First Madoff case finally hits EU court
After movie and miniseries, investors are still waiting for resolution to endless lawsuits
LUXEMBOURG— It’s been so long they’ve already made a movie and a miniseries. But nearly a decade after Bernard Madoff’s Ponzi scheme was discovered, many European investors are still waiting for the resolution of endless lawsuits stalled in Luxembourg courts.
Last week, the EU’s top court was asked to rule on its first Madoff-related dispute — a fund executive’s fight for access to confidential files that he says may vindicate him, held by Luxembourg’s financial regulator, including ones concerning UBS Group AG.
The case is one of hundreds that have been trickling through the tiny country, the second-biggest fund market after the U.S. The case is representative of how protracted European Madoff litigation has become.
At least 17 funds, including Access International Advisors’ LuxAlpha Sicav-American Selection and Luxembourg Investment Fund, were forced to suspend redemptions after Madoff’s arrest in December 2008. Dozens of lawsuits filed in the Grand Duchy against the custodians overseeing the funds, including UBS, have been stuck for years.
The EU case deals with an executive at LuxAlpha, the Luxembourg fund that has been most closely linked to Madoff. LuxAlpha invested 95 per cent of its money with Madoff and had $1.4 billion (U.S.) in net assets a month before the Ponzi scheme was discovered. Thierry Magon de La Villehuchet, CEO of Access International, which managed LuxAlpha, killed himself in his office 12 days after Madoff’s arrest.
Pierre Delandmeter, a lawyer and former board member of LuxAlpha and its management company, is fighting to get documents from the country’s financial regulator, CSSF, about its Madoff probe. In particular, he is seeking a document UBS sent to the CSSF.
UBS, which oversaw investor deposits, the regulator and former LuxAlpha directors are seeking to block the request.
An adviser to the EU court said she will publish her non-binding opinion about the case on July 26. The court’s final ruling will be binding across the EU and is expected to bring clarity to where regulators must draw the line between professional secrecy and the rights of defence of those they sanction.
Frustration is mounting among lawyers, who are working with several hundreds of investors seeking to recoup some of their losses. After eight-and-a-half years and masses of legal briefs having passed through the local courts, not a single case has tackled the substance of the whole dispute: Who really is to blame for Madoff’s fraud in Luxembourg?
Madoff, 79, who founded his investment firm in 1960, is serving a 150year prison sentence in the U.S. after pleading guilty in 2009 to running a $17.5-billion scheme that used funds from new investors to pay old ones.
It was only a matter of time before the improbable story of greed and ignorance grabbed the attention of Hollywood directors. Richard Dreyfuss played the title role in last year’s ABC miniseries Madoff. HBO’s The Wizard of Lies, opened last month, starring Robert De Niro as the fraudster and Michelle Pfeiffer as his wife.
While smaller cases have been resolved, the key lawsuits to establish whether custodian banks and auditors can be held liable aren’t moving.
The glacial pace in Europe is in contrast to the U.S., where Irving Picard, the trustee overseeing the liquidation of Madoff’s firm, has paid out more than $9 billion.