Judge drops some claims against Madoff relatives (Reuters)

NEW YORK (Reuters) ? A federal bankruptcy judge has dismissed portions of a $199 million lawsuit against close relatives of convicted Ponzi schemer Bernard Madoff, but said a trustee seeking restitution for the swindler's victims can proceed with most claims in the suit.

Irving Picard, a lawyer appointed by the U.S. Bankruptcy Court in New York to liquidate Madoff's estate, had filed suit last October alleging that Madoff's brother Peter, sons Andrew and Mark, and niece Shana, obtained almost $200 million by treating Madoff's investment company "as if it were the family piggy bank."

U.S. Bankruptcy Judge Burton Lifland on Thursday dismissed some of the claims, saying that the majority of alleged fraudulent transfers of funds to the family members were not identified completely. But he said the flaws were largely correctable and could be amended within 45 days.

The suit urged the court to require the relatives, all senior managers within the Madoff firm, to return the funds which Picard alleged were used to pay for their vacations, travel, homes and personal expenses.

Instead of preventing Madoff from bilking unwary investors, Picard's suit alleged the family members stood by and profited while allowing it to continue.

But the relatives contended their involvement with the firm was entirely legitimate and that they, above all, were betrayed by Madoff -- who pleaded guilty to the Ponzi scheme in March 2009 and is serving a 150-year prison sentence.

A Ponzi scheme is one in which early investors are paid with money deposited by new clients.

The relatives contend they worked for the firm's legitimate market-making and proprietary trading units, not the investment advisory arm at the center of the decades-long multibillion-dollar fraud.

The case is Irving H. Picard, Trustee for the Liquidation of Bernard L. Madoff Investment Securities LLC v Peter B. Madoff, Mark D. Madoff, Andrew H. Madoff, and Shana D. Madoff. U.S. Bankruptcy Court for the Southern District of New York No. 09-01503.

(Reporting by Ransdell Pierson)

Source: http://us.rd.yahoo.com/dailynews/rss/crime/*http%3A//news.yahoo.com/s/nm/20110923/ts_nm/us_madoff

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