Investors in Irish hedge fund sue over fraud by Madoff

Date: Monday, March 30, 2009
Author: James Doran, Irish Times

INVESTORS IN Thema International, an offshore hedge fund based in Ireland, have filed a lawsuit in New York in an effort to claw back $3 billion (€2.3 billion)they lost in the Bernard Madoff Ponzi scheme.

Fabian Perrone, an Argentine hedge fund investor, and Chia Hung Kao, who is from Taiwan, filed the complaint in New York last week.

The pair are likely to become the lead plaintiffs in the class action, which is filed on behalf of all investors in hedge funds controlled by Thema International Fund of Ireland; the Primeo Fund and the Medici funds between March 1st, 2001 and December 10th, 2008.

British banking giant HSBC along with accountancy firms Ernst Young and PriceWaterhouse Coopers have been named as defendants in the $3 billion class action lawsuit filed on March 19th in New York District Court.

The lawsuit is just the latest in a long line of legal actions filed by angry Madoff victims desperate to recoup billions of dollars of lost funds.

HSBC is named in the suit as it acted as administrator and custodian for two of the funds. Brian Murray, a lawyer with Murray Frank and Sailer LLC in New York, explained that HSBC was included in the suit as it was responsible for determining the net asset value of the funds.

“The contention is they should have done better due diligence,” Mr Murray said.

If HSBC and other advisers had been more thorough in performing due diligence, it is alleged, they would have realised Madoff had never traded a share and was not in fact making any legitimate profits for decades.

Ernst and Young and PWC, meanwhile, are included in the suit for their alleged role in auditing some of the funds and for giving expert opinion on them in investment prospectuses. None of the defendants would comment about the class action lawsuit.

Madoff, meanwhile, is still in jail in New York where he awaits sentencing after pleading guilty to 11 counts of fraud.

His wife Ruth remains free but is under investigation by US authorities. A New York judge last week signed an order to freeze the assets of Madoffs brother Peter, who is also under scrutiny in the $65 billion fraud case.