UPDATE 3-Trustee sues Ruth Madoff for $44.8 mln in US court

* Ruth Madoff sued by court-appointed trustee

* Cites $44.8 mln for recovery to investors

* Lawyer calls action unjustified
(Adds transaction detail)

By Grant McCool

NEW YORK, July 29 (Reuters) - The trustee winding down
imprisoned swindler Bernard Madoff's former firm sued his wife
on Wednesday, seeking at least $44.8 million for investors
bilked in Wall Street's biggest investment fraud.

Court-appointed trustee Irving Picard said in court papers
that of that amount, Ruth Madoff received at least $23.7
million directly or indirectly from Bernard L. Madoff
Investment Securities LLC (BLMIS). He said she received an
additional $21.1 million during the six years up to her
husband's arrest last December.

"For decades, Mrs Madoff lived a life of splendor using the
money of BLMIS's customers," the trustee said in the filing in
U.S. Bankruptcy Court in New York. "Regardless of whether or
not Mrs Madoff knew of the fraud her husband perpetrated ...
she received tens of millions of dollars from BLMIS."

Married to Madoff for 49 years, she was a controller of
Madoff Securities International in London and worked on
accounts at the New York firm, the lawsuit said.

New York lawyer Picard did not accuse Ruth Madoff of
knowing about the multibillion-dollar fraud in which thousands
of investors worldwide were swindled or of taking part in it.
But his lawsuit details 111 transactions which Picard says were
fraudulent and recoverable under bankruptcy code.

For example, she received money from an investment vehicle,
Madoff Technologies, for her and sons Andrew and Mark,
brother-in-law Peter and her niece Shana Madoff, among others.

Although she was never a BLMIS employee, "millions of
dollars belonging to BLMIS and its customers found their way
into her personal accounts and investments without any
legitimate business purpose."

PERPLEXING

In a statement, a lawyer for Ruth Madoff described the
complaint as "particularly perplexing and totally unjustified"
because she has already forfeited almost all of her assets in
an agreement with U.S. prosecutors.

The agreement in June allowed her to keep $2.5 million in
cash, but it did not preclude the trustee from suing her.

"We believe the Trustee's action is wrong as a matter of
law and fairness," lawyer Peter Chavkin said in the statement.

Bernard Madoff, 71, pleaded guilty in March and is serving
a 150-year sentence in a prison in Butner, North Carolina, for
a fraud U.S. prosecutors estimated at as much as $65 billion
over at least two decades.

About $13.2 billion has been traced, according to court
documents. So far, the trustee has recovered about $1.2 billion
under the auspices of the Securities Investor Protection Corp.

Wednesday's lawsuit by Picard said at least $44.8 million
"was subject to recapture" from Ruth Madoff.

It described how the worldwide Ponzi scheme by the former
investment adviser and trader left investors impoverished and
charities ruined. Madoff ran a classic Ponzi scheme in which
early investors were paid with the money of new clients.

"The inequity between Mrs. Madoff's continuing financial
advantages and the economic distress of Madoff's customers
compels the Trustee to bring this action," the complaint said.

On the day of her husband's sentencing a month ago, Ruth
Madoff said she was sympathetic to those left in financial
ruin. Some of the defrauded investors have publicly stated
their suspicions about the disgraced financier's wife.

The case is Irving Picard, Trustee for the liquidation of
Bernard L. Madoff Investment Securities LLC v Ruth Madoff
09-01391 in U.S. Bankruptcy Court for the Southern District of
New York (Manhattan)
(Reporting by Grant McCool, editing by Gerald E. McCormick and
Matthew Lewis)