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Entries in milberg (1)

Thursday
Sep082011

Milberg LLP Founder Seeks Dismissal of Madoff Trustee's Clawback Suit

The former co-founding partner of Milberg LLP is seeking to dismiss a clawback suit filed by the court-appointed trustee seeking assets for victims of Bernard Madoff's Ponzi scheme, alleging that the funds sought are beyond the time periods allowable under Bankruptcy and New York state law.  Irving Picard, the court-appointed trustee, filed suit in November 2010, seeking the return of over $20 million in false profits from Melvyn Weiss and David J. Bershad.  Both are former lawyers in Milberg, which was later disbanded after admitting to paying clients to file securities fraud lawsuits.

In the filing, Weiss argues that Picard is prevented from recovering any alleged false profits due to the length of time over which the profits were made, stating

“The trustee’s claims violate the statutory ‘look back’ periods limiting avoidance to six years prior to the filing date for state law,”

Both the Bankruptcy Code and New York state law govern the time period preceding the filing of a bankruptcy petition that a trustee may recover transfers from the debtor.  Under the Code and New York law, the maximum length of time preceding the petition filing date is six years.  According to Weiss, Picard is seeking the return of funds acquired over a fifteen-year period.  Picard has sought the return of funds from defendants in similar cases beyond the six-year limitation, but on the premise that those defendants knew or should have known of the fraudulent nature of the transfers.  Weiss attempts to distinguish those cases, arguing that Picard has not demonstrated that Weiss knew or should have known of Madoff's fraud.  

Weiss also asked United States Bankrtupcy Judge Burton L. Lifland to transfer the case to a district court, arguing that the case involved issues raising non-bankruptcy questions and would be more appropriately decided in a federal court.