Judge to move part of UniCredit Madoff trustee suit

A US judge said he will take over at least a portion of a USD 19.6 billion lawsuit accusing Italian bank UniCredit of helping convicted fraudster Bernard Madoff orchestrate his Ponzi scheme.

The suit was filed in bankruptcy court in December by Irving Picard, a court appointed trustee in charge of recovering money for Madoff's victims. Along with UniCredit, Picard has accused other defendants - including Austrian banker Sonja Kohn - of running an international network of banks and funds to help perpetrate Madoff's fraud.

UniCredit asked to move the case out of bankruptcy court in February, arguing that it mainly asserts non-bankruptcy claims, such as violations of the Racketeer Influenced and Corrupt Organizations Act.

The bank also said there was a serious risk of duplicative recoveries and inconsistent results and a "virtual certainty of judicial inefficiency."

At a hearing on Tuesday, US District Judge Jed S Rakoff said he will decide by Friday whether to take on the full matter, or just the non-bankruptcy issues.

UniCredit raised questions as to whether the Judge Rakoff's ruling would involve all defendants or would be limited to UniCredit. They requested that the ruling be narrowly tailored. Rakoff did not make a decision, but said he would take the request under advisement.

The 73-year-old Madoff is serving a 150-year prison sentence after pleading guilty in March 2009 to orchestrating the largest Ponzi scheme in history.

Picard and others seeking money for Madoff's customers were paid USD 318.4 million through March, with USD 148.9 million going to Picard's law firm Baker & Hostetler LLP, according to a recent court filing.

Rakoff said he had read about the fees and chided Picard's team for sending too many lawyers to the hearing.

"I can't imagine, for the life of me, why we need four attorneys," Rakoff said. "If you don't know your arguments by now, you're in trouble."

Baker & Hostetler's Timothy Pfeifer defended the team, citing its expertise on "complex" issues.

"I would challenge the characterization that the firm is profligate in this matter," Pfeifer said.

Defendants in the UniCredit suit have until July 25 to file papers asking that the case be dismissed.

The case is In re: Bernard L Madoff Investment Securities LLC, US Bankruptcy Court, Southern District of New York, No 08-1789.