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Madoff Trustee Sues California AG
January 5, 2012
Irving Picard, trustee in the Madoff bankruptcy case, has sued California Attorney General Kamala Harris in an attempt to stop her from interfering with his efforts to recover money for the swindler's former customers. The lawsuit against Harris and four other defendants largely to Stanley Chais, a Beverly Hills money manager for Hollywood elite and a longtime Madoff friend. Mr. Chais died in September 2010 at the age of 84.
Picard's suit aims to stop the state of California from pursuing 5 California lawsuits against the Chais estate, along with his related entities and family members. Picard argues that these individual cases "side-step the trustee's exclusive right to seek recovery of fraudulently transferred property," and could reduce the amount he can recover for customers. Picard asked the court to void the lawsuits and to order an injunction to prevent similar litigation.
The AG's lawsuit against Chais' widow, Pamela, originally filed by Harris' predecessor Jerry Brown who's now Governor of California, seeks to recover $270 million of fees that Chais allegedly collected. The trustee and the SEC in separate 2009 lawsuits have accused Chais of sending client money to Madoff even though they were aware of red flags about his business. In the process, Chais pocketed hundreds of millions of dollars in fees - that benefit both himself and his family. Before his death, Chais claimed that, he too was a Madoff victim.
A lawyer for the plaintifs said it was "surprising" that Picard waited nearly 3 years to challenge his lawsuits and that their claims are independent from the Madoff bankruptcy case. Investigations have shown that Madoff and some employees created fictitious accounts, and paid out consistently high but fictitious returns to customers over 3 decades. [Reuters 1/5/12]

