Madoff's UK unit was "warehouse for stolen money": liquidators' representative

Wed Jun 12, 2013 4:38pm EDT
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By Laurence Fletcher

LONDON (Reuters) - 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.   Continued...

Accused swindler Bernard Madoff (front) enters the Manhattan federal court house in New York March 12, 2009. REUTERS/Shannon Stapleton