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Seven months after kicking off an aggressive campaign to collect $80 billion in damages from firms associated with Bernie Madoff, the trustee liquidating the Ponzi scammer’s firm is beating a hasty retreat.
Irving Picard, after running into howls of protest from the banks and other firms he claimed should have known about Madoff’s scam — and therefore are liable for damages on top of repaying phony profits, told a federal judge overseeing a protest suit filed by one of the banks, UBS, this week that he will drop the damages claim.
The decision marks a significant setback for Picard and potentially Madoff victims. By being forced to back away from his damages claim, Picard might be blocked from pursuing tens of billions of dollars in assets that would ultimately be distributed to Madoff victims.
The retreat from pursuing common law remedies is also good news for the other banks he has sued and for Mets owners Fred Wilpon and Saul Katz.
Picard had sought roughly $1 billion from the partners’ Sterling Equities, which owns the Mets, claiming the businessmen should have known the returns from the Madoff fund over 25 years were too good to be true.
Wilpon and Katz have strenuously denied those charges.
UBS had set up Madoff feeder funds and was sued by Picard for $2.6 billion. Other damages suits: JPMorgan Chase, $6.4 billion; UniCredit, $19.6 billion; HSBC, $9 billion; and Citigroup, $425 million.
Picard made the decision to retreat from his damages claims, sources said, after he was told his aggressive push to grab back billions from companies might not hold water in bankruptcy court.
“Picard clearly is beating a strategic retreat,” said Douglas Furth, a partner at Golenbock Eiseman, who is not involved with the case.
So far Picard has clawed back nearly $8 billion in cash on behalf of Madoff victims from those he has charged improperly profited from Madoff’s Ponzi scheme.
Manhattan federal court judge Jed Rakoff has been weighing removing certain legal claims from Picard’s suits against UniCredit and HSBC.
Judge Colleen McMahon also is mulling whether claims against JPMorgan should be dismissed.
A Picard spokeswoman said the decision to eliminate claims against UBS does not change its game plan.
“The trustee’s decision to eliminate two of the common law causes of action in the complaint involving [UBS and its affiliates] has no impact either on the strength of our case or on the amounts of recoveries and damages that the trustee’s actions will seek for ultimate distribution,” spokeswoman Amanda Remus said in a statement.
One bankruptcy lawyer, who declined to be identified, dismissed Picard’s statements as spin and wondered how Picard could see anywhere near $80 billion in damages by cutting claims.