April 30, 2009 / 6:26 PM / 9 years ago

Lawyer: Madoff brother demands $500,000 license fee

NEW YORK (Reuters) - Bernard Madoff’s brother demanded a $500,000 licensing fee for part of the market-making unit of the swindler’s firm being sold at auction, a lawyer for the trustee winding down the company said on Thursday.

The issue of the fee request has not been resolved, but the winning bidder at Monday’s auction, Boston financial firm Castor Pollux LLC, went ahead with the deal without the licensing agreement, said lawyer Marc Hirschfield.

At a hearing Thursday in U.S. Bankruptcy Court in New York, Judge Burton Lifland said he was willing to approve the auction in which Castor Pollux bid up to $25.5 million [ID:nSP79600].

Hirschfield told reporters after the hearing that Madoff’s wife Ruth Madoff, his brother Peter Madoff and others owned PRIMEX LLC, which had the license for the software that enabled Bernard L. Madoff Investment Securities LLC’s (BLMIS) brokerage in New York to do electronic trading.

He said the disagreement over the PRIMEX license “won’t disrupt the sale of the market-making business.” Trustee Irving Picard expects eventually to be able to Bring PRIMEX into the BLMIS estate “and he will grant the license to Castor Pollux down the road.”

Peter Madoff made the demand for the fee in the last week when he was asked to sign the agreement that would turn over the unit to the trustee, Hirschfield said.

A lawyer for Peter Madoff could not immediately be reached for comment.

The trustee argues that all the Madoff assets should be recovered to pay former customers of the fraud, the biggest in Wall Street history with as much as $65 billion invested in the past 20 years.

Bernard Madoff, who turned 71 on Wednesday, pleaded guilty on March 12, three months after his arrest last December. He is jailed awaiting sentencing scheduled for June 16.

Only Madoff and his outside accountant have been charged.

Peter Madoff was an executive of the brokerage arm, which Picard has said was a legitimate business while all of the nefarious activity took place in the investment advisory part of the firm.

Picard and his lawyers have recovered only about $1 billion so far in their continuing global search for money and assets once owned by the swindler.

The case is Securities Investor Protection Corp v Bernard L. Madoff Investment Securities LLC 08-01789 in U.S. Bankruptcy Court for the Southern District of New York (Manhattan)

Reporting by Grant McCool; Editing by Richard Chang

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