Court to examine US ruling on Madoff settlement plan

A VACATION sitting of the High Court today is to consider the implications for actions being taken here of a ruling on Wednesday in New York where HSBC sought to settle with investors who lost hundreds of millions of euro in the Bernie Madoff fraud.

A Manhattan federal judge rejected HSBCs proposed $62.5 million (€44.7 million) settlement with investors in an Irish fund, Thema International Fund plc, which channelled $1.1 billion to Madoff. Earlier this year the bank said the Thema investors had lost an estimated $312 million.

US district judge Richard Berman said the HSBC proposal was “not fair, reasonable or adequate – even at this preliminary stage” to investors in the fund.

The judge said he would consider a revised accord, and “generally favours the voluntary settlement of matters before it, including the settlement of purported class actions”.

Settlements of class actions in the US can have legal implications for plaintiffs in other jurisdictions. Investors who put money into Thema are seeking damages through the Irish courts.

It is understood the bank and other parties to the Irish cases will seek guidance from Mr Justice Frank Clarke on the roles of courts here and in the US.

The Thema Fund was one of a number of “feeder funds” that invested in Madoff’s bogus operation. HSBC Institutional Trust Services (Ireland) Ltd acted as custodian to four of the Madoff feeder funds, including Thema, while HSBC Securities Services (Ireland) Ltd, served as their administrator. Both subsidiaries are based in Grand Canal Harbour, Dublin. Most investors come from continental Europe.

The investors who put money into the feeder funds are taking legal cases against HSBC and other parties. There are more than 60 such cases pending. Two test cases, likely to be heard in 2012, may decide the outcome of most.

The investors are also taking cases against Thema which is, in turn, taking a case against the two Dublin HSBC subsidiaries. HSBC is taking a case against Thema and against Medici Bank in Vienna which was founded by an associate of Madoff, Sonia Kohn.

HSBC subsidiaries are defendants in cases in the US, Ireland, Luxembourg and other jurisdictions. The bank has said it considers it has good defences to the claims being made against it.

Madoff, now 73, pleaded guilty to running his Ponzi scheme in March 2009, and is serving a 150-year prison sentence.