JP Morgan fires back in $6.4b Madoff lawsuit
NEW YORK (Reuters) JPMorgan Chase & Co accused the trustee seeking $6.4 billion for victims of Bernard Madoff’s Ponzi scheme of doing an end run around the law in pursuing his case, and said it has a right to a jury trial.The second-largest US bank said court-appointed trustee Irving Picard is exceeding his authority by suing in bankruptcy court, where a judge rather than a jury would decide the case. It said the case should be moved to federal district court.“The trustee’s massive damages action against JPMorgan bears no resemblance to a typical lawsuit commenced by a bankruptcy trustee,” JPMorgan said in a court filing late on Tuesday. “In substance, the trustee is trying to pursue an enormous back-door class action,” it said.Kevin McCue, a spokesman for Picard, did not immediately respond to a request for a comment yesterday.A ruling in the case could affect some other lawsuits that Picard has filed to recover money from companies and individuals he believes benefited from Madoff’s estimated $65 billion Ponzi scheme, which was uncovered in December 2008. Picard has filed lawsuits seeking more than $50 billion. Defendants include the owners of the New York Mets baseball team, from whom he seeks as much as $1 billion, and other banks such as HSBC Holdings Plc and UBS AG.JPMorgan was the main banker for Madoff’s firm, Bernard L. Madoff Investment Securities LLC, for more than 20 years. It has said it did not know about or assist in Madoff’s fraud.“The crux of this lawsuit is that JPMorgan breached its duties as Madoff’s banker, and hinges on what a bank’s duties are when there are red flags about a customer,” said Philip Bentley, a partner at Kramer Levin Naftalis & Frankel LLP.“The lawsuit is very different from most of Picard’s lawsuits, which seek to claw back money from Madoff investors rather than seek damages for aiding and abetting a fraud,” added Bentley, who represents some of these former investors. Picard so far has recovered about $10 billion for former Madoff clients. The trustee is a partner at Baker & Hostetler LLP. JPMorgan’s court filing was submitted by John Savarese, a partner at Wachtell Lipton Rosen & Katz.In bankruptcy court papers unsealed on February 3, Picard accused JPMorgan of having significant doubts about Madoff but silently acquiescing in his fraud, hoping to preserve its own investments and its business relationship with Madoff.Madoff, 72, pleaded guilty in March 2009 and is now serving a 150-year sentence in a North Carolina federal prison.