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10-04285-brl Doc 127 Filed 08/17/12 Entered 08/17/12 14:29:55 Main Document Pg 28 of 133 As demonstrated below, many of these entities and individuals, working on Luxalpha’s behalf, were in regular telephone, written and, in at least the case of Littaye, in-person communication with BLMIS. Through their administration and management of Luxalpha from 2004 through 2008, Luxalpha invested approximately $1.5 billion into account 1FR108 at BLMIS. (See Am. Compl. 262 & Ex. B.) Luxalpha also withdrew approximately $766 million from the account—in the two years preceding the December 11, 2008 filing date (the “Filing Date”), $743 million was withdrawn, and in the 90 days preceding the Filing Date, $536 million was withdrawn. (Id. 263–65 & Ex. A.) The Moving Luxalpha Director Defendants and Delandmeter, as members of Luxalpha’s board, enabled the ongoing Luxalpha investment in BLMIS. For example, they approved the publication and dissemination of Luxalpha’s sales prospectuses that made no mention of BLMIS or the fact that Luxalpha’s board and UBS SA had delegated custodial and portfolio management responsibility to BLMIS in New York (Pergament Decl. Exs. 8 at 2; 12; 13 at 3 4 ; see, e.g., Pergament Decl. Ex. 10); executed resolutions confirming that Luxalpha was “in conformity with the determined investment policy” and “the investment restrictions as mentioned in the prospectus,” even though neither the policy nor the prospectus disclosed that UBS SA had contracted its custodial duty to BLMIS (Pergament Decl. Exs. 14; 15; see, e.g., Pergament Decl. Ex. 10 at 9, 17–22); and authorized resolutions that ensured that various UBS and Access entities received their enormous fees from Luxalpha’s investment in BLMIS—the very fees that the Trustee now seeks to recover through his subsequent transfer claims. (See, e.g., Pergament Decl. Exs. 16, 13.) 4 Although this board resolution was only produced to the Trustee in an unsigned form, the Trustee believes that the Board undertook the actions specified in the document. 8
10-04285-brl Doc 127 Filed 08/17/12 Entered 08/17/12 14:29:55 Main Document Pg 29 of 133 Meanwhile, by 2005 UBS SA and UBSFSL had begun servicing a second Madoff feeder fund, Groupement. (See Baumert Decl. 12 [Bankr. S.D.N.Y. ECF No. 112] Boulat Decl. 12 [Bankr. S.D.N.Y. ECF No. 111.]) Groupement was created by Access in 2003, and opened its account with BLMIS that same year. (Pergament Decl. Exs. 17; 3 at 2.) Although UBS was careful to not directly contract with BLMIS with regard to Groupement—even stating in the Operating Memorandum, “Not to do [:] Neither [UBS SA] nor UBSFSL should ever enter into a direct contract with Bernard Madoff!!!”—UBS SA and UBSFSL, along with Access, directed investment activity into BLMIS in New York on behalf of Groupement. (Pergament Decl. Ex. 18 at 20.) During its lifetime, Groupement invested approximately $492 million into account 1FR096 at BLMIS. (See Am. Compl. 262 & Ex. C.) Groupement also withdrew approximately $356 million from the account—in the two years preceding the Filing Date, $277 million was withdrawn, and in the 90 days preceding the Filing Date, $260 million was withdrawn. (Id. 263–65 & Ex. A.) Through it all, UBS and Access ignored numerous indicia of fraud at BLMIS so that they could continue to collect fees from Luxalpha and Groupement. As described above, UBS AG and the Moving UBS Defendants knowingly made an exception to allow Luxalpha to invest in BLMIS despite their prohibition against permitting a broker to be a depository as well, and took steps to conceal the fact that they were conducting business with BLMIS through the Luxalpha and Groupement funds. Likewise, Access, including the Moving Access Defendants and Delandmeter, exempted BLMIS from its ordinary due diligence procedures; was aware that BLMIS used a small and unknown auditor; and acquiesced to BLMIS’s unusual practice of only reporting trades through delayed paper confirmations. (Am. Compl. 201–08, 231–39.) Access was also aware of the impossibility of the option trade volumes reported by BLMIS; 9
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