Top law firm William Fry sued by Madoff Ponzi scheme investors
ONE of Ireland's "magic circle" law firms is fighting a $700m (e480m) class action lawsuit by investors who lost money with Ponzi scheme fraudster Bernie Madoff.
William Fry, one of the country's top five law firms, is being sued in New York in its capacity as legal adviser to Thema International, a Dublin-based hedge fund.
Thema was one of the leading "feeder funds" for Madoff who is serving a 150-year jail sentence over the spectacular $50bn (e34bn) fraud.
William Fry, which is separately representing Thema in an Irish High Court action against banking giant HSBC, says the New York claim is "without foundation" and will seek to have the US case against it dismissed within weeks.
Earlier this week HSBC, which acted as custodian for Thema and other funds that fed money to Madoff, made a $62m (e42m) settlement with Thema investors.
William Fry has been named, along with 'big four' auditor PwC Ireland, in the massive class action lawsuit which is set to come before a jury later this year.
Solicitor Daniel Morrissey, the head of William Fry's asset management and investment funds practice, is also being sued in his capacity as a director of Thema, according to the class action complaint.
Mr Morrissey is a former chairman of the Irish Funds Industry Association.
The investors claim that Thema was one of the four largest feeder funds for Madoff and collected over $100m (e68m) in fees.
Frank Bottini, a San Diego, California-based attorney who is representing investors, said he would oppose any bid by William Fry for the claim against the firm to be dismissed.
"They [William Fry] have liability as lawyers for the fund," Mr Bottini told the Irish Independent.
"Thema had no real employees so the entire operation was handled by the professional advisers. Mr Morrissey was one of the directors of Thema and he was responsible for the overall management of the fund.
"We believe that Mr Morrissey, a partner in William Fry, is conflicted because the law firm not only advised Thema but continues to act for the fund."
Mr Bottini said William Fry and PwC were being sued on a joint and several liability basis, meaning they can be pursued for all or part of the compensation sought if the case succeeds.
"This is a $600m (e410m) to $700m (e478m) claim," he added.
The investors claim that Madoff's Ponzi scheme could not have occurred without the knowledge and substantial assistance of feeder funds like Thema which engaged William Fry and PwC Ireland as its lawyers and auditors respectively.
"Unbeknownst to plaintiff and the class, Thema became a portal through which money was secretly sent to Madoff even though Thema Management and Medici (Medici Bank) were represented to the investment managers," say the investor's lawyers in a 190-page class action complaint.
"But for the billions of dollars that Thema gave to Madoff, the scheme would have unravelled substantially earlier and not damaged thousands of US citizens."
Last night, William Fry issued a statement confirming it was one of about 20 defendants, including Thema and a number of global financial institutions, seeking compensation for losses stemming from the Madoff fraud.
"The inclusion of William Fry in the amendment to the suit is without foundation and a motion to dismiss this US suit is scheduled to be filed later this month," said the firm.
PwC refused to comment on the action.