| LONDON, June 12
LONDON, June 12 U.S. fraudster Bernard Madoff
used his London-based company to "warehouse" huge amounts of
money stolen from the Ponzi scheme and buy luxury items for
himself, a court heard on Wednesday.
The liquidators of UK-based Madoff Securities International
Limited (MSIL) began a civil case in London's High Court on
Monday against defendants including Madoff's brother Peter and
his son Andrew, as well as Stephen Raven, chief executive of the
UK unit, and Bank Medici founder Sonja Kohn.
The case by the liquidators, who are trying to recover $80
million, centers on loans between Madoff's London and New York
operations and payments by the UK firm to Kohn for research, and
the extent of the liability of the directors of the London unit.
Madoff is serving a 150-year prison sentence for his Ponzi
scheme, which was revealed in 2008 and which is estimated by
Irving Picard, the trustee seeking money for Madoff's victims,
to have led to $17.3 billion of investor losses.
"Mr. Madoff was warehousing very, very large amounts of
stolen money in his directors' account in London," said
Pushpinder Saini QC, representing the liquidators.
"The London directors allowed him to use the directors'
account as his personal bank account in London. (That) assisted
him in making purchases of luxury items using MSIL's accounts."
Saini said claims by directors of the UK firm not to know
about Madoff's fraud "doesn't get them off the hook" as they
"ought to ask questions" about the firm's payments.
"Between 2005 and 2008 the directors were happily sending it
(the money) over to New York where it was used for fictitious
T-bill trading," he said.
"So absurd was the situation that Mr. Madoff had to make
payments to the (UK) company so they could pay him the interest
(on the loans)."
In 2009 Reuters revealed that Madoff had moved nearly $160
million of his own assets to his British-based firm in 2007, via
the allotment of two sets of new shares in the firm.
In a statement on Tuesday Raven's lawyer said, "As far as
the London operation was concerned it was a legitimate
proprietary trading business, well capitalised with what the
directors believed was a small part of Mr. Madoff's wealth,
undertaking an honest trading business.
"The claims that Mr. Raven and his co-directors breached
their duties to the company are plainly wrong and are based
solely on the wisdom of hindsight."
Britain's Serious Fraud Office said in 2009 that it had
begun investigating Madoff's British operations but it dropped
the probe the following year.
Saini also said on Wednesday that payments made to Kohn for
research were "hidden from auditors" and that the research she
provided was "worthless" and a "sham".
Kohn has in the past denied knowledge of Madoff's fraud and
claimed instead to be a victim.
The case comes as Picard battles in the courts to recover
money for victims and stop Madoff-related litigation that he
believes interferes with his own. According to his website,
Picard has recovered $9.3 billion for victims.
The High Court case is scheduled to continue on Thursday.