March 12, 2009 / 11:38 AM / in 10 years

UPDATE 2-UBP to partially reimburse Madoff victims

* UBP to buy clients’ Madoff exposure at 50 pct of cost

* To pay 1/5 of purchase price each yr plus 2 pct over 5 yrs

* Lawyer says bank risks legal action by clients

(Adds more details, comments)

By Martin de Sa’Pinto

ZURICH, March 12 (Reuters) - Swiss private bank Union Bancaire Privee (UBP) has offered to buy back its clients’ Madoff exposure for 50 percent of the original cost, hoping to rebuild client trust after it was hit hard in the scandal. [ID:nN05342616]

Under the terms of the offer unlisted bank UBP said it will pay one-fifth of the offered price each year plus a 2 percent interest over the course of five years.

“It is a good move from a marketing perspective and as an attempt by the bank to maintain its client base,” Geneva-based business lawyer Franco Foglia told Reuters.

However, he said this may be just an initial attempt by UBP to head off legal action being mooted by many clients, including prospective clients of Foglia’s law firm, with the bank preparing to gauge client reactions to the offer.

UBP was one of the hardest-hit private banks following revelations concerning an alleged $50-billion fraud by former Nasdaq chairman Bernard Madoff.

The Geneva-based bank has admitted an overall exposure to Madoff of more than 1 billion Swiss francs ($863.6 million).

Separately, a report in Swiss newspaper La Tribune de Geneve said legal complaints had recently been lodged against

Aurelia Finance, a Geneva-based asset manager whose customers lost money to Madoff via investments in the Hermes World Fund.

A spokesman for Aurelia declined to comment because he said his company was as yet unaware of the nature of the accusations.

Marc Tappolet, examining magistrate at the Geneva Cantonal Administration, told Reuters that several charges have been filed concerning investor losses in Madoff-related funds. However he did not name any of the defendants.

Tappolet confirmed that several of these charges are criminal rather than civil.

Foglia said that criminal charges do not preclude civil charges which may be brought at a later date, while evidence gathered in support of a criminal indictment can also be used in a later civil case.

Also, the subjects of criminal charges are liable to the seizure of their property of owners or directors of the company under Swiss law. The proceeds from the liquidation of the property can then be used for restitution to damaged parties.

This is an important aspect, since it may push asset management companies which lost client money through Madoff-related investments to seek out of court settlements with clients.

($1=1.158 Swiss Franc)

Editing by Sharon Lindores

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