Irish firm seeks return of €31.6m destined for Madoff’s fund, court hears

AN Irish investment firm is seeking the return of €31.6 million given to a company which was to be passed on for investment with international securities fraudster Bernard Madoff, the Commercial Court heard yesterday.

The claim was made in proceedings to freeze the funds which were given by Fortis Prime Fund Solutions Custodial Services (Ireland) Ltd to HSBC Security Services (Ireland) Ltd to administer for the purpose of buying shares through British Virgin Islands-based investment company Defender Ltd.

Mr Justice Peter Kelly yesterday granted Fortis an ex-parte (one side only) injunction directing HSBC to disclose forthwith the location of the money, made up of $33m (€25.5m) and €6.1m, and restraining it from disposing or diminishing the value of that money pending further court proceedings. The judge also ordered that Defender Ltd be served with notice of these proceedings in the Virgin Islands.

Two other investment funds, Thema International Fund plc, and AA (Alternative Advantage) plc, both of Fitzwilton House, Wilton Place, Dublin, have already brought an action in the High Court against HSBC Securities Services (Ireland) Ltd and HSBC Institutional Trust Services (Ireland) Ltd, seeking to recover $1.2bn.

Fortis, of Park Lane, Spencer Dock, Dublin, claims the investment monies it gave to HSBC, as an administrator, was credited to HSBC bank in London on November 28 last, days before the arrest of Bernard Madoff by the FBI.

It was to be passed on to Defender, described as an “open-ended investment company”, which has as its objective the achievement of long-term capital appreciation through the allocation of assets to a single trader. Fortis was aware that this was through Bernard L Madoff Investment Securities LLC.

In an affidavit from Fortis director, Noel Fahy, he says that the final day for authorising the buying of shares by Defender was November 28 and therefore the funds should not have passed from HSBC to Defender, but have gone into the following dealing period, December. Mr Fahy says following the arrest of Madoff, Defender’s directors decided to terminate trading agreements with immediate effect and therefore Fortis is entitled to the return of the monies.

Fortis wrote to HSBC seeking their return, but was told that its (Fortis’s) application to have the money invested was irrevocable. Fortis says that because its shares could only have been bought from December 1 (a new dealing period), it was covered by Defender’s cancellation of Madoff-linked funds.

Mr Fahy says he believes the monies are still under the control of HSBC and his company has a real and grave concern that Defender may rely on a request it made to HSBC to transfer the monies to its (Defender’s) account on the day after Madoff’s arrest.

Any transfer of those funds to Defender, Mr Fahy believes, would result in the funds being lost.

He believes that it is reasonable to infer from the arrest of Madoff that there is likely to be a deficit in Defender’s account and Fortis’s claim will be frustrated by this.