UBS Said to Get Subpoena From Trustee Liquidating Madoff Firm

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UBS Said to Get Subpoena From Trustee Liquidating Madoff Firm


By David Glovin, David Voreacos and Christopher Scinta

May 7 (Bloomberg) -- UBS AG, the Swiss bank that helped wealthy Americans evade U.S. taxes, was subpoenaed by the bankruptcy trustee liquidating Bernard L. Madoff Investment Securities LLC, a person familiar with the matter said.

The subpoena from Irving Picard seeks information about Madoff accounts at UBS, Switzerland’s largest bank by assets, the person said. Picard, who is liquidating the firm, also seeks information about UBS accounts held by several Madoff feeder funds and banks, including Banco Santander SA, the person said.

“We have received a third-party subpoena and we are complying,” UBS spokeswoman Karina Byrne said in an interview, when asked if the bank had received a Madoff-related subpoena from Picard. She declined further comment.

UBS avoided U.S. prosecution for helping some Americans evade taxes by agreeing in February to pay $780 million in penalties. The bank admitted it helped taxpayers hide money in Swiss accounts, and gave the Internal Revenue Service more than 250 client names. The U.S. subsequently sought the identities of 52,000 account holders. UBS said on April 30 that it would violate Swiss laws by complying with the request.

Picard, a lawyer with Baker & Hostetler LLP in New York, was hired by the Securities Investor Protection Corp., a government-backed firm that covers losses when brokerages fail, and is conducting a broad investigation to find assets. He has so far recovered more than $1 billion in assets. Prosecutors said $170 billion moved through Madoff Securities since the fraud began in the 1980s.

Kevin McCue, Picard’s spokesman, declined to comment.

Pleaded Guilty

Madoff, 71, pleaded guilty March 12 to fraud and money laundering by using money from new investors to pay off old ones in the largest Ponzi scheme in U.S. history. Before his Dec. 11 arrest, he had told his thousands of clients that they had about $65 billion in accounts with him, prosecutors said. He faces a prison sentence of as many as 150 years when he is sentenced next month.

The subpoena for documents is dated March 17, five days after Madoff pleaded guilty, the person said.

Another entity named in the UBS subpoena is Plaza Investments, the person said. A British Virgin Islands entity called Plaza Investments International Ltd. placed money with Madoff, according to one of its investors, Swiss money manager Notz, Stucki & Cie.

Banco Santander spokesman Peter Greiff declined to comment. A Plaza Investments spokesman couldn’t be contacted.

Deferred Prosecution

The U.S. request for customer names is separate from Picard’s subpoena. The U.S. Justice Department sued UBS in Miami federal court on Feb. 19, a day after the bank resolved the criminal probe. The Swiss government filed a friend-of-the-court brief supporting UBS’s refusal to turn over the names.

As part of its deferred-prosecution agreement, UBS admitted that from 2000 to 2007, its Swiss private bankers helped Americans evade U.S. taxes through sham offshore companies in tax havens including Panama, Hong Kong and the British Virgin Islands. UBS said it created misleading forms saying those companies, not taxpayers, were the beneficial account owners.

UBS also admitted that its private bankers marketed securities and banking services in the U.S., even though it didn’t have the required license from the U.S. Securities and Exchange Commission. Those bankers, UBS admitted, met with clients in the U.S. and communicated with them regularly as they traded securities in their accounts or transferred assets.

Consulting With Others

Daniel Richman, a former federal prosecutor who teaches law at Columbia University, said Picard may be seeking to identify funds from which he can clawback assets. He said it’s possible that Picard will consult with Florida prosecutors in the UBS case as well as New York prosecutors in the Madoff case.

“At the very least, one would expect coordination,” Richman said in an interview.

Separately, Picard filed court papers on May 5 saying Madoff turned his investment firm into his “personal piggy bank,” using tens of millions of dollars in client funds to cover costs for employees and family members.

That filing in U.S. bankruptcy court came as part of his request to consolidate the bankruptcy proceedings of the business with those of Madoff’s estate.

The UBS case is U.S. v. UBS AG, 09-20423, U.S. District Court, Southern District of Florida (Miami). The Chapter 11 bankruptcy 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).

To contact the reporters on this story: David Glovin in Manhattan federal court at dglovin@bloomberg.net; David Voreacos in Newark, New Jersey, at dvoreacos@bloomberg.net; Christopher Scinta in U.S. Bankruptcy Court in New York at cscinta@bloomberg.net