• Insurance Coverage May Cover Madoff Clawback Settlement Payments
  • December 14, 2010 | Author: Robert H. Friedman
  • Law Firm: Gunster, Yoakley & Stewart, P.A. - West Palm Beach Office
  • Tomorrow is the deadline for Irving Picard, the Madoff trustee, to file fraudulent transfer (“clawback”) lawsuits against Madoff net winners.  Several high profile individuals, including Carl Shapiro and Robert Jaffe, recently settled the claims against them.  Those individuals and organizations that have not settled either have been sued (mostly in complaints filed under seal in the past few days), have entered into tolling agreements, or will be sued today.  Sonja Kohn, who headed Bank Medici in Austria, was sued today for $19.6 billion.  Targets of suit this week have included large banks with connections to Madoff, including JPMorgan Chase, HSBC, and UBS.

    For most individuals and organizations, Picard is seeking a return of their investment profits.  For some - who Picard alleges knew or should of known of the fraud - Picard is seeking to recover the entire amount of principle that was invested with Madoff.  The difference between the amount of principle invested and the net profit received is an enormous figure for certain defendants, and Picard’s threat to pursue claims for principle has pressured many defendants to settle.

    The clawback litigation is expected to last for many years, and the costs to defend and resolve these lawsuits will be massive and crippling even to the most wealthy individuals and organizations.  Defendants may have directors & officers, errors & omissions, or other liability insurance to pay for the cost to defend these lawsuits.  Insurance may also cover some or all settlement or judgment payments.  Policy language and individual facts differ, but defendants should look closely at the potential protections that their insurance can provide.