UBS wins review of Madoff trustee's $2.6 billion suits

Reuters

By Jonathan Stempel

NEW YORK (Reuters) - UBS AG won review by a Manhattan federal judge of $2.6 billion of lawsuits brought by the trustee liquidating Bernard Madoff's firm, at least the fourth time a bank has obtained access to that court.

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U.S. District Judge Colleen McMahon agreed to accept the two UBS lawsuits, which accused the Swiss bank and various "feeder funds" that steered money to Madoff of profiting from and covering up his Ponzi scheme.

Her decision is a setback to the trustee, Irving Picard, who has filed roughly 1,050 lawsuits seeking more than $103 billion for Madoff's victims, and has been trying to pursue his cases in bankruptcy court.

But banks and some other targets of Picard's lawsuits have said the trustee is raising issues that cannot be addressed by a bankruptcy judge, and should be handled in a federal district court, a higher tribunal. District courts also allow for trial by jury, while a bankruptcy court does not.

A spokeswoman for Picard did not immediately return a request for comment.

McMahon has also agreed to handle Picard's $19.9 billion lawsuit against JPMorgan Chase & Co .

Another federal judge, Jed Rakoff, is considering whether Picard can invoke racketeering law in a $58.8 billion lawsuit against Italy's UniCredit SpA , Austria's Bank Medici AG and its founder Sonja Kohn, and other defendants.

Rakoff is also reviewing some issues in Picard's $9 billion lawsuit against HSBC Holdings Plc , as well as his $1 billion lawsuit against Fred Wilpon and Saul Katz, owners of the New York Mets baseball team.

UBS had in a June 21 court filing questioned Picard's standing to raise some claims, and said his common law claims were preempted under a 1998 federal law concerning class-action lawsuits, the Securities Litigation Uniform Standards Act.

"I am only interested in dealing with the threshold issues now -- SLUSA preemption and standing," McMahon wrote on a July 12 letter from UBS' lawyers. "I don't want to deal with other issues."

In February, JPMorgan raised similar concerns, accusing Picard of effectively pursuing "an enormous backdoor class action to recoup damages incurred by individuals and entities other than the firm to which he is the appointed successor."

Madoff, 73, is serving a 150-year prison sentence.

The cases are Picard v. UBS AG et al, U.S. District Court, Southern District of New York, Nos. 11-04212 and 11-04213.

(Reporting by Jonathan Stempel, editing by Bernard Orr)