HSBC unable to reliably estimate cost of litigation in State over Madoff fraud

HSBC IRELAND has said the group cannot reliably estimate the cost of lawsuits being brought in this jurisdiction over money lost in Bernard Madoff’s $65 billion (€44 billion) Ponzi scheme.

HSBC Holdings, Europe’s largest bank, is facing lawsuits in Ireland by investors over how it performed as custodian for money lost in the Madoff scheme.

In accounts filed with the Companies Registration Office for the 12 months to the end of December last, HSBC Security Services Holdings Ireland noted that proceedings concerning Madoff had been brought in various jurisdictions including Ireland with an aggregate net asset value of $8.4 billion.

However, in its notes on the group’s consolidated financial statements, the group states that it cannot estimate how much these claims might amount to.

“The HSBC group considers that it has good defences to these claims and will continue to defend them vigorously. The HSBC group is unable to reliably estimate the liability, if any, which may arise as a result of these claims.”

The HSBC group expects further proceedings will be brought.

HSBC, a custodian of funds invested with Madoff, provided custodial, administration and other services to funds outside the US whose assets were invested with Madoff Securities.

Various HSBC group companies have also received requests for information from various regulatory authorities in connection with the alleged fraud and the group is co-operating with these requests.

HSBC Securities Services Holdings (Ireland) Ltd posted pretax losses of $5.2 million (€3.5 million) for 2008. This figure represented a drop of more than $12 million on the group’s 2007 profits of $7 million.

The group held assets worth $104 million at the end of 2008 with liabilities totalling $70 million.

The average number of people employed by the group in 2008 stood at 522 with total wage costs, including social security, medical insurance and other staff-related costs totalling $58.9 million, more than $4.3 million higher than in 2007. The number of employees in the group stood at 501 at the end of 2008.

The company noted that, subsequent to the year end, a number of incorrect calculations of the net asset values had been discovered in relation to a small number of clients due an internal issue which had since been rectified.