More banks reveal exposure to Madoff scandal

By Martha Graybow and Douwe Miedema

NEW YORK/LONDON (Reuters) - Banks and investment funds around the world lined up on Monday to disclose they invested billions of dollars in companies controlled by Bernard Madoff, who is accused by U.S. authorities of masterminding a massive fraud.

Britain's HSBC Holdings Plc was the latest bank to join the growing list, saying it had exposure of around $1 billion, making it one of the biggest victims of the alleged $50 billion fraud.

Royal Bank of Scotland Group Plc and Man Group Plc in the United Kingdom, Japan's Nomura Holdings Inc and France's Natixis SA also said they were hit by the worldwide scandal.

In the United States, no major banks have said they were exposed. But Sterling Equities, which owns the New York Mets professional baseball team, acknowledged it had accounts managed by Madoff -- one of hundreds of private investors, pension funds and charities believed to have been bilked by companies tied to his investment advisory firm, part of Bernard L. Madoff Investment Securities LLC.

Madoff's lawyer, Ira Sorkin, declined comment on the case on Monday, other than to say that a hearing was scheduled Friday in the Securities and Exchange Commission's case against his client in U.S. District Court in New York. Sorkin said he did not know yet if Madoff would attend that hearing.

Madoff's two sons, who worked at the firm, said Monday through their lawyer they had no knowledge of the alleged fraud.

U.S. prosecutors and regulators have accused Madoff, a former chairman of the Nasdaq Stock Market, of running the fraud through his investment advisory business.

The Wall Street Journal, citing regulatory filings, reported Monday that a charity established by Oscar-winning film director Steven Spielberg, the Wunderkind Foundation, appears to have invested a significant portion of its assets with Madoff.

In 2006, the Journal said, the Madoff firm accounted for roughly 70 percent of the foundation's interest and dividend income.

A Spielberg spokesman, Marvin Levy, confirmed to Reuters that the foundation "did have an investment with (Madoff)" and that the charity suffered some losses on that investment, but Levy declined to elaborate.

Financial companies, reeling after a year of enormous writedowns on bad credit assets, have so far tallied up more than $10 billion in direct and indirect exposure to the alleged fraud by Madoff, the 70-year old trader who was arrested on Thursday.

Even investors who managed to pull their funds out of Madoff's firm two years ago, or more, may have to return money, said Jeff Marwil, a partner at law firm Winston & Strawn, which is representing a group of Madoff investors.

"It's about the equalization of harm," Marwil said.

Shares in France's Natixis were down 3.4 percent after it said it had as much as 450 million euros ($605 million) of exposure to the fiasco.

Man Group, the world's largest listed hedge fund manager, said it was exposed to Madoff through its RMF fund of funds business, which has $360 million invested in funds directly or indirectly subadvised by Madoff.