The Work

December 7, 2010 5:40 PM

Picard Makes It So: Madoff Trustee Nets $1 Billion in Settlements, Sues Mets

Posted by Brian Baxter

He might not be captain of the Enterprise, but Bernard L. Madoff Investment Securities (BLMIS) liquidating trustee Irving Picard of Baker & Hostetler is firing plenty of his own salvos as he seeks to recoup funds for out-of-pocket Madoff investors.

Picard has secured settlements with a former friend of the notorious Ponzi schemer in Boston-based philanthropist Carl Shapiro and a leading Swiss private bank in Union Bancaire Privée (UBP), while slapping the owners of the New York Mets baseball team with a long-anticipated clawback suit.

On Monday, Picard announced that UBP had agreed to pay $470 million to Madoff victims in order to avoid litigation. In a statement, Picard and his firm called the agreement the largest feeder fund bank settlement to date. (Click here for a copy of the 67-page settlement agreement, which provides for an additional payment of up to $30 million.)

That sum doesn't bode well for the trio of major banks that Picard has sued over the past two weeks in the prelude to a December 11 deadline--two years to the day of Madoff's downfall--that will preclude any further actions against parties alleged to have enabled or profited from the disgraced financier's $65 billion fraud. Baker & Hostetler litigation partner David Sheehan, who is serving as lead counsel to Picard in his role as BLMIS trustee, did not immediately respond to a request for comment.

Court documents show that Geneva-based UBP was advised on the settlement by Herbert Wachtell and Stephen DiPrima of Wachtell, Lipton, Rosen & Katz. UBP, which invested in Madoff through feeder funds, has retained the firm to defend it in class action litigation stemming from the collapse of BLMIS. (Forbes has more on the circumstances leading to UBP's settlement.)

On Tuesday, one of Madoff's first ill-fated clients agreed to forfeit $625 million to the government, Bloomberg reports. The forfeiture agreement reached with 97-year-old Carl Shapiro, who had a BLMIS account since 1961, was unveiled in an 18-page complaint filed in U.S. district court in Manhattan by federal prosecutors.

The civil suit claims that money from the Shapiro family's accounts at JPMorgan Chase was traced to funds invested with Madoff. Bloomberg reports that the Shapiro deal was part of a joint effort between Picard and federal prosecutors and that the government will request that the funds be distributed to "victims of the fraud."

Court documents show that the Shapiro family was represented by Shearman & Sterling litigation partner Stephen Fishbein and David Andelman of Boston's Lourie & Cutler. Andelman is also a member of the CBS Corporation's board of directors. (According to our previous reports, the Shapiro family retained Shearman shortly after Madoff turned himself in two years ago. Click here for a statement from the Shapiros.)

The next settlement on Picard's slate could come from Sterling Equities--a group of companies owned by the family of Fred Wilpon, owner of the Mets and their minor league franchise, the Brooklyn Cyclones. Picard sued Sterling, the Mets, and the Wilpons on Tuesday, accusing the so-called net winners of making $47.8 million in profits on Madoff's massive swindle, according to The Wall Street Journal.

The Wilpons are among a group of BLMIS customers who are unhappy with Picard's plans for compensating Madoff victims. A Sterling entity put a total of $522.7 million into Madoff accounts and withdrew $570.5 million for a nearly $48 million profit, exposing the Wilpons to clawback actions by Picard, as detailed in court filings and The New York Times.

Picard filed the latest complaint under seal in U.S. bankruptcy court seeking to recover money from Sterling, its partners, and Wilpon family members. Picard said in a statement that his firm is "engaged in good-faith negotiations" with the defendants, who have not been charged criminally. Sterling confirmed the settlement negotiations in a statement by its general counsel Gregory Nero.

Davis Polk & Wardwell litigation partner Karen Wagner, who is representing the Wilpons and their affiliated entities, did not respond to a request for comment on the suit.

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