HSBC tells of Madoff link to disputed €1.2bn

THE IRISH arm of banking giant HSBC has told the Commercial Court it is waiting to see whether competing claims will be brought…

THE IRISH arm of banking giant HSBC has told the Commercial Court it is waiting to see whether competing claims will be brought over sums of more than €1.2 billion given to it by two Irish-listed investment firms and destined for investment with alleged $50 billion (€38 billion) fraudster Bernard Madoff and his companies.

Michael Cush SC, for HSBC, said yesterday its legal advice from US lawyers was they believed the US bankruptcy trustee could have no claim over the monies in question, but the matter had to be clarified.

Jim Breslin, for the two investment companies – Thema International Fund plc and AA (Alternative Advantage) plc, both of Fitzwilton House, Wilton Place, Dublin – said his clients were in a “very serious” situation and needed to have their action against HSBC, aimed at having the monies returned, heard urgently.

His side had received correspondence from solicitors acting for investors, and anticipated that legal actions against it seeking redemption of invested monies were “imminent” but its funds remained frozen by the HSBC companies.

His side needed money to pay US lawyers and to pay registration fees necessary for it to continue marketing its shares in Germany and Italy, counsel added. Those registration payments were overdue.

Mr Cush, for the two defendant HSBC companies – HSBC Securities Services (Ireland) Ltd and HSBC Institutional Trust Services (Ireland) Ltd, Grand Canal Square, Dublin – said his clients would not object at this stage to orders sought by the plaintiffs not to dissipate or transfer the funds, but they needed clarification from the US bankruptcy trustee dealing with the Madoff case as to whether he intended to bring any proceedings.

Mr Cush said his clients were waiting to see whether the US bankruptcy trustee was making a claim and it was taking advice in that regard from US lawyers, counsel added.

If the bankruptcy trustee anticipated that there would be no claim over the monies, the entire case could be dealt with.

If they were persuaded the plaintiffs urgently needed monies to avoid deregistration of their funds in Italy and Germany and to secure legal services in the US, his clients would also consider applications in that regard, counsel added. The HSBC companies did not object to orders, the terms of which were handed into court later yesterday, restraining them from dissipating any monies standing to the credit of the plaintiff companies in certain accounts, including accounts referred to as custody accounts and transit accounts, operated by the HSBC companies.

Mr Justice Peter Kelly said he accepted the matters involved were urgent and said he would hear, at 24 hours’ notice to HSBC, any application by the plaintiffs for an order requiring payment of a $50,000 retainer to US lawyers, and other fees of some €10,000, to avoid deregistration and insurance costs.

The judge added that the US bankruptcy trustee would need a reasonable time to take a view on whether there would be any claim over the monies involved.

He believed a prudent trustee would seek court approval for any view he might take in that regard.

In those circumstances, the judge adjourned the proceedings to February 10th to enable the trustee’s view to be ascertained.