Investment fund company files lawsuit against Ernst & Young, UBS

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Administrators of an investment fund associated with fraudster Bernard Madoff are suing Ernst & Young LLP and Switzerland's biggest bank, UBS AG.

“We filed the lawsuit today seeking the return of some $426 million,” Alain Rukavina, one of the liquidators for Luxembourg Investment Fund, told Bloomberg News on March 22.

UBS AG was the Luxembourg Investment Fund's custodian bank, and Ernst & Young's local unit was the auditor. The fund dissolved after Madoff's investment firm collapsed following his December 2008 arrest. A Luxembourg court in early March gave liquidators for local funds the “exclusive” right to recover assets, Bloomberg reported. The move was seen as potentially preventing hundreds of lawsuits by investors.

Rukavina also sued UBS and Ernst & Young in December over Access International Advisors LLC's LuxAlpha Sicav-American Selection Fund. UBS also was custodian for LuxAlpha, which once had $1.4 billion. UBS was responsible for oversight of funds and investor payments and deposits, but failed to prevent assets from being handed over to a third party, or sub-custodian, Bernard L. Madoff Investment Securities Inc., court papers state.

Rukavina said the Luxembourg Investment Fund was "more of a pure UBS product" than LuxAlpha, the Financial Times reported. A spokeswoman for UBS said that the Luxembourg Investment Fund suit “was entirely expected.” UBS has denied wrongdoing.

In addition, 80 French investors sued UBS on March 16 in Paris for failing to state in the LuxAlpha prospectus that Madoff handled the assets.

Even though the Luxembourg commercial court already has rejected claims by individual investors, directing claims to go through liquidators, French lawyers are confident, Investment International reported. “Given how the case evolved in Luxembourg, we have been in contact with other lawyers. As well as civil claims, we might, where possible, bring criminal complaints,” said Marc-Pierre Stehlin of the law firm Stehlin & Associes.

Madoff pleaded guilty last year to a Ponzi scheme in which money from new clients was used to pay earlier investors. He was sentenced to 150 years in prison.

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