MANHATTAN, N.Y. (Legal Newsline) - The trustee overseeing the liquidation of Bernard Madoff Investment Securities LLC is suing California Attorney General Kamala Harris to stop her from "undermining" a bankruptcy court's continuing jurisdiction over the estate and its customers' property.
The trustee, Irving H. Picard, filed a 21-page complaint with the U.S. Bankruptcy Court in the Southern District of New York Wednesday.
In addition to Harris, Picard names Douglas Hall, Steven Heimoff, Bottlebrush Investments LP and Leghorn Investments Ltd.
Madoff, the former non-executive chairman of the NASDAQ stock market, is the admitted operator of a Ponzi scheme considered to be the largest financial fraud in U.S. history.
"By commencing actions against the estate of Stanley Chais and related entities and individuals in California, the third party plaintiffs threaten the orderly administration of the BLMIS estate and seek to diminish the pool of assets from which the trustee can make equitable and pro rata distributions to the victims of Madoff's fraud," Picard wrote.
Picard is already suing Chais' estate, hoping to recover the more than $1.3 billion that it received in fraudulent and unauthorized transfers from Madoff's company.
Chais, a Beverly Hills investment advisor who died in 2010, once managed money for some of Hollywood's biggest stars. He also was a close friend of Madoff.
Picard said he is seeking to ensure that customer property is recovered and distributed to the victims of Madoff's massive Ponzi scheme in a "fair and efficient manner" consistent with the U.S. Securities Investor Protection Act and the U.S. Bankruptcy Code.
"The third party actions threaten to thwart the trustee's efforts, as the third party plaintiffs seek to recover fictitious profits and unauthorized transfers for themselves directly from the Chais defendants," he wrote.
"To allow the third party actions to proceed would usurp the trustee's authority and divest him of his power to marshal customer property for equitable distribution."
Picard is asking the bankruptcy court to declare that Harris' and the other third party plaintiffs' actions violate the automatic stay and the stay orders and are void, and to preliminarily enjoin them from litigating any action against the Chais defendants pending completion of his own action.
From Legal Newsline: Reach Jessica Karmasek by email at email@example.com.