brl Doc 111 Filed 12/17/13 Entered 12/17/13 15:22:56 Main Document Pg 1 of 12

Transcription

1 Pg 1 of 12 WINDELS MARX LANE & MITTENDORF, LLP 156 West 56 th Street Presentment Date: December 30, 2013 New York, New York Time: 12:00 p.m. Telephone: (212) Facsimile: (212) Objections Due: December 30, 2013 Howard L. Simon Time: 11:00 a.m. Antonio J. Casas Kim M. Longo Special Counsel for Irving H. Picard, Trustee for the Substantively Consolidated SIPA Liquidation of Bernard L. Madoff Investment Securities LLC and Bernard L. Madoff UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK SECURITIES INVESTOR PROTECTION CORPORATION, Plaintiff-Applicant, v. Adv. Pro. No (BRL) SIPA LIQUIDATION (Substantively Consolidated) BERNARD L. MADOFF INVESTMENT SECURITIES LLC, Defendant. In re: BERNARD L. MADOFF, Debtor. IRVING H. PICARD, Trustee for the Liquidation of Bernard L. Madoff Investment Securities LLC, Adv. Pro. No (BRL) Plaintiff, v. MAGNIFY INC., et al., Defendants. TRUSTEE S MOTION FOR ISSUANCE OF A LETTER OF REQUEST UNDER THE HAGUE EVIDENCE CONVENTION { :3}

2 Pg 2 of 12 TABLE OF CONTENTS Page I. BACKGROUND...1 II. III. STANDARD FOR ISSUING LETTERS OF REQUEST...2 ISSUANCE OF THE LETTER OF REQUEST IS PROPER HERE...3 A. The Request Complies with Article 3 of the Convention...4 B. The Request Complies with Switzerland s Reservations to the Convention and Satisfies the U.S. Courts Standard for Issuing Letters of Request...4 C. Credit Suisse Has Maintained that the Trustee Must Proceed through the Convention...6 IV. NOTICE...7 V. CONCLUSION...7 -i-

3 Pg 3 of 12 Irving H. Picard, as trustee ( Trustee ) under the Securities Investor Protection Act ( SIPA ), 15 U.S.C. 78aaa et seq., for the substantively consolidated liquidation of the business of Bernard L. Madoff Investment Securities LLC ( BLMIS ) and the estate of Bernard L. Madoff ( Madoff ), individually, by and through his undersigned counsel, respectfully submits this Motion for Issuance of a Letter of Request Under the Hague Evidence Convention (the Motion ) pursuant to Federal Rule of Civil Procedure 28(b)(2), Bankruptcy Rule 7028, 28 U.S.C. 1781(b)(2), and the Convention of 18 March 1970 on the Taking of Evidence Abroad in Civil or Commercial Matters (the Hague Evidence Convention or Convention ). In support thereof, the Trustee respectfully represents as follows: I. BACKGROUND 1. By this Motion, the Trustee requests that the Court enter an order directing the issuance of a letter of request (the Request ) pursuant to the Hague Evidence Convention. 1 The Request seeks assistance from an appropriate judicial authority in Switzerland to compel the production of documents from non-party Credit Suisse AG ( Credit Suisse ), an entity located in Zurich, Switzerland. The Trustee seeks documents related to fictitious profits withdrawn from BLMIS and deposited in certain defendants bank accounts at Credit Suisse. Proceeding by way of the Hague Evidence Convention under which a Swiss judicial authority may compel Credit Suisse to produce documents is appropriate in this case, particularly since, to the extent relevant here, Credit Suisse has objected to, and refused to comply with, a Rule 45 subpoena for documents (the Subpoena ) the Trustee served on Credit Suisse s New York branch in January of this year. A copy of the Subpoena is attached as Exhibit A to the accompanying Declaration of Antonio J. Casas (the Casas Declaration ). While the Trustee disagrees, Credit Suisse has 1 See Convention on the Taking of Evidence Abroad in Civil or Commercial Matters, Mar. 18, 1970, 23 U.S.T. 2555, 847 U.N.T.S { :3}

4 Pg 4 of 12 maintained that the only potential avenue for obtaining documents in the possession, custody or control of Credit Suisse AG in Switzerland is to proceed through the Hague Convention. Casas Declaration, Exhibit D The Trustee submits that, under the circumstances, the Request will avoid litigation over the Subpoena and will facilitate the gathering of evidence that may be material or may lead to the discovery of material evidence. According to the Trustee s records, at least $11.5 million of fictitious profits were wired directly from BLMIS to the Credit Suisse accounts of defendants Magnify, Inc. ( Magnify ) and Strand International Investments Ltd. ( Strand ). See Request, Exhibit 1. The Trustee seeks banking records from Credit Suisse in order to shed light on these transfers. Specifically, the Request seeks defined categories of documents that will confirm defendants receipt of the transfers, may illuminate the Trustee s claims of defendants lack of good faith with respect to the transfers, and reveal whether and if so, to what extent the funds have been subsequently transferred to others. 3. For these reasons, as explained more fully below, the Court should grant the Motion and enter an order issuing the Request. 3 II. STANDARD FOR ISSUING LETTERS OF REQUEST 4. The Hague Evidence Convention, of which both the United States and Switzerland are signatories, 4 provides a mechanism for gathering evidence abroad through the issuance of a letter of request. The Convention procedures are available whenever they will facilitate the gathering of evidence by the means authorized in the Convention. Tulip 2 Credit Suisse s full objection to the Subpoena and a May 3, 2013 letter from the Trustee s counsel following up on discussions regarding that objection are attached to the Casas Declaration as Exhibits B and C, respectively. 3 In accordance with the Court s instructions for the issuance of letters of request, the Request will not be docketed with this motion. 4 See Hague Conference on Private International Law Status Table, (last visited December 12, 2013). { :3} 2

5 Pg 5 of 12 Computers Int l B.V. v. Dell Computer Corp., 254 F. Supp. 2d 469, 474 (D. Del. 2003) (quoting Société Nationale Industrielle Aerospatiale v. United States District Court for the District of Iowa, 482 U.S. 522, 541 (1987)). 5. The Court has the authority to issue a letter of request pursuant to Federal Rule of Civil Procedure 28(b)(2), made applicable through Bankruptcy Rule 7028, and 28 U.S.C. 1781(b)(2). See Netherby Ltd. v. Jones Apparel Group, Inc., No. 04 Civ (GEL), 2005 WL , at *1 (S.D.N.Y. May 18, 2005). See also DBMS Consultants v. Computer Assocs. Int'l, 131 F.R.D. 367, 369 (D. Mass. 1990). Furthermore, such letters are routinely issued where the movant makes a reasonable showing that the evidence sought may be material or may lead to the discovery of material evidence. Netherby, 2005 WL , at *1. See also Lantheus Medical Imaging, Inc. v. Zurich American Ins. Co., 841 F. Supp. 2d 769, 776 (S.D.N.Y. 2012) (stating that a federal court should issue letters rogatory when it will facilitate discovery ) (citing 8 Charles Alan Wright, et al., Federal Practice and Procedure at 70 (3d ed. 2010)); Xcentric Ventures, LLC v. Karsen, Ltd., No. CV PHX-FJM, 2012 U.S. Dist. LEXIS , at *3 (D. Ariz. Sept. 27, 2012) (granting the letter of request to ask assistance from the government of India to compel production of documents from a party located in Mumbai, India when the information plaintiff seeks may be relevant to its case and lead to the discovery of admissible evidence. ). III. ISSUANCE OF THE LETTER OF REQUEST IS PROPER HERE 6. Issuance of the Request is proper for three reasons: (1) the Request complies with the requirements of Article 3 of the Hague Evidence Convention regarding the form and content of letters of request; (2) the Request complies with Switzerland s reservations to the Convention 5 5 See Hague Conference on Private International Law Declarations Reservations, (last visited December 12, 2013). { :3} 3

6 Pg 6 of 12 and satisfies the U.S. courts standard for issuing letters of request; and (3) Credit Suisse has taken the position that the Trustee must proceed through the Convention if he wishes to obtain documents in Switzerland. A. The Request Complies with Article 3 of the Convention. 7. Article 3 of the Convention provides that a letter of request shall specify certain information. See Hague Evidence Convention, Art The Trustee s Request contains all of this necessary information and is therefore proper under Article 3 of the Convention: a. The authority requesting its execution and the authority requested to execute it, if known to the requesting authority (see Request, Section I); b. The names and addresses of the parties to the proceedings and their representatives, if any (see Request, Section II 4); c. The nature of the proceedings for which the evidence is required, giving all necessary information in regard thereto (see Request, Section II 5); d. The evidence to be obtained or other judicial act to be performed (see Request, Section II 6); e. The names and addresses of the persons to be examined (see Request, Section III 1); f. The documents or other property, real or personal, to be inspected (see Request, Section III 3). B. The Request Complies with Switzerland s Reservations under Article 23 of the Convention and Satisfies the U.S. Courts Standard for Issuing Letters of Request. 9. The Trustee s Request complies with Switzerland s Reservations under Article 23 of the Convention, 6 because, for among other reasons: 1) the evidence sought in the Request has a direct and necessary link to the issues in dispute in the above-captioned adversary proceeding; 6 See Hague Conference on Private International Law Declarations Reservations, (last visited December 12, 2013). { :3} 4

7 Pg 7 of 12 2) the Request fully identifies the documents requested from Credit Suisse; 3) Credit Suisse is not required to produce any document other than the ones requested; and 4) Credit Suisse s interests are not endangered by the Request The Request seeks banking records from Credit Suisse, a global financial institution at which two of the defendants Magnify and Strand had accounts. As noted above, the Trustee has identified over $11 million worth of transfers wired directly from Strand s BLMIS account ($9.4 million) and Magnify s BLMIS account ($2.1 million) to their respective accounts at Credit Suisse. See Request, Exhibit 1. The Trustee seeks documents relating to these transfers to confirm the entities receipt of the transfers and to trace any subsequent transfers of customer property. Furthermore, given that the Trustee has alleged that the defendants lacked good faith in receiving these transfers, he is entitled to discovery to determine, inter alia, whether the transfers were used for their stated purposes, whether they were subsequently transferred to third parties, and/or whether they were transferred in bad faith. Such facts are directly relevant to the Trustee s claims regarding the defendants fraudulent intent with respect to these transfers and their knowledge of and participation in the Ponzi scheme, especially given their factual arguments regarding their rights to receive and/or distribute certain transfers to third parties. See, e.g., Answer to Amended Complaint [Dkt. No. 63], 63, 64, 70, The Request is not a fishing expedition, and granting it would be consistent with the practice in U.S. courts of routinely issuing letters of request where, as here, the movant makes a reasonable showing that the evidence sought may be material or may lead to the 7 Switzerland s other reservations to the Convention mainly deal with procedures, and to the extent they are applicable, the Trustee has complied by: 1) indicating in the Request that the Central Authority for the Canton of Zurich is the appropriate authority to execute the Request; and 2) providing a translation of the Request and exhibit thereto in German, the official language of the Canton of Zurich. { :3} 5

8 Pg 8 of 12 discovery of material evidence. Netherby, 2005 WL , at *1. The Request seeks specific documents relating to the nineteen known transfers from Magnify s and Strand s BLMIS accounts to their respective accounts with Credit Suisse. See Request, Section III 3 and Exhibit 1. To the extent possible, the Request specifies the time frames and amounts for any subsequent transfer or withdrawal, and asks for related wire and outgoing check records and monthly account statements. Accordingly, the Request seeks no more than is necessary to illuminate the issues in this case, and therefore should not endanger Credit Suisse s interests. Should the Swiss judicial authority nonetheless deem the Request overbroad, that authority may tailor the request as necessary to accord with local law and practice. See Tulip Computers, 254 F. Supp. 2d at 475 (noting that, if request is overbroad under foreign law, foreign judicial authority may narrow the request before any documents are produced). C. Credit Suisse Has Maintained that the Trustee Must Proceed through the Convention. 12. The Hague Evidence Convention is an appropriate means of obtaining the evidence sought under the circumstances. Credit Suisse is a non-party domiciled in a foreign country (Switzerland) and, in objecting to the Subpoena, has stated that requesting documents through the Hague Convention appears to be the only potential avenue for obtaining documents in the possession, custody or control of Credit Suisse AG in Switzerland. See Casas Declaration, Exhibit D. While the Trustee does not agree, he seeks to utilize the Convention under the particular circumstances here in order to avoid further litigation regarding contentious international comity issues that would surely arise were he instead to pursue enforcement of the Subpoena as to documents located in Switzerland. See, e.g., Wultz v. Bank of China Ltd., 910 F. Supp. 2d 548, (S.D.N.Y. 2012) (U.S. court employed seven-factor balancing test to determine whether it should compel a foreign entity to produce foreign documents). That said, { :3} 6

9 Pg 9 of 12 the Trustee is not withdrawing the Subpoena and reserves the right to seek its enforcement if his efforts to obtain documents through the Convention are not successful. IV. NOTICE 13. Notice of this motion has been provided by U.S. Mail or to all defendants in this adversary proceeding pursuant to the Order Establishing Notice Procedures and Limiting Notice filed in the main docket, Adv. Pro. No brl [Dkt. No. 4560]. The Trustee submits that no other or further notice is required. V. CONCLUSION WHEREFORE, the Trustee respectfully requests that the Court enter an order, substantially in the form of the proposed order attached hereto, directing that the Request be issued so that the Trustee may obtain material evidence from Credit Suisse in Switzerland. Dated: New York, New York December 17, 2013 Respectfully submitted, By: /s/ Howard L. Simon WINDELS MARX LANE & MITTENDORF, LLP 156 West 56 th Street New York, New York Tel: (212) Howard L. Simon Antonio J. Casas Kim M. Longo Special Counsel to Irving H. Picard, Trustee for the Substantively Consolidated SIPA Liquidation of Bernard L. Madoff Investment Securities LLC and Bernard L. Madoff { :3} 7

10 Pg 10 of 12 EXHIBIT 1

11 Pg 11 of 12 UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK SECURITIES INVESTOR PROTECTION CORPORATION, Plaintiff-Applicant, v. Adv. Pro. No (BRL) SIPA LIQUIDATION (Substantively Consolidated) BERNARD L. MADOFF INVESTMENT SECURITIES LLC, Defendant. In re: BERNARD L. MADOFF, Debtor. IRVING H. PICARD, Trustee for the Liquidation of Bernard L. Madoff Investment Securities LLC, Adv. Pro. No (BRL) Plaintiff, v. MAGNIFY INC., et al., Defendants. ORDER ISSUING LETTER OF REQUEST FOR INTERNATIONAL JUDICIAL ASSISTANCE PURSUANT TO THE HAGUE CONVENTION OF 18 MARCH 1970 ON THE TAKING OF EVIDENCE ABROAD IN CIVIL OR COMMERCIAL MATTERS Upon the motion (the Motion ), dated December 17, 2013, brought by Irving H. Picard, as trustee (the Trustee ) for the substantively consolidated liquidation of the business of Bernard L. Madoff Investment Securities LLC and the estate of Bernard L. Madoff, individually, seeking entry of an order (the Order ) issuing the Request (as defined in the Motion) to be transmitted to the Central Authority for the Canton of Zurich; and it appearing that due and { :6}

12 Pg 12 of 12 sufficient notice of the Motion has been given under the circumstances; and it further appearing that the relief sought in the Motion is appropriate based upon the information provided therein; and it further appearing that this Court has jurisdiction to consider the Motion and the relief requested therein pursuant to 28 U.S.C. 1334(b) and 157(a); and after due deliberation; and sufficient cause appearing therefore; it is hereby ORDERED that the Motion is granted; and it is further ORDERED that the Request forwarded to the Court and addressed to the Central Authority for the Canton of Zurich shall not be docketed, and shall be signed by the Court, stamped with the seal of the Court for transmission to the Central Authority for the Canton of Zurich, and returned to the Trustee s special counsel at the following address: Dated: New York, New York, 2013 Howard L. Simon, Esq. Windels Marx Lane & Mittendorf LLP 156 West 56th Street New York, NY Tel: Fax: hsimon@windelsmarx.com THE HONORABLE BURTON R. LIFLAND UNITED STATES BANKRUPTCY JUDGE { :6} 2

13 brl Doc Filed 12/17/13 Entered 12/17/13 15:22:56 Notice of Presentment of Motion for Issuance of Letter of Request Under the Hag Pg 1 of 3 WINDELS MARX LANE & MITTENDORF, LLP 156 West 56 th Street Presentment Date: December 30, 2013 New York, New York Time: 12:00 p.m. Telephone: (212) Facsimile: (212) Objections Due: December 30, 2013 Howard L. Simon Time: 11:00 a.m. Antonio J. Casas Kim M. Longo Special Counsel to Irving H. Picard, Trustee for the Substantively Consolidated SIPA Liquidation of Bernard L. Madoff Investment Securities LLC and Bernard L. Madoff UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK SECURITIES INVESTOR PROTECTION CORPORATION, Plaintiff-Applicant, v. Adv. Pro. No (BRL) SIPA LIQUIDATION (Substantively Consolidated) BERNARD L. MADOFF INVESTMENT SECURITIES LLC, Defendant. In re: BERNARD L. MADOFF, Debtor. IRVING H. PICARD, Trustee for the Liquidation of Bernard L. Madoff Investment Securities LLC, Adv. Pro. No (BRL) Plaintiff, v. MAGNIFY INC., et al., Defendants. { :1}

14 brl Doc Filed 12/17/13 Entered 12/17/13 15:22:56 Notice of Presentment of Motion for Issuance of Letter of Request Under the Hag Pg 2 of 3 NOTICE OF PRESENTMENT OF TRUSTEE S MOTION PURSUANT TO 28 U.S.C. 1781(b)(2), RULE 28(B)(2) OF THE FEDERAL RULES OF CIVIL PROCEDURE, AND RULE 7028 OF THE FEDERAL RULES OF BANKRUPTCY PROCEDURE FOR AN ORDER ISSUING A LETTER OF REQUEST UNDER THE HAGUE EVIDENCE CONVENTION PLEASE TAKE NOTICE that upon the attached motion of Irving H. Picard, as trustee (the Trustee ) for the substantively consolidated liquidation of the business of Bernard L. Madoff Investment Securities LLC ( BLMIS ), under the Securities Investor Protection Act ( SIPA ) 78aaa et seq., and the estate of Bernard L. Madoff ( Madoff ), individually (collectively, the Debtor ), the undersigned will present the attached proposed order (the Order ) to the Honorable Burton R. Lifland, United States Bankruptcy Judge, for signature and entry on December 30, 2013, at 12:00 p.m. PLEASE TAKE FURTHER NOTICE that objections, if any, to the proposed Order ( Objections ), shall (i) be in writing; (ii) conform to the Federal Rules of Bankruptcy Procedure, Local Bankruptcy Rules and General Orders; (iii) specify the name of the objecting party and state with specificity the basis of the Objection(s) and the specific grounds therefor; (iv) be filed in accordance with the electronic filing procedures for the United States Bankruptcy Court for the Southern District of New York, with a proof of service, and a courtesy copy delivered to the Chambers of the Honorable Burton R. Lifland, One Bowling Green New York, New York 10004; and (v) be served upon (a) Windels Marx Lane & Mittendorf, LLP, special counsel for the Trustee, 156 West 56th Street, New York, New York 10019, Attn: Howard L. Simon, Esq. and (b) the Securities Investor Protection Corporation, 805 Fifteenth Street, NW, Suite 800, Washington, DC 20005, Attn: Kevin H. Bell, Esq., so as to be received no later than 11:00 a.m. on December 30,

15 brl Doc Filed 12/17/13 Entered 12/17/13 15:22:56 Notice of Presentment of Motion for Issuance of Letter of Request Under the Hag Pg 3 of 3 PLEASE TAKE FURTHER NOTICE that, in the event any Objections are timely served and filed, a hearing may be held before the Honorable Burton R. Lifland, United States Bankruptcy Judge, at a date to be scheduled by the Court, upon such additional notice as the Court may direct. The moving and objecting parties are required to attend the hearing, and failure to attend in person or by counsel may result in relief being granted or denied upon default. PLEASE TAKE FURTHER NOTICE that unless Objections are timely served and filed, the proposed Order may be signed without a hearing. Dated: New York, New York December 17, 2013 WINDELS MARX LANE & MITTENDORF, LLP By: /s/ Howard L. Simon Howard L. Simon (hsimon@windelsmarx.com) Antonio J. Casas (acasas@windelsmarx.com) Kim M. Longo (klongo@windelsmarx.com) 156 West 56 th Street New York, New York Telephone: (212) Special Counsel to Irving H. Picard, Trustee for the Substantively Consolidated SIPA Liquidation of Bernard L. Madoff Investment Securities LLC and Bernard L. Madoff 3