NEW YORK – A federal appeals court dealt the trustee working to recover money for Bernard Madoff’s investors a setback Thursday, ruling that he doesn’t have legal standing to make claims against major financial institutions that Madoff’s burned customers could make themselves.
The 2nd U.S. Circuit Court of Appeals in Manhattan upheld earlier district court decisions barring trustee Irving Picard from pursuing tens of billions of dollars from JPMorgan Chase, USB AG and other institutions.
Picard, as trustee for the Securities Investor Protection Corporation, has brought claims in bankruptcy court alleging that the institutions were complicit in Madoff’s massive Ponzi scheme because they provided him with financial services while ignoring obvious signs he was a con artist.
The appeals court found that as trustee, Picard “stands in the shoes” of Bernard L. Madoff Investment Securities LLC and therefore “may not assert claims against third parties for participating in a fraud that BLMIS orchestrated.”
The ruling cited New York state laws that “bars a trustee from suing to recover for a wrong that he himself essentially took part in.” It also shot down Picard’s argument that denying him the exclusive authority to bring the claims would in effect immunize the institutions, saying it’s “not obvious customers cannot bring their own suits” against the institutions.
“Picard’s scattershot responses are resourceful, but they all miss the mark,” the 2nd Circuit said.
Picard issued a statement Thursday saying he was reviewing the appeals court’s decision.