Madoff trustee cannot void Merkin, Fairfield settlements: court

Fri Aug 8, 2014 2:51pm EDT
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By Jonathan Stempel

NEW YORK (Reuters) - In a setback for the trustee seeking money for former customers of fraudster Bernard Madoff, a U.S. appeals court refused to void two settlements benefiting investors who sued "feeder funds" that sent their money to Madoff.

Friday's unanimous decision by a three-judge panel of the 2nd U.S. Circuit Court of Appeals in New York leaves intact a $410 million settlement with J. Ezra Merkin, a Wall Street hedge fund manager who oversaw the Ariel Fund Ltd and Gabriel Capital LP, and an $80 million settlement with Fairfield Greenwich Ltd.

The Merkin settlement had been negotiated by New York Attorney General Eric Schneiderman and also resolved claims by Bart Schwartz, the receiver of the Ariel and Gabriel funds.

Irving Picard, the trustee liquidating Bernard L. Madoff Investment Securities LLC, claimed the settlements impeded his ability to recoup fraudulent transfers that Madoff made to Merkin and Fairfield, and which belong to the firm's estate.

Writing for the appeals court, however, Circuit Judge Robert Sack said Picard "is incapable of establishing either that the settlements would in fact have an immediate adverse economic consequence for the BLMIS estate, or that the estate is likely to suffer irreparable harm" if the settlements go ahead.

Amanda Remus, a spokeswoman for Picard, said the trustee is reviewing the decision, and will keep pursuing his own cases related to Merkin and Fairfield in Manhattan bankruptcy court.

The decision upheld rulings last year by U.S. District Judges Jed Rakoff and Victor Marrero allowing the respective Merkin and Fairfield settlements.

"This ruling is a victory for justice and accountability," Schneiderman said in a statement.   Continued...

Bernard Madoff exits the Manhattan federal court house in New York in this January 14, 2009 file photo.   REUTERS/Brendan McDermid/Files