Madoff's UK unit was "warehouse for stolen money" - liquidators' representative

LONDON Thu Jun 13, 2013 2:06am IST

Related Topics

LONDON (Reuters) - U.S. fraudster Bernard Madoff used his London-based company to "warehouse" huge amounts of money stolen from the Ponzi scheme and buy luxury items for himself, a court heard on Wednesday.

The liquidators of UK-based Madoff Securities International Limited (MSIL) began a civil case in London's High Court on Monday against defendants including Madoff's brother Peter and his son Andrew, as well as Stephen Raven, chief executive of the UK unit, and Bank Medici founder Sonja Kohn.

The case by the liquidators, who are trying to recover $80 million, centers on loans between Madoff's London and New York operations and payments by the UK firm to Kohn for research, and the extent of the liability of the directors of the London unit.

Madoff is serving a 150-year prison sentence for his Ponzi scheme, which was revealed in 2008 and which is estimated by Irving Picard, the trustee seeking money for Madoff's victims, to have led to $17.3 billion of investor losses.

"Mr. Madoff was warehousing very, very large amounts of stolen money in his directors' account in London," said Pushpinder Saini QC, representing the liquidators.

"The London directors allowed him to use the directors' account as his personal bank account in London. (That) assisted him in making purchases of luxury items using MSIL's accounts."

Saini said claims by directors of the UK firm not to know about Madoff's fraud "doesn't get them off the hook" as they "ought to ask questions" about the firm's payments.

"Between 2005 and 2008 the directors were happily sending it (the money) over to New York where it was used for fictitious T-bill trading," he said.

"So absurd was the situation that Mr. Madoff had to make payments to the (UK) company so they could pay him the interest (on the loans)."

In 2009 Reuters revealed that Madoff had moved nearly $160 million of his own assets to his British-based firm in 2007, via the allotment of two sets of new shares in the firm.

In a statement on Tuesday Raven's lawyer said, "As far as the London operation was concerned it was a legitimate proprietary trading business, well capitalised with what the directors believed was a small part of Mr. Madoff's wealth, undertaking an honest trading business.

"The claims that Mr. Raven and his co-directors breached their duties to the company are plainly wrong and are based solely on the wisdom of hindsight."

Britain's Serious Fraud Office said in 2009 that it had begun investigating Madoff's British operations but it dropped the probe the following year.

Saini also said on Wednesday that payments made to Kohn for research were "hidden from auditors" and that the research she provided was "worthless" and a "sham".

Kohn has in the past denied knowledge of Madoff's fraud and claimed instead to be a victim.

The case comes as Picard battles in the courts to recover money for victims and stop Madoff-related litigation that he believes interferes with his own. According to his website, Picard has recovered $9.3 billion for victims.

The High Court case is scheduled to continue on Thursday. (Reporting by Laurence Fletcher; Editing by Toni Reinhold)

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

REUTERS SHOWCASE

Quarterly Results

Quarterly Results

HDFC Bank net profit up 20 percent, lags estimates.  Full Article 

China Economy

China Economy

China's growth slowest since global crisis, annual target at risk  Full Article 

Coal Reforms

Coal Reforms

Factbox - India pushes ahead with coal reforms  Full Article 

Apple Result

Apple Result

Apple's iPhone sales beat Street but iPad volumes slide  Full Article 

Airport Accident

Airport Accident

Total CEO de Margerie killed in Moscow plane accident - airport spokeswoman.  Full Article 

Nadella's Paycheck

Nadella's Paycheck

New Microsoft CEO Nadella's pay tops $80 mln with big stock awards.  Full Article 

Deregulation Impact

Deregulation Impact

Private fuel retailers to dip toe, not dive back, into India  Full Article 

JLR China

JLR China

JLR sees 20 percent growth in China sales this year - exec  Full Article 

An RBI First

An RBI First

RBI releases minutes of financial stability council's Aug meet  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device.  Full Coverage