Madoff Geneva Case Gets Partial Reboot a Decade Later

(Bloomberg) -- Nearly a decade after Bernie Madoff was sentenced to 150 years in prison for orchestrating a $17.5 billion Ponzi scheme, Switzerland’s top court revived prospects for a criminal complaint against the manager at one of Madoff’s Geneva-based feeder funds.

In a decision earlier this month, a trio of federal court judges said that the Geneva court of appeal should have at least examined whether to extend the allegations of fraud to Manuel Echeverria, who ran Banco Santander SA’s Optimal Investment Services from the Swiss city. In the same ruling, however, the tribunal upheld the Geneva appeals court’s rejection of criminal mismanagement charges against Echeverria.

Madoff Geneva Case Gets Partial Reboot a Decade Later

Madoff was sentenced in 2009 after he pleaded guilty to running a fraud that took in money from unwitting investors including the Elie Wiesel Foundation. That same year Echeverria was first charged by a Geneva prosecutor with criminal mismanagement.

He was acquitted in a trial six years later because, as the presiding judge said in her ruling, there was no reasonable expectation that the Spaniard could have known of Madoff’s fraud: Echeverria never set foot on the 17th floor of New York’s Lipstick building from where Madoff ran his firm and the conman had even hid his scheme from family members.

Saverio Lembo, Echeverria’s lawyer, declined to comment on the federal court’s decision or on a possible fraud case. Echeverria “is awaiting the final outcome of the legal process with confidence,” Lembo said.

Armed with the decision by the federal court, lawyers for Franck Berlamont, a Geneva asset manager who had money invested in an Optimal fund and also invested some of his clients’ money with Optimal, plan go back to the appeals court and press the case for fraud.

Deliberately Hidden?

The next step is to go before the court and argue that Echeverria and OIS deliberately hid from investors the fact that the controls promised were never implemented, despite red flags received about Madoff’s practices, Miriam Mazou and Laurent Moreillon, Berlamont’s lawyers, said in a telephone interview.

Given the time needed to digest the tribunal’s decision and prepare the case, that probably won’t be before the summer recess, they said.

In their published decision the judges wrote that the appellant, without referring to Berlamont by name, was “himself an experienced wealth manager who knew how Madoff Securities products worked and was only interested in” one specific fund represented by Optimal Investment Services.

Other cases tied to Madoff in Europe have stalled before the European Union’s Court of Justice as lawyers for the banks that were custodians of the funds, and are the targets of lawsuits, try to block access to relevant documents.

Jean-Cedric Michel, another lawyer working on Berlamont’s team, said he is in regular contact with the office of Irving Picard, the trustee appointed to try and claw back the billions lost in Madoff’s scheme.

“I am sure that Irving Picard and his team are very interested to see if Mr. Echeverria will go on trial for fraud, in particular because of other funds in the U.S. with which he was involved.”

$13 Billion

Heather Wlodek, a spokesman for the New York-based Madoff Recovery Initiative, didn’t immediately respond to requests for comment. The group has so far recovered almost $13 billion of the $17.5 billion lost in Madoff’s Ponzi scheme, which “far exceeds any prior restitution effort related to Ponzi schemes both in terms of dollars and percentage of stolen funds recovered,” it says on its website.

Earlier this month, the U.S. Department of Justice began its second distribution of $504 million to 21,000 of Madoff’s victims across the globe. The cash is part of a series of payments that will return over $4 billion to his former clients, the DOJ said in a statement.

“We cannot undo the damage that Bernie Madoff has done, but today’s distribution will provide significant relief to many of the victims of one of the worst frauds of all time,” U.S. Attorney-General Jeff Sessions said in the statement

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