KBL Seeks $4.1 Million From UBS, Madoff-Linked Fund

KBL Seeks $4.1 Million From UBS, Madoff-Linked Fund

By Stephanie Bodoni

Jan. 29 (Bloomberg) -- KBL Richelieu, a French wealth management company, and insurer La Mondiale are suing a Bernard Madoff-linked fund and a UBS AG unit to recover $4.1 million that had been invested with the alleged New York fraudster.

Lawyers for the French investors told a court in Luxembourg today that they made a redemption request to Access International Advisors LLC’s LuxAlpha Sicav-American Selection fund Nov. 14, almost a month before Madoff was charged with fraud. They asked the court to order the fund, through its custodian UBS, to pay the proceeds from the sale.

“What I want is an order of payment against LuxAlpha from the court,” lawyer Pierre Reuter told the judge, adding that UBS should pay within 24 hours of the ruling. “If the bank refuses to do so, I also want an order against UBS.”

UBS has already been ordered to pay French fund manager Oddo & Cie. 30 million euros ($39.3 million) in a similar Luxembourg case. Madoff’s alleged Ponzi scheme may have cost French investors more than 500 million euros, according to French market regulator Autorite des Marches Financiers.

Lawyers for LuxAlpha and UBS argued that judges can’t continue to order disbursements to investors before there is more clarity from Luxembourg’s financial market regulator.

“There are some 38 million euros in LuxAlpha’s account with us and if we have to repay the investors here now, then at some point there’s nothing left for all the others,” said Francois Kremer, whose law firm Arendt & Medernach represents UBS.

Dec. 10 Confirmation

KBL Richelieu Private Banking received confirmation that the LuxAlpha shares were sold on Dec. 10 and payment was due five days later, Reuter said. KBL Richelieu held the shares for La Mondiale, he said.

Madoff was arrested Dec. 11 and charged with securities fraud in a federal court in New York after allegedly telling his sons his investment-advisory business was a Ponzi scheme. Madoff, 70, is free on bail and hasn’t formally responded to the charges or entered a plea.

Isn’t it “first come, first served,” Judge Frederic Mersch asked UBS lawyer Kremer. La Mondiale and KBL had received the confirmation that the shares were sold based on the fund’s net asset valuation of Nov. 17, 2008. “Isn’t it clear that there was this agreement and we must now stick to that?” he said.

In order to treat all investors fairly as a fund custodian, UBS must get instructions from a court before making redemptions given the current investigations into Madoff, bank spokeswoman Tatiana Togni said in a statement.

“Lots of new developments are coming out of this global fraud on a daily basis and based on all this new information it’s not clear anymore what the situation is today,” said Pascal Sassel, a lawyer for LuxAlpha at law firm Loyens & Loeff.

Financial Regulator

It would be best to wait until the investigations by the Luxembourg financial regulator into the liabilities attached to the different Madoff-linked funds are finished, said Thibaut Partsch, another lawyer for LuxAlpha.

“Here we are in a situation where on Nov. 17 we thought there were $1 billion in bonds, but later we realized that they probably never existed,” Partsch told the court. The net asset valuation of the fund from Nov. 17 “was a mistake” because no one had an idea about the fraud, said Partsch.

The regulator in Luxembourg, Europe’s largest mutual funds market, said in an e-mail that its investigations “may be completed within the coming weeks.” It said it will “take appropriate measures in order to protect the investors of the concerned funds.”

The judge scheduled a second hearing Feb. 9.

To contact the reporter on this story: Stephanie Bodoni in Luxembourg at sbodoni@bloomberg.net

Last Updated: January 29, 2009 11:07 EST