Madoff trustee alleges J.P. Morgan aided fraud

By Bob Van Voris
Friday, December 3, 2010

J.P. Morgan Chase, Bernard Madoff's "primary banker," was sued Thursday for $6.4 billion by the trustee liquidating the imprisoned con man's former firm.

Irving H. Picard, the lawyer appointed as trustee by a New York bankruptcy court, said he sued J.P. Morgan over claims that the bank aided and abetted Madoff's fraud. Picard said his suit seeks $1 billion in fees and $5.4 billion in damages.

"J.P. Morgan was willfully blind to the fraud, even after learning about numerous red flags surrounding Madoff," David J. Sheehan, counsel to Picard, said in the statement.

Any money recovered from J.P. Morgan will be returned to Madoff's victims on a pro rata basis, said Picard, who has recovered about $1.5 billion for Madoff creditors.

"The complaint filed today by the trustee for the Madoff estate blatantly distorts both the facts and the law in an attempt to grab headlines," said J.P. Morgan, the second-biggest U.S. bank. "J.P. Morgan did not know about or in any way assist in the fraud orchestrated by Bernard Madoff."

J.P. Morgan, based in New York, said it has assisted Picard in his investigation of Madoff's firm and called his claims "irresponsible and over-reaching."

The lawsuit was filed under seal in U.S. bankruptcy court in Manhattan, according to Picard's statement.

The suit is the second-largest filed by Picard in the Madoff bankruptcy, after a $7.2 billion claim he filed against investor Jeffry Picower in May 2009.

Picower died in October 2009.

Picard faces a Dec. 11 deadline for filing suits to recover false profits.

Madoff, 72, is serving a 150-year sentence in a North Carolina federal prison after admitting he directed the biggest Ponzi scheme in history.

- Bloomberg News

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