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 In the latest twist in the Bernard Madoff scandal, San Francisco trial lawyer Joseph Cotchett (pictured), the legal representative for several Madoff victims, is taking aim at larger investment banks, the New York Post reports. Cotchett alleges that the banks failed to conduct sufficient due diligence -- or even worse, realized that Madoff was a fraudster and didn't protect their clients. Although Cotchett, who wrangled an interview with Madoff in North Carolina last week, declined to identify which institutions he planned to go after, he did suggest looking at the list of Madoff victims' claims, as it names investment banking executives. "If you have executives ... investing in Madoff, you might want to see what their hedge funds are controlling," he said. OK, so that's not the clearest clue, and as the Post points out, the list of Madoff's victims' claims filed with trustee Irving Picard isn't publicly available. However, a list made available in February on The Wall Street Journal's Web site, offers some direction. The Post zeroed in on J.P. Morgan Chase & Co. (NYSE:JPM), whose name appears several times on the list. J.P. Morgan is likely a prime target given allegations that the bank cut its own exposure to Madoff just before the scheme was revealed, saving itself from a $250 million loss, at the same time as providing its clients the means to lever (even worse!) their exposure. But what other investment banks or subsidiaries were listed? A quick perusal reveals several other bigguns':
Many of the institutions are listed as both fiduciaries and as victims, as firms have often found themselves on both sides of the coin, and each has already publicly stated that it had exposure to the mother of all Ponzi schemes. UBP and Banco Santander, even, have settled part of their clients' claims. What remains to be seen is how far down the line the banks that oversaw so-called "feeder funds" will be culpable for client losses. It was thought that when UBP and Banco Santander reimbursed a portion of their clients' money that was lost with Madoff, it would set the tone for other institutions (though the settlement, which required clients that were partially reimbursed to agree to not sue the firm, has not protected either from lawsuits). So far, however, most banks have claimed they were just as much a victim as their own clients. Maybe Cotchett, with his direct access to Madoff, will change their tune. - Sara Behunek
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