NEW YORK, Jan 6 (Reuters Legal) - A group of investors who claim they lost money to convicted swindler Bernard Madoff objected to a $7.2 billion settlement between a court-appointed trustee and the estate of Madoff friend and investor Jeffry Picower, a court document filed on Thursday said.
The objection to the biggest settlement so far in the Madoff affair was made on behalf of a putative class of investors whose claims are not recognized by the trustee, New York lawyer Irving Picard.
Thursday's objection in U.S. Bankruptcy Court in New York argued that under case law, the trustee "lacks standing to assert or release claims that do not belong to him."
It said that the "objectants have claims against the Picower parties that are personal to them and do not belong to the estate: claims for taxes paid on fictitious income; claims for the money stolen from them which deprived them of a reasonable return on their investment."
Many of the same investors are pursuing a challenge in the Second Circuit Court of Appeals over the trustees method of calculating the so-called "net winners" of the fraud at Bernard L. Madoff Investment Securities LLC -- clients who took out more than they deposited over the years.
The trustee and the U.S. Department of Justice announced the settlement last Dec. 17 with the estate of Picower, who died of a heart attack at the age of 67 in October of 2009.
Madoff, 72, is serving a 150-year prison sentence after pleading guilty in March 2009 to orchestrating the massive scheme. U.S. prosecutors estimated the international investment fraud took in about $65 billion over at least two decades.
The trustee has put the amount of principal that investors lost at about $20 billion. So far, Picard and his team of lawyers have won settlements of about $10 billion.
Lawyers for objecting investors wrote that they constitute $46.8 billion of the Madoff losses and asked U.S. Bankruptcy Court Judge Burton Lifland to "permit limited discovery of the trustee and the Picower parties so that there will be a complete record on appeal for this issue of vital importance to thousands of investors."
Separately in a court hearing on Thursday, Lifland approved the trustee's $500 million settlement with private Swiss bank Union Bancaire Privee (UBP) and a related fund, M-Invest Limited, incorporated in the Cayman Islands. Picard announced that settlement on Dec. 6.
The challenge to the Picower settlement is Picard v. Jeffry M. Picower, U.S. Bankruptcy Court for the Southern District of New York No. 09-01197. The following firms are representing the plaintiffs: Cole, Schotz, Meisel, Forman & Leonard (New York); Beasley Hauser Kramer Leonard & Galardi (West Palm Beach); Blackner, Stone & Associates (Palm Beach).
The Second Circuit case challenging the calculation of net winners and investor losses is In Re: Bernard L. Madoff, United States Court of Appeals for the Second Circuit, No. 08-1789.
The court appointed trustee is Irving Picard, a partner with the New York office of Baker & Hostetler.
(Reporting by Grant McCool of Reuters; Additional reporting by Jeff Roberts of Reuters Legal)