| NEW YORK
NEW YORK Jan 13 Two former investors with
Bernard Madoff cannot pursue claims against the estate of a
Florida businessman who was one of the convicted swindler's
biggest clients, a federal appeals court ruled on Monday.
The decision by a three-judge panel of the 2nd U.S. Circuit
Court of Appeals in Manhattan is a victory for Irving Picard,
the trustee liquidating Madoff's firm, in a battle over his
authority to reach settlements on behalf of victims of Madoff's
Picard reached a $7.2 billion settlement with the estate of
Jeffry Picower in 2010, the largest such settlement on behalf of
victims of Madoff's Ponzi scheme.
The trustee has said that Picower, who drowned in 2009, knew
or should have known that Madoff was operating a fraud.
About $5 billion was to go to the estate of Bernard L.
Madoff Investment Securities LLC and $2.2 billion was to be
forfeited to the U.S. government. Picower's widow at the time
said she "absolutely confident" her husband was not complicit.
Despite the settlement, Madoff victims Adele Fox and Susan
Marshall sought to press their own claims against Picower.
Picard had denied Fox's claims to recover money because she
was a "net winner," having withdrawn more money than she had in
principal. Marshall, whose account showed a final balance of
$203,000, received $30,000 from Picard in 2009.
U.S. Bankruptcy Judge Burton Lifland, who oversaw the Madoff
firm's bankruptcy prior to his death at age 84 on Sunday, issued
an injunction in 2011 blocking Madoff victims from pursuing
individual claims against Picower's estate.
That injunction was upheld in 2012 by U.S. District Judge
John Koeltl in Manhattan, and again on Monday by the 2nd
Circuit, which found the claims of Fox and Marshall were
"derivative" of Picard's claims.
"They are predicated upon mere secondary harms flowing from
the Picower defendants' fraudulent withdrawals and the resulting
depletion of (Madoff firm) funds," Judge Jose Cabranes wrote for
a three-judge 2nd Circuit panel.
He said Fox and Marshall were free to pursue claims against
Picower's estate that did not derive from Picard's claims.
Lawyers for Fox and Marshall did not immediately respond to
requests for comment.
Picard has largely been successful in defeating challenges
to his authority to recover money for Madoff customers.
He has recovered about $9.51 billion for victims, excluding
sums from last week's settlements with Madoff's bank JPMorgan
Chase & Co, and distributed more than half this amount.
Separately on Monday, the U.S. Supreme Court asked the Obama
administration to weigh in on whether Picard can recover damages
from banks he accused of aiding in Madoff's fraud.
It was not immediately clear who would replace Lifland as
the judge overseeing the Madoff liquidation.
Madoff pleaded guilty in March 2009 and is serving a
150-year sentence in federal prison.
The cases are Marshall et al v. Picard, 2nd U.S. Circuit
Court of Appeals, Nos. 12-1645, 12-1646, 12-1651, 12-1669,