Irving L. Picard, the court appointed trustee in the Bernard L. Madoff fraud, has filed the largest lawsuit yet, seeking to recover $19.6 billion in damages from Austrian banker Sonja Kohn. The trustee claims that Kohn was a central figure in the 23-year Ponzi scheme, and without her involvement, Madoff could not have swindled billions of dollars from unsuspecting clients.
The statute of limitations on fraud claims runs out on Saturday, and Picard and his lawyers have been busy filing last-minute claims to insure that every potential source of ill-gotten gains is covered.
The lawsuit brought by Baker & Hostetler, the trustee’s law firm, is the first to include charges that the defendant violated the Racketeer Influenced and Corrupt Organizations Act. The Act provides the means to sue a number of interconnected entities under one lawsuit, making it easier to prosecute complex cases usually found in organized crime. The law also allows for the recovery of triple damages.
Madoff’s relationship with Kohn, an Austrian citizen, began in 1985 when she was a broker for Merrill Lynch in Monsey, N.Y. The lawsuit alleges that Kohn was aware from the start that Madoff’s operation was a Ponzi scheme, and that she received kickbacks from the steady stream of clients she referred to him.
In 1993, Kohn returned to her home turf in Vienna, where she set up a base of operations to feed business to her associate, Madoff, in New York. She frequented the money centers of London, Zurich and Milan cultivating relationships with the wealthy. Like other money managers involved with Madoff, she boasted of her relationship with him and offered to provide access to his funds, when rivals could not.
In 1994, Kohn formed Bank Medici, an entity which Picard alleged is nothing more than a conduit to provide a legitimate flow of investment monies to the Madoff funds. Through Medici, Kohn tapped into a network of banks, hedge funds and other companies throughout Europe, and eventually the newly-created wealth in Russia.
Kohn traveled in high-end circles throughout Europe, and was known for her bouffant red wig and flamboyant attire. Timothy S. Pfeifer, a lawyer for the trustee said, “Sonja Kohn went by many names and operated under many guises, creating an international network of spurious investment entities and masterminding an illegal scheme not only to support the Madoff fraud, but also to enrich herself, her family, and the largest banks in Austria and Italy.”
As the Madoff funds were beginning to collapse in late 2008, feeder funds controlled by Kohn began making large withdrawals, including a single $423 million transfer. Kohn and her family were reportedly hiding out after the collapse, some say in fear of retribution from Russian investors.
Madoff, 72, is currently serving a 150-year sentence in prison after pleading guilty to the largest ever Ponzi scheme in history.