Madoff trustee launches urgent bid for broad powers - Trustee Info

Madoff trustee launches urgent bid for broad powers
Diana Henriques, New York
January 5, 2009
THE trustee overseeing the bankruptcy of Wall Street financier Bernard Madoff's trading firm has made an urgent request to the courts for unusually broad authority to subpoena witnesses and documents, citing the vast scale of what is alleged to be a $US50 billion ($A70.2 billion) Ponzi scheme.

While not unprecedented, the request from the trustee, Irving Picard, is far from routine, and it illustrates how much Mr Picard's burdens have expanded beyond a trustee's traditional tasks of identifying assets and selling them to satisfy claims.

Noting that "the debtor's operations were allegedly a massive fraudulent enterprise," Mr Picard said he needed the authority to issue expedited subpoenas to investigate those allegations — and that his need was "most urgent".

The request was filed on Wednesday amid new allegations that Madoff had been pulling in fresh investors — and at least $US10 million in cash — within a week of his arrest on December 11 on federal fraud charges.

The trustee is just one of several investigators trying to determine what Madoff did with investors' money. Prosecutors are conducting a criminal investigation, while the Securities and Exchange Commission continues its regulatory inquiry.

The SEC is also conducting an internal examination of why it failed to respond aggressively to previous warnings about Madoff, going back several years. And the House Financial Services Committee will hold a hearing today to explore the regulatory implications of the Madoff case, with a witness list that includes the SEC's inspector-general.

According to his lawyers, Madoff — free on a $US10 million bond but confined to his Manhattan apartment — is cooperating with federal authorities.

Few details have emerged about the case beyond those included in the earliest complaints: that Madoff's sons questioned him on December 10 about his plan to distribute several hundred million dollars in bonuses two months ahead of schedule; when confronted, he confessed that his business was a fraud whose losses could run as high as $US50 billion.

His sons promptly reported the confession to federal authorities, and their father was arrested the next day.

Meanwhile, the management of Bank Medici, the small Austrian merchant bank that emerged as one of the largest victims of the Madoff scandal has resigned, making room for a government-appointed accountant to temporarily take over day-to-day operations of the bank.

NEW YORK TIMES