HSBC 'failed to act on Madoff fears ; HSBC failed to act on “numerous red flags” raised over Bernard Madoff in an act of wilful neglect that allowed the fraudster to carry on for years longer than he otherwise would have done, a lawsuit alleges.Irving H Picard, the court-appointed trustee seeking to recover billions for Madoff’s former customers, is looking $9bn (£5.7bn) from Europe’s biggest bank after alleging that it was “wilfully and deliberately blind to the fraud”, about which there were warnings as far back as 2001.
The suit, which was filed in the US bankruptcy court in New York, claims that HSBC twice asked accountancy firm KPMG to look into suspicions it had about the New York- based investment company.
However, the bank along with other defendants named in the suit “possessed a strong financial incentive to participate in, perpetuate, and stay silent about Madoff’s fraudulent scheme,” said David J Sheehan, a partner at Baker & Hostetler, the law firm representing Mr Picard.
A spokesman for HSBC declined to comment yesterday. However, at the time of its interim results in August, the bank said that it had been named as a defendant in certain Madoff claims and could be named in more. It added that “it has good defences to these claims and will continue to defend them vigorously”.
The suit against HSBC is the third in as many weeks against a major bank. Mr Picard last week filed a $6.4bn claim against JPMorgan and a $2bn claim a week earlier against Swiss lender UBS. Overall, the lawyer is trying to recover more than $15bn for Mr Madoff’s customers.
Separately, Mr Picard said that he had reached a settlement of between $470m and $500m with Swiss bank Union Bancaire and M-Invest, a feeder fund created by Union Bancaire to channel money to Bernard Madoff’s funds. Union Bancaire could not be reached for comment.
Mr Picard’s suit accuses HSBC of creating feeder funds that channelled money to Madoff, who was sentenced to 150 years in jail last year for fraud, which came to a head in 2008 when clients demanded their money back.
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