Picard aims for triple-word score in Madoff case
By Reynolds Holding
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
Irving Picard is aiming for a triple-word score in the Bernard Madoff case. He’s not playing Scrabble, but the trustee for the Ponzi schemer’s victims is trying for treble damages of $59 billion by suing Madoff’s Italian and Austrian banks for racketeering. Though the novel tack raises issues that a judge on June 6 agreed to resolve, Picard has again shown a creative touch in beating the bushes for cash.
The civil case against Vienna-based Bank Medici, its founder, Sonja Kohn, and Milan’s UniCredit is an audacious leap in size and law for Picard. At $19.6 billion, it’s by far his biggest suit. And with the racketeering counts, he not only shoots for triple the base amount, but also opens a can of legal worms.
For starters, all the defendants are based abroad, and the U.S. Supreme Court decided last year that a federal law doesn’t cover foreigners acting outside the United States unless it specifically says so. RICO, the racketeering law, mentions nothing about foreign applications, which led a federal court to dismiss a case last year. Picard’s approach may be to argue that Kohn, whom he calls Madoff’s “criminal soul mate,” started the racketeering scheme in New York.
A thornier issue is whether Picard has the right to sue under RICO. As trustee, he stands legally in the Madoff fund’s shoes. By accusing the banks and Kohn of duping investors and using the fund’s accounts, he arguably includes Madoff in the pattern of racketeering. An objection may be that the trustee, as Madoff’s legal avatar, can’t sue as a victim of a fraud he participated in.
If Picard makes his preliminary case, though, he’ll wield a frightening weapon. In addition to triple damages, RICO winners can get legal fees and the losers’ property. It’s likely the accused would scramble to settle for big bucks.
And the trustee is far from done. On Wednesday he filed another lawsuit, this one seeking $975 million that Kingate Global Fund and other feeder funds allegedly took out of the Ponzi scheme. Beside the RICO claim and the impressive $10 billion Picard has already recovered, the breathtaking $175 million in fees charged so far by Picard and his lawyers is looking like peanuts.