One of Switzerland's biggest financial firms was hit with a $2-billion lawsuit late Tuesday, accusing it of turning a blind eye to Bernard Madoff's fraud and helping the Wall Street con artist rip off his customers in the big Ponzi scheme.
UBS AG, the global Swiss company based in Zurich and Basel, "enabled Madoff's Ponzi scheme" through various international feeder funds and enabled the fraud despite knowing that it was likely that Madoff's operation was a giant scam, trustee Irving Picard charged in a $2-billion lawsuit filed in New York federal bankruptcy court against UBS and related entities and individuals.
"As we allege in the complaint, Madoff's scheme could not have been accomplished unless UBS had agreed not only to look the other way but also to pretend that they were truly ensuring the existence of assets and trades when in fact they were not and never did," said Picard's counsel David Sheehan in a prepared statement.
Among those sued was the widow of French hedge fund manager Thierry Magon de la Villehuchet. Villehuchet, who committed suicide in Manhattan in 2008 when Madoff's company collapsed, was a director of Groupement Financier Ltd., a company Picard alleges was a feeder fund that funneled money to Madoff. Villehuchet's widow, Claudine, is sued as executor of her husband's estate and a beneficiary of his will. She didn't return a call for comment.
Picard's complaint alleged that UBS facilitated Madoff's fraud through a number of international feeder funds, including Luxalpha SICAV and Groupement Financier. The funds pulled out $796 million in assets in the three months before Bernard Madoff Investment Securities Limited Llc went out of business on Dec. 11, 2008, and a total of $1.12 billion in the prior six years, the complaint stated.
A number of sections of the complaint were redacted, indicating that UBS wanted certain material kept confidential. Picard is expected to ask the court to unseal the material later.
Picard is suing the bank and a number of other related financial firms for at least $2 billion in an attempt to recoup that money for Madoff investors who lost an estimated $21 billion.
In a statement Wednesday, a UBS spokesman said the allegations in Picard's news release were "completely unfounded and without merit."
The Luxalpha fund was created at the explicit request of wealthy clients who wanted to invest in Madoff and were represented by sophisticated financial institutions, said bank spokesman Dominique Gerster.
UBS is the largest financial firm sued so far by Picard. A blizzard of up to 60 lawsuits seeking nearly $1.5 billion is expected next week against other high-rolling investors.