Fairfield Sentry Battles HSBC, Others Over Venue

Law360–An attorney for Fairfield Sentry Ltd., Bernard L. Madoff’s largest feeder fund, told a bankruptcy judge Wednesday not to remand more than 40 adversary proceedings against financial institutions and others back to state court.

The defendants agreed to settle disputes in New York and it made more sense to keep all actions before the same judge in bankruptcy court instead of before a state court, Sentry attorney David J. Molton of Brown Rudnick LLP told Judge Burton R. Lifland of the U.S. Bankruptcy Court for the Southern District of New York.

“A dual track … will delay and be harmful to the liquidation,” Molton said.

Sentry has filed 205 actions, and about 42 of those actions were subject to the remand motions, Molton said.

But Thomas J. Moloney of Cleary Gottlieb Steen & Hamilton LLP, who represents defendants affiliated with HSBC Holdings PLC and others, said that cases belonging in state courts will have just as much expertise before a judge in the commercial division of the Supreme Court of the State of New York.

The 205 actions before Judge Lifland seek some $5.5 billion in redemptions, Moloney said.

British Virgin Islands-based Sentry filed for bankruptcy in April 2009 in the territory’s Commercial Division of the High Court of Justice. Two units, Fairfield Sigma Ltd. and Fairfield Lambda Ltd., have also sought protection. The Chapter 15 proceedings commenced in June 2010.

With at least $7 billion in assets held by Bernard L. Madoff Investment Securities LLC, Sentry claims to have been Madoff’s largest feeder. Sentry said it needed Chapter 15 protection from multiple potential creditors, including Irving H. Picard, Securities Investor Protection Act trustee for the BLMIS liquidation, who has filed an adversary proceeding looking to recover $3.5 billion Sentry received from Madoff during the six years prior to BLMIS’ collapse.

Sentry ceased calculating its net asset value in December 2008, when Madoff was arrested and charged with conducting the largest Ponzi scheme in U.S. history.

Sentry formed a litigation committee in February 2009, at which point the company said its sole purpose had become ensuring the preservation of its assets for efficient distribution.

The Irish Stock Exchange delisted Sentry in May 2009. Brown Rudnick LLP represents Sentry.
Cleary Gottlieb Steen & Hamilton LLP represents HSBC, Citigroup Inc., BNP Paribas SA and Credit Agricole SA. Counsel information for the defendants was not immediately available.
Sentry’s British Virgin Islands bankruptcy is case number BVIHCV2009/136 in the Commercial Division of the High Court of Justice, British Virgin Islands.

The Chapter 15 case is In re: Fairfield Sentry Ltd., case number 10-bk-13164, in the U.S. Bankruptcy Court for the Southern District of New York.