Madoff trustee sues dozens in Fairfield lawsuit

By Jonathan Stempel

July 21, 2010 6:40 PM EDT

The trustee overseeing the liquidation of Bernard Madoff's financial advisory firm has sued 43 new defendants affiliated with a hedge fund firm that fed money to the now-imprisoned Ponzi schemer.

Irving Picard, the court-appointed trustee, is seeking more than $3.6 billion in damages and to undo transfers to Bernard L. Madoff Investment Securities LLC orchestrated by Fairfield Greenwich Group, a "feeder fund" for Madoff's operations.

"Sophisticated hedge fund investment advisers and promoters engaged in a systematic, purposeful enterprise with Madoff to maintain and profit from a fraud and wrongly enrich themselves," lawyers for Picard wrote in a complaint filed on Tuesday night with the U.S. bankruptcy court in Manhattan.

"The defendants did not properly, independently, and reasonably perform due diligence into the many red flags strongly indicating Madoff was a fraud," the 217-page complaint added. "The defendants did exactly the opposite."

A spokesman for the defendants rejected the allegations.

Picard filed his original complaint against three Fairfield Greenwich defendants in May 2009.

The new defendants include 24 Fairfield Greenwich affiliates, and 19 individuals who received hundreds of millions of dollars for improperly feeding money to Madoff, he said. Three of the individuals are founding Fairfield Greenwich partners Walter Noel, Jeffrey Tucker and Andres Piedrahita.

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"We reject absolutely the allegation that Fairfield Greenwich or any of its executives or employees was aware of the fraud or in any way abetted it," said Thomas Mulligan, a spokesman for the defendants.

Fairfield Greenwich remains "willing to work toward a settlement that will help all victims of the Madoff fraud move beyond this disaster," Mulligan said.

Picard, a partner at the law firm Baker & Hostetler LLP, is trying to recover money for victims of Madoff's estimated $65 billion Ponzi scheme. He has said he has recovered more than $1.5 billion of assets.

Madoff, 72, is serving a 150-year sentence in a North Carolina federal prison.

The case is Picard v. Fairfield Sentry Ltd et al, U.S. Bankruptcy Court, Southern District of New York, No. 09-01239.

(Reporting by Jonathan Stempel, editing by Gerald E. McCormick and Ted Kerr)