Madoff trustee files appeals in bank suits

Thu Feb 16, 2012 7:38pm EST

* Trustee accuses JPMorgan, HSBC and other banks of aiding fraud

* Asks appeals court to reinstate $30 billion in claims

* Defends authority to pursue claims for victims

By Terry Baynes

Feb 16 (Reuters) - The trustee seeking money for Bernard Madoff's victims filed two appeals on Thursday to reverse judges' rulings that wiped out around $30 billion of his claims against banks including JPMorgan Chase & Co and HSBC Holdings Plc.

U.S. District Judge Colleen McMahon of Manhattan in November took away all but $425 million of trustee Irving Picard's $19.9 billion lawsuit against JPMorgan, Madoff's main bank for two decades. Her colleague, Judge Jed Rakoff, in July dismissed $8.6 billion of Picard's claims against HSBC and Italy's UniCredit SpA.

Both judges found that Picard, a trustee for the estate of Bernard L. Madoff Investment Securities LLC, lacked the power to bring numerous claims against the banks for violating their duty to detect the fraud. Rather, the claims belong to the victims themselves, the judges ruled.

In two briefs filed with the U.S. Court of Appeals for the 2nd Circuit, Picard said that the judges were wrong to prevent him from seeking damages from banks he believes aided or abetted Madoff in his fraud.

He argued that case law, the U.S. Bankruptcy Code, New York law and sound public policy give him the authority to pursue claims against the banks on behalf of customers.

JPMorgan, HSBC and UniCredit did not immediately respond to requests for comment.

The banks have argued that, while the law allows Picard to sue to recover investors' property, the trustee had no right to pursue fraud claims against them, because such claims could be brought only by the victims of a fraud.

Madoff is currently serving a 150-year prison term.

The rulings by McMahon and Rakoff dismissed roughly one-third of Picard's more than $103 billion of asserted claims against banks and other defendants.

The cases before the 2nd Circuit are Picard v. HSBC Bank Plc et al, No. 11-5175 and Picard v. JPMorgan Chase & Co et al, No. 11-5044.

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