman and media magnate Mortimer Zuckerman, New York Mets owner and Sterling Equities cofounder Fred Wilpon, GMAC chairman J. Ezra Merkin, and Bed Bath & Beyond cofounder Leonard "Lenny" Feinstein have significant investments in BMIS. (We'll update their legal representations as we learn of them.)

Institutions

The Wall Street Journal reports that two investment management funds with significant investments in BMIS--Manhattan-based Fairfield Greenwich Advisors and Rye, N.Y.-based Tremont Capital Management--have retained Scott Berman of New York's Friedman Kaplan Seiler & Adelman to determine how to recover lost assets and examine due diligence procedures. (The Journal reports that Marc Kasowitz of New York's Kasowitz, Benson, Torres & Friedman represents Fairfield Sentry, a fund thought to have the most exposure to BMIS.)

Two renowned plaintiffs firms also have jumped into the fray. Milberg's Brad Friedman and Seeger Weiss cofounder Stephen Weiss announced on Friday that they have been retained by dozens of individual investors--including a senior citizens center, corporate executives, banks, and hedge funds--thought to have lost hundreds of millions of dollars in BMIS. Milberg partners Sanford Dumain and Matthew Gluck also will work on the matter.

There's plenty to go around. Regional firms like Long Island's Ruskin Moscou Faltischek and Fort Lauderdale's Sonn & Erez are representing a well-known MarketWatch economist and several South Florida investors, among others. Seattle's Hagens Berman Sobol Shapiro, New York's Rich & Intelisano, and Boca Raton, Fla.-based securities litigation firm Klayman & Toskes are investigating possible claims on behalf of clients they represent.

The Am Law Litigation Daily's Andrew Longstreth has learned that Steptoe & Johnson litigation partner Michael Miller, a former prosecutor familiar with Ponzi-style schemes, is representing a New York-based investor group.

Charities and Foundations

The Wall Street Journal reports that in addition to individual investors and financial institutions, many prominent Jewish charities and foundations are thought to have significant exposures to BMIS, given Madoff's philanthropic activities.

BMIS had about $17 billion in assets under management, Newsday reports, with about half of the firm's clients being hedge funds. Jerome "Jerry" Reisman, a lawyer with Garden City's Reisman Peirez & Reisman, told the Long Island newspaper that Madoff used his social connections to solicit new investors.

"[Madoff's] returns far exceeded the market," said Reisman, noting that his firm represents several individuals with investments in BMIS. Now Reisman claims that many of them, including "one of the wealthiest real estate families on Long Island," have been wiped out.

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So the son of our current Bush-appointed Atty General is actually the lawyer defending these ponzi-scheme crooks? How is that not a conflict of interest? This is corruption run rampant! Even worse, his law firm is Bracewell & Giuliani? Giuliani? Oh what a criminal web they weave!

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