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:

Religion and Politics

REUTERS SHOWCASE

Fund Raising

Fund Raising

Flipkart raises $700 million in fresh funding.   Full Article 

Reforms Push

Reforms Push

Modi may order insurance, coal reforms if vote delayed - officials.  Full Article 

Reuters Exclusive

Reuters Exclusive

India looks to sway Americans with nuclear power insurance plan  Full Article 

To Boost Growth

To Boost Growth

Crank up public spending to revive growth - chief economic adviser.   Full Article 

Bold Steps

Bold Steps

SpiceJet rescue plan marks bold bet on Indian aviation recovery.   Full Article 

New Airline

New Airline

Tata, Singapore Air venture Vistara to take off on Jan 9.  Full Article 

Online Sales

Online Sales

Knock knock. Who's there? Amazon's best-selling holiday author.  Full Article 

Hacking Attack

Hacking Attack

N.Korea says did not hack Sony, wants joint probe with U.S.  Full Article 

Reuters Poll

Reuters Poll

BSE Sensex to hit 32,980 by December 2015  Full Article 

Reuters India Mobile

Reuters India Mobile

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