* Trustee claims JPMorgan and other banks aided fraud
* Appeal seeks to reinstate nearly $30 bln in claims
* Banks deny knowledge of Madoff fraud
By Joseph Ax
NEW YORK, Nov 21 A lawyer for the trustee
seeking money for Bernard Madoff's victims asked an appeals
court on Wednesday to restore nearly $30 billion in claims
against JPMorgan Chase & Co and other banks, saying it
would force those who furthered the fraud to "pay their fair
In arguments before the 2nd U.S. Circuit Court of Appeals,
the trustee's lawyer sought to overturn lower court rulings that
only Madoff victims themselves -- not the trustee -- could sue
third parties such as banks for damages.
The trustee has said JPMorgan, Madoff's main bank for two
decades, and other banks ignored numerous warning signs about
Madoff's business -- allegations the banks have denied.
Oren Warshavsky, a lawyer for trustee Irving Picard, told
the appeals court that federal law empowers Picard to pursue
claims on behalf of Madoff customers. He said the banks' failure
to detect that the money manager was running a Ponzi scheme
exacerbated the victims' losses.
"Anybody who suffered by virtue of this fraud, their
suffering was increased each time it was extended," Warshavsky
said. "Those that helped propagate it should pay their fair
Lawyers for the banks said only the victims of a purported
fraud themselves can pursue fraud claims.
"A trustee has no standing generally to sue third parties on
behalf of creditors," said John Savarese, a lawyer for JPMorgan.
The Madoff fraud was revealed in December 2008, when the
financier ran out of money to meet redemption requests from his
customers. Madoff, 74, is serving a 150-year prison sentence.
The trustee was appointed to liquidate Madoff's firm,
Bernard L. Madoff Investment Securities LLC, and hunt for
recoveries for the swindler's victims. As part of his efforts,
Picard sued various banks or "feeder funds" that did business
with Madoff, saying they ignored red flags about the fraud,
often to win more fees or commissions.
In a setback for the trustee, U.S. District Judge Colleen
McMahon in Manhattan last November tossed all but $425 million
of Picard's $19.9 billion lawsuit against JPMorgan. Her decision
followed a similar ruling in July 2011 from U.S. District Judge
Jed Rakoff, who dismissed $8.6 billion of Picard's claims
against HSBC Holdings Plc and the Italian bank
Picard has recovered more than $9.2 billion for former
Madoff customers. The Rakoff and McMahon rulings wiped out close
to one-third of the trustee's more than $103 billion of claims
against banks and other defendants. Individual Madoff customers
also have sued banks.
The cases are Picard v. HSBC Bank Plc et al, No. 11-5175 and
Picard v. JPMorgan Chase & Co et al, No. 11-5044, both in the
2nd U.S. Circuit Court of Appeals.