January 8, 2009 / 6:50 PM / 11 years ago

Watchdogs probe Madoff as lawsuits loom

LONDON (Reuters) - Fraud-busters set about scrutinising Bernard Madoff’s UK business on Thursday, and European investors readied lawsuits, as U.S. prosecutors laid out new grounds for revoking the suspected fraudster’s bail.

Bernard Madoff (R), who confessed to defrauding investors of 50 billion dollars, arrives home after a hearing at Federal Court, in New York, January 5, 2009. REUTERS/Chip East

Investor activist group Deminor said it would file a legal complaint against UBS, HSBC, Hyposwiss and others, saying they had neglected clients exposed to the alleged fraud, which could be as big as $50 billion (32 billion pounds).

Wall Street financier Madoff is under house arrest in his luxury Manhattan apartment after his arrest last month, charged with running a huge investment scam. Banks have revealed tens of billions of dollars worth of damage from the scandal.

Separately, company accounts and filings obtained by Reuters showed the 70 year old moved nearly $160 million of his own assets to his British-based firm in 2007, via the allotment of new shares in the UK unit.

The Serious Fraud Office said it had begun investigating Madoff’s British operation after it was given an interim report by Grant Thornton, provisional liquidators of the unit in Mayfair, London’s hedge fund hotspot.

It was not immediately clear whether the watchdog’s investigation was related to the money transfers.

In New York, a search of Madoff’s office desk revealed he had signed cheques totalling more than $173 million ready to be sent, U.S. prosecutors said, urging a judge to jail him.

A decision on Madoff’s bail was expected by Friday or Monday, a clerk at the judge’s chambers said.


The scandal surrounding Madoff, who prosecutors say has confessed to running a Ponzi or pyramid scheme, has hurt a slew of banks, many in Europe. One, Austria’s Bank Medici, is under government control as a consequence.

The scandal has embarrassed many private banks — which administer rich people’s money and many of which had products exposed to Madoff — and funds-of-funds, which select hedge funds for clients in return for a fee.

Shareholder group Deminor will file its complaint before the end of the month in courts in Luxembourg and Ireland, where the funds through which some of the banks’ clients invested are located, a representative told Reuters.

UBS said it did not recommend investments in Madoff products, but it did set up a Luxembourg-based fund called Luxalpha to allow its clients to invest in the products.

And HSBC referred to its December 15 statement, which said it had custody clients who had invested with Madoff.

In France, a lawyer for some of the victims of the alleged fraud said he would file legal actions against intermediaries involved in the case before the end of the month.

“We are going to launch procedures soon. Formal complaints with the Paris civil court are currently being drafted,” Nicolas Lecoq Vallon, a senior partner at the law firm Lecoq Vallon, told Reuters.

His firm represents some 20 clients who invested around 100 million euros ($135.6 million) in Madoff-related products.

Lecoq Vallon said his action would focus on France, while action by other law firms are being planned in Luxembourg, Ireland and Switzerland.

Meanwhile, Paris prosecutors are informally looking into the case but have not yet opened any formal probe, said Jean-Michel Aldebert, head of the financial section of the Paris Prosecutors’ office.

In December, French market regulator Autorite des Marches Financiers (AMF) said French mutual funds had incurred losses of about 500 million euros due to Madoff’s alleged Ponzi scheme.

Swiss bank Union Bancaire Prive is threatening to pull several billion dollars of investments from large U.S. hedge funds because they do not use a full-time independent administrator, the Wall Street Journal said. UBP is facing hefty losses from the scandal.

Additional reporting by Silke Koltrowitz, Lisa Jucca, Laurence Fletcher, Steve Slater, Julien Ponthus, Matthieu Protard and Grant McCool; editing by Will Waterman

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