Hoping to bolster his biggest case, the trustee seeking money for Bernard Madoff's victims has proposed adding new claims and 23 defendants to his $58.8 billion lawsuit against Bank Medici AG founder Sonja Kohn and Italy's UniCredit SpA.
Irving Picard, the trustee, said he has uncovered thousands of new instances of racketeering activity and illicit transfers by the defendants to further Madoff's Ponzi scheme.
In December Picard sued Kohn, UniCredit and its Bank Austria unit, and others, invoking the Racketeer Influenced and Corrupt Organizations Act (RICO) to try to recover three times the $19.6 billion in net investor deposits he claimed was lost as a result of the defendants' actions.
The new defendants include several Kohn relatives. They are named in a proposed amended complaint filed late Monday in U.S. District Court in Manhattan.
In the revised complaint, Picard alleged that 76 individuals and corporate entities, 20 more than previously identified, acted in concert with Kohn to further her scheme to funnel money to Madoff, beginning as early as 1985.
He also identified what he called new sham entities in Canada, the Caribbean, Liechtenstein and Switzerland, in addition to those earlier identified in New York, Austria, Italy and Gibraltar. Picard said these entities helped further the fraud at Bernard L. Madoff Investment Securities LLC.
The height of the illegal scheme, and the deepening insolvency of the BLMIS estate, occurred after UniCredit's entrance into the Medici Enterprise, and especially when it was fully integrated from 2006 to 2008, the complaint said.
Marco Schnabl, a partner at Skadden Arps Slate Meagher & Flom representing the defendants, declined to discuss Picard's filing. Schnabl plans to file a reply by September 12 as required by U.S. District Judge Jed Rakoff, who oversees the case.
JUDGE TO REVIEW RICO CLAIMS
Rakoff agreed in June to decide whether Picard may plausibly invoke RICO and apply it to the defendants' alleged wrongdoing outside the United States. He said he will also decide whether Picard has standing to sue UniCredit.
The U.S. Congress enacted RICO to eradicate organized crime from the social fabric and hold criminals, including rogue financial institutions, responsible for the damage that they have wrought, said Timothy Pfeifer, a lawyer at Baker & Hostetler who represents the trustee. Picard is a partner at that firm.
The judge scheduled oral argument for September 19. After he rules, he plans to return the case to U.S. Bankruptcy Judge Burton Lifland, who oversees the liquidation of Madoff's former firm.
Picard said Rakoff asked that the proposed complaint be submitted now. It is unclear how the judge might use that complaint in his evaluation of the case. A spokeswoman for Picard was not immediately available for comment.
In the last five weeks, Rakoff has dismissed a variety of Picard's so-called common law claims against UniCredit and Bank Austria, saying the trustee has no power to bring them.
HSBC Holdings Plc won the dismissal of similar claims in a separate Picard lawsuit.
Picard is pursuing more than 1,050 lawsuits to recover more than $94 billion. His second-largest lawsuit seeks $19.9 billion from JPMorgan Chase & Co, once Madoff's main bank. Madoff, 73, is serving a 150-year prison sentence.
The cases are Picard v. Kohn et al, U.S. District Court, Southern District of New York, No. 11-01181; and Picard v. Kohn et al, U.S. Bankruptcy Court, Southern District of New York, No. 10-ap-05411.
(Reporting by Jonathan Stempel; editing by John Wallace)