Trade-Worker Funds Can’t Recover Madoff Losses, Court Says
(Updates with excerpt from ruling in fourth paragraph.)
Feb. 22 (Bloomberg) -- Building-trade worker benefit funds that invested in feeder funds to Bernard L. Madoff Investment Securities LLC won’t be able to recover money from the Ponzi schemer’s estate, a federal appeals court ruled.
The pension, health-care and benefit funds for bricklayers, construction workers, electrical workers and others don’t qualify as “customers” of Madoff under the Securities Investor Protection Act and are not eligible for recovery, the appeals court in Manhattan said today.
The funds invested in Spectrum Select LP and Spectrum Select II LP, which in turn invested in hedge funds Rye Select Broad Market Fund LP and Rye Select Broad Market Prime Fund LP, according to the ruling. The Rye funds funneled capital to Madoff’s firm, according to the ruling.
“As investors in the Spectrum funds that invested in the feeder funds, appellants had no direct financial dealings with BLMIS, and no account information in BLMIS records identified them as BLMIS investors,” the appellate judges said in the order.
The worker funds, including the Bricklayers and Allied Craftsman Local 2 Annuity Fund, the Central New York Laborers Annuity Fund, and the International Brotherhood of Electrical Workers Local Union NO. 43 and Electrical Contractors Pension Fund, appealed from previous rulings by a bankruptcy court and federal district court.
U.S. Bankruptcy Judge Burton R. Lifland initially ruled against the worker funds in June 2011, siding with Madoff estate trustee Irving H. Picard’s denial of the claims, according to the appeals court’s order.
The case is In Re: Bernard L. Madoff Investment Securities LLC, 12-410, U.S. Court of Appeals for the Second Circuit (Manhattan).
--Editors: John Pickering, Fred Strasser