Madoff Trustee Says Vizcaya Hedge Fund Ignored Suit Against It

Date: Wednesday, July 8, 2009
Author: Erik Larson, Bloomberg

The trustee liquidating Bernard Madoff’s investment-advisory business told a judge that British Virgin Islands-based hedge fund Vizcaya Partners Ltd. missed a deadline to respond to a lawsuit accusing it of taking $150 million in fake profit from Madoff’s firm.

Trustee Irving Picard asked U.S. Bankruptcy Judge Burton Lifland in Manhattan to enter a so-called notice of default against Vizcaya, setting the stage for a default-judgment motion by Picard that could force Vizcaya to turn over the money.

Picard sued the so-called feeder fund in April over claims Madoff transferred $150 million to Vizcaya less than 90 days before his Dec. 11 arrest for running a $65 billion Ponzi scheme, the biggest in U.S. history. The Vizcaya money must be returned under U.S. law and should be used to repay Madoff’s victims, according to the complaint.

Recovery of Vizcaya’s alleged Madoff money may hinge on cooperation by authorities in Gibraltar, the home of the hedge fund’s bank, Banque Jacob Safra (Gibraltar) Ltd., which also was sued by Picard. The notice of default that Picard requested on July 6 doesn’t apply to the bank.

Lifland last month asked Acting Chief Justice Anthony Dudley in the Supreme Court of Gibraltar to turn over $10.7 million of Vizcaya money that it’s holding, court records show. The court took possession as part of a legal action against the hedge fund by financial authorities in the U.K. territory on the southern tip of Spain.

Picard Lawsuits

Madoff, 71, pleaded guilty in March and was sentenced on June 29 to 150 years in prison for using money from new clients to pay earlier investors. Picard has sued Madoff’s biggest clients, seeking a total of more than $12 billion to repay thousands of victims a portion of their claims.

“We will do whatever is appropriate to enforce the judgment in order to collect,” Picard said yesterday in an e-mail.

Vizcaya’s lawyer, Merritt Pardini of Katten Muchin Rosenman LLP in New York, declined to comment yesterday.

The case is Picard v. Vizcaya Partners Ltd., 09-01153, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

To contact the reporter on this story: Erik Larson in New York at elarson4@bloomberg.net.