Madoff trustee sues AG over $405 million settlement

The trustee in the Bernard Madoff case is clashing with New York State Attorney General Eric Schneiderman, charging that the state's recent $410-million settlement with some large investment feeder funds would cheat individual victims of the Ponzi scheme.

In papers filed yesterday in Manhattan, federal bankruptcy court, trustee Irving Picard is seeking an injunction to stop Schneiderman's settlement in June with the funds that pumped money into Madoff's company and were run by philanthropist Ezra Merkin.

Schneiderman's deal is an attempt to do an end run around the trustee's federally mandated recovery process and give money to select individual investors in Merkin's funds, Picard claimed.

"We believe this effort by Mr. Picard to prevent the attorney general from distributing $410 million to investors who were victimized by Mr. Merkin is inappropriate and without legal merit," said Scheniderman spokeswoman Jennifer Givner.