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Madoff trustee seeks first 'clawback'

A police officer and a US marshal stand watch on a balcony of Bernard Madoff's seized Palm Beach, Fla., residence last week. A police officer and a US marshal stand watch on a balcony of Bernard Madoff's seized Palm Beach, Fla., residence last week. (Brandon Kruse/Palm Beach Post/via Associated Press)
Associated Press / April 10, 2009
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NEW YORK - The trustee overseeing the liquidation of Bernard Madoff's business sued yesterday to retrieve $150 million paid out to one of the fallen financier's clients about a month before Madoff's arrest.

The trustee, Irving Picard, filed the lawsuit in US Bankruptcy Court in Manhattan to retrieve the money from Banque Jacob Safra (Gibraltar) Limited. It was the first major attempt to get back money paid out recently to a Madoff investor, an effort known as a "clawback."

In the lawsuit, Picard said the funds he is recovering would not be adequate to reimburse investors.

Thus, he said, he must use his authority to recover money from customers who received preferences or payouts of fictitious profits "to the detriment of other defrauded customers whose money was consumed by the Ponzi (pyramid) scheme."

The lawsuit said Safra had since 2002 invested a total of $327 million with Madoff's investment business. The money was invested on behalf of an international company, Vizcaya Partners Limited.

Picard said Madoff's business wired $150 million to Safra on Oct. 31, apparently for the benefit of Vizcaya.

The trustee wrote that the transfer amounted to preferential treatment under federal bankruptcy rules, which permit the recovery of money paid out in the three months before a bankruptcy proceeding is initiated.

Efforts to reach Safra and Vizcaya, were not immediately successful.