$235mln settlement agreed over Madoff claims

May 27, 2009 07:33:36 AM

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Spanish bank Santander, a major feeder to Wall Street fraudster Bernard Madoff's pyramid scheme, agreed Tuesday to a 235 million dollar (167.9 million euro) settlement of any legal claims by the US trustee.

The government-appointed trustee overseeing liquidation of Madoff's business said in a statement it had reached agreement with two funds managed by Optimal Investment Services, a branch of Santander.

The deal, if approved by a US bankruptcy court, will "resolve all claims that the trustee has against Optimal. Under the agreement, Optimal will pay the trustee more than 235 million dollars, an amount equal to 85 percent of the amount of the trustee's claims against Optimal."

"This settlement was reached without the need for the trustee to commence litigation against Optimal," the office of trustee Irving Picard said.

A spokesman for the bank confirmed the move. The court is due to rule on the deal June 16.

Picard said earlier this month that he is seeking to recover 10.1 billion dollars in phony profits paid by Madoff to his clients in the biggest financial fraud in Wall Street history.

Santander, the eurozone's largest bank by market capitalization, is one of the companies most exposed in Madoff's multi-billion-dollar Ponzi scheme.

In December the bank announced Optimal had a total exposure of 2.33 billion euros to the Madoff scheme, while Santander itself was exposed to the tune of 17 million euros.

"I am very pleased that we reached such a favorable settlement with Optimal.... We hope that other entities against which we have claims will likewise come forward to settle those claims for the benefit of all of Madoff's victims," Picard said in a statement.

Madoff, a former chairman of the Nasdaq stock exchange, operated the fraud for more than two decades, conning thousands of investors into depositing billions of dollars that were then used to pay fictitious returns.

Major investors, like Santander, acted as unwitting accomplices by funneling the money into Madoff's fund, thereby allowing his fraud to keep going. The scheme collapsed last year when clients started to withdraw investments.

He was arrested on December 11, 2008, and has been jailed since March 12 after pleading guilty. He is scheduled to be sentenced on June 29 and is likely to be sentenced to prison for the rest of his life.