Madoff Investors Want U.K. Unit Bankruptcy Moved

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Madoff Investors Want U.K. Unit Bankruptcy Moved


By Christopher Scinta

April 21 (Bloomberg) -- Investors who filed to push Bernard Madoff into personal bankruptcy are now seeking to have the bankruptcy case of his business’s U.K. unit, Madoff Securities International Ltd., transferred from Florida to New York.

Madoff International filed for Chapter 15 bankruptcy protection in West Palm Beach, Florida, on April 14 and sued Bernard’s brother, Peter Madoff, to recover a $200,000 Aston Martin car, according to court documents.

The case, filed by the U.K. liquidators of Madoff’s business in Florida, should move to Manhattan bankruptcy court because both the involuntary bankruptcy against Bernard Madoff and the liquidation of Bernard L. Madoff Investment Securities LLC by Securities Investor Protection Corp. trustee Irving Picard are pending there, according to court papers filed today by the investors.

“Overlapping discovery, related assets and common creditors” among the various cases mean they should be in the same court, the investors said.

Separately, the arm of the Justice Department that monitors bankruptcy cases today named Alan Nisselson, an attorney with Windels Marx Lane & Mittendorf LLP in New York, as interim trustee in charge of preserving Madoff’s assets for creditors.

U.S. Bankruptcy Judge Burton Lifland ruled yesterday that Madoff’s assets should be under a trustee’s control to better coordinate their collection and distribution to victims of his $65 billion Ponzi scheme. Lifland’s order may be rendered moot after U.S. District Judge Denny Chin, presiding over Madoff’s criminal case, issued an order blocking Madoff and his wife Ruth from disposing of assets including homes, investments, boats and business ventures.

Meet With Creditors

Nisselson said in a phone interview he will meet with Madoff’s various creditors and Picard in an effort to coordinate, as Lifland’s order states. He said it’s unclear how the processes in district court and bankruptcy court will be reconciled.

Madoff pleaded guilty on March 12 to defrauding investors by using money from new ones to pay off old ones. Before his Dec. 11 arrest, he told thousands of clients they had about $65 billion in accounts with him, prosecutors said.

The investors that filed the Chapter 7 bankruptcy against Madoff were Blumenthal & Associates Florida General Partnership, Martin Rappaport Charitable Remainder Unitrust, Martin Rappaport, Marc Cherno and Steven Morganstern. They have said they hold $64 million in claims against Madoff. Madoff’s attorney, Ira Sorkin, has said he will fight the involuntary bankruptcy petition.

Chapter 15 Filing

Madoff International listed assets of as much as $500 million and debt of more than $1 billion in its bankruptcy petition. The London-based business filed under Chapter 15 of the federal bankruptcy code, which is designed to block U.S. lawsuits against foreign companies with U.S. operations while they reorganize overseas.

The liquidators claim that in March and May 2008, Madoff International wire-transferred 135,000 pounds ($198,207) to buy a car for Peter Madoff, court papers show. The vehicle, a 1964 Aston Martin DB2/4, was delivered to Madoff, 63, at his residence in Palm Beach, Florida, according to court papers.

Tina Talarchyk, an attorney for the U.K. liquidators in the Florida case, didn’t immediately return a phone call or e-mail seeking comment.

The bankruptcy case is Bernard L. Madoff, 09-11893; The SIPC case is Securities Investor Protection Corp. v. Bernard L. Madoff Investment Securities LLC, 08-01789, U.S. Bankruptcy Court, Southern District of New York (Manhattan). The Chapter 15 case is In re Madoff Securities International Ltd., 09-16751, U.S. Bankruptcy Court, Southern District of Florida (West Palm Beach).

To contact the reporter on this story: Christopher Scinta in New York bankruptcy court at cscinta@bloomberg.net.

Last Updated: April 21, 2009 17:31 EDT