10-05356-brl doc 47 filed 11/09/12 entered 11/09/12 17:41 ... · 10-05356-brl doc 47 filed 11/09/12...

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Windels Marx Lane & Mittendorf, LLP Hearing Date: December 4, 2012 at 10 a.m. 156 West 56th Street Objection Deadline: November 27, 2012 at 5 p.m. New York, New York 10019 Tel: (212) 237-1000 Howard L. Simon ([email protected]) Clark E. Alpert ([email protected]) Kim M. Longo ([email protected]) Special Counsel to Irving H. Picard, Trustee for the Substantively Consolidated SIPA Liquidation of Bernard L. Madoff Investment Securities LLC and Bernard L. Madoff UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK

SECURITIES INVESTOR PROTECTION CORPORATION,

Plaintiff-Applicant,

v.

BERNARD L. MADOFF INVESTMENT SECURITIES LLC,

Defendant.

Adv. Pro. No. 08-01789 (BRL)

SIPA Liquidation

(Substantively Consolidated)

In re:

BERNARD L. MADOFF,

Debtor.

IRVING H. PICARD, Trustee for the Liquidation of Bernard L. Madoff Investment Securities LLC,

Plaintiff,

v.

BEACON ASSOCIATES LLC I, BEACON ASSOCIATES LLC II, BEACON ASSOCIATES LLC, BEACON ASSOCIATES MANAGEMENT CORPORATION, ANDOVER ASSOCIATES, L.P., ANDOVER ASSOCIATES LLC I, ANDOVER ASSOCIATES (QP) LLC, ANDOVER ASSOCIATES LLC II, ANDOVER ASSOCIATES MANAGEMENT CORPORATION, JOEL DANZIGER, HARRIS

Adv. Pro. No. 10-05356 (BRL)

10-05356-brl Doc 47 Filed 11/09/12 Entered 11/09/12 17:41:24 Main Document Pg 1 of 15

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MARKHOFF, J.P. JEANNERET ASSOCIATES, INC., JOHN JEANNERET, PAUL PERRY, IVY ASSET MANAGEMENT LLC, LAWRENCE SIMON, HOWARD WOHL, IVY BIRCHWOOD ASSOCIATES, L.P., IVY ENHANCED INCOME FUND, OAKWOOD ASSOCIATES, IVY REGENCY FUND, L.P., IVY ROSEWOOD ASSOCIATES, L.P., IVY ROSEWOOD OFFSHORE FUND, LTD., BIRCHWOOD ASSOCIATES MANAGEMENT, LLC, OAKWOOD ASSOCIATES MANAGEMENT, LLC, ROSEWOOD ASSOCIATES MANAGEMENT, LLC, IVY INTERNATIONAL, LLC AND REGENCY ASSET MANAGEMENT, LLC,

Defendants.

MOTION FOR ENTRY OF AN ORDER PURSUANT TO SECTION 105(A) OF THE BANKRUPTCY CODE AND RULES 2002 AND 9019 OF THE FEDERAL

RULES OF BANKRUPTCY PROCEDURE APPROVING A SETTLEMENT AGREEMENT BY AND BETWEEN THE TRUSTEE, ON THE ONE HAND, AND

BEACON ASSOCIATES LLC I, BEACON ASSOCIATES LLC II, BEACON ASSOCIATES LLC, BEACON ASSOCIATES MANAGEMENT CORPORATION,

ANDOVER ASSOCIATES, L.P., ANDOVER ASSOCIATES LLC I, ANDOVER ASSOCIATES (QP) LLC, ANDOVER ASSOCIATES LLC II, ANDOVER

ASSOCIATES MANAGEMENT CORPORATION, JOEL DANZIGER, HARRIS MARKHOFF, J.P. JEANNERET ASSOCIATES, INC., JOHN JEANNERET, PAUL

PERRY, IVY ASSET MANAGEMENT LLC, LAWRENCE SIMON, HOWARD WOHL, IVY BIRCHWOOD ASSOCIATES, L.P., IVY ENHANCED INCOME

FUND, IVY REGENCY FUND, L.P., IVY ROSEWOOD ASSOCIATES, L.P., IVY ROSEWOOD OFFSHORE FUND, LTD., BIRCHWOOD ASSOCIATES

MANAGEMENT, LLC, ROSEWOOD ASSOCIATES MANAGEMENT, LLC, IVY INTERNATIONAL, LLC AND REGENCY

ASSET MANAGEMENT, LLC, ON THE OTHER HAND

TO: THE HONORABLE BURTON R. LIFLAND UNITED STATES BANKRUPTCY JUDGE:

Irving H. Picard (the “Trustee”), as trustee for the substantively consolidated

liquidation of Bernard L. Madoff Investment Securities LLC (“BLMIS”) and Bernard L.

Madoff (“Madoff,” and together with BLMIS, collectively, the “Debtors”), by and through

his undersigned counsel, submits this motion (the “Motion”) seeking entry of an order,

pursuant to section 105(a) of the United States Bankruptcy Code, 11 U.S.C. §§ 101 et seq.

(the “Bankruptcy Code”), and Rules 2002 and 9019 of the Federal Rules of Bankruptcy


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Procedure (the “Bankruptcy Rules”), approving a settlement, the terms and conditions of

which are set forth in the settlement agreement (the “Agreement”)1 by and among the

Trustee on the one hand, and the Settling Defendants, as defined therein, on the other hand,

and in support thereof, the Trustee respectfully represents as follows:2

PRELIMINARY STATEMENT

The Trustee’s settlement with the Settling Defendants results in a $24 million

settlement payment (the “Settlement Payment”), which represents a return of 100% of

Settling Defendants’ withdrawals (in the amount of $20.50 million) directly from BLMIS

during the six-year period prior to the Filing Date (as defined below) (the “Six-Year

Period”), plus additional recoveries for (i) direct withdrawals by certain of the Settling

Defendants during the period prior to the Six-Year Period and (ii) subsequent transfers

made to various Settling Defendants.

Each of the Settling Defendants in this proceeding is a BLMIS feeder fund or a

manager, advisor, and/or consultant of one or more BLMIS feeder funds. The Trustee’s

complaint against the Settling Defendants seeks (i) the avoidance and recovery of initial

and subsequent transfers from BLMIS to the Settling Defendants and (ii) the recovery of

subsequent transfers made to certain Settling Defendants from three feeder fund entities

(the JPJ Initial Transferees) which are the named defendants in certain separately-filed

Trustee net winner adversary proceedings (the JPJ Funds Adversary Proceedings). The

1 The form of Agreement is attached hereto as Exhibit A. Capitalized terms used but not defined herein have the meaning ascribed to such terms in the Agreement. 2 “Settling Defendants” is defined in the Agreement to include all Defendants in this Adversary Proceeding, and, with respect to certain specific provisions of the Agreement only, Sandra Simon and Joan K. Danziger – the wives of two of the Defendants. Moreover, Defendants Oakwood Associates and Oakwood Associates Management did not execute the Agreement because they are dissolved, but they are also “Settling Defendants”.


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complaint also seeks the disallowance and equitable subordination of certain customer

claims filed by two feeder funds--Settling Defendants Beacon I and Andover Associates.

This Settlement represents a good faith, complete, and total settlement between the

Trustee and the Settling Defendants as to any and all disputes between them raised in the

Adversary Proceeding (including without limitation claims for the avoidance and/or

recovery of transfers during the two year period prior to the Filing Date, the Six-Year

Period, and all times prior to the Six-Year Period) and the direct customer claims submitted

by Settling Defendants Beacon I and Andover Associates (which are being allowed as set

forth herein). This Settlement does not release or waive the Trustee’s right and ability to

pursue his pending avoidance and recovery actions against the JPJ Initial Transferees or

any other person that is a defendant in the JPJ Funds Adversary Proceedings, and the

Trustee continues to pursue such actions.

In addition to the $24 million Settlement Payment, the Settling Defendants that

acted as feeder fund managers and/or advisors have agreed to forego any and all

management or similar fees otherwise due to them, to the extent such amounts would be

paid out of distributions by the BLMIS estate on account of Beacon I’s and Andover

Associates’ allowed claims. The JPJ Management Defendants have further agreed to

forego such management or similar fees with respect to the Income Plus Fund, a non-party

with an allowed BLMIS claim.

This Settlement will benefit the customers of BLMIS with allowed claims, and the

Trustee respectfully requests that the Court approve it.


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BACKGROUND

1. On December 11, 2008 (the “Filing Date”),3 the Securities and Exchange

Commission (“SEC”) filed a complaint in the United States District Court for the Southern

District of New York (the “District Court”) against the Debtors (Case No. 08 CV 10791).

The complaint alleged that the Debtors engaged in fraud through investment advisor

activities of BLMIS.

2. On December 15, 2008, pursuant to section 78eee(a)(4)(A) of SIPA, the

SEC consented to a combination of its own action with an application of the Securities

Investor Protection Corporation (“SIPC”). Thereafter, pursuant to section 78eee(a)(3) of

SIPA, SIPC filed an application in the District Court alleging, inter alia, that BLMIS was

not able to meet its obligations to securities customers as they came due and, accordingly,

its customers needed the protection afforded by SIPA.

3. On that date, the District Court entered the Protective Decree, to which

BLMIS consented, which, in pertinent part:

(i) removed the receiver and appointed the Trustee for the liquidation of the business of BLMIS pursuant to section 78eee(b)(3) of SIPA;

(ii) appointed Baker & Hostetler LLP as counsel to the Trustee pursuant to section 78eee(b)(3) of SIPA; and

(iii) removed the case to this Court pursuant to section 78eee(b)(4) of SIPA.

4. At a plea hearing on March 12, 2009 (the “Plea Hearing”) in the criminal

action filed against him by the United States Attorney’s Office for the Southern District of

New York, Madoff pled guilty to an 11-count criminal information, which counts included

3 In this case, the Filing Date is the date on which the Securities and Exchange Commission commenced its suit against BLMIS, December 11, 2008, which resulted in the appointment of a receiver for the firm. See Section 78lll(7)(B) of SIPA.


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securities fraud, money laundering, theft and embezzlement. At the Plea Hearing, Madoff

admitted that he “operated a Ponzi scheme through the investment advisory side of

[BLMIS].” (Plea Hr’g Tr. at 23:14-17.) On June 29, 2009, Madoff was sentenced to a

term of imprisonment of 150 years.

5. On April 13, 2009, an involuntary bankruptcy petition was filed against

Madoff. On June 9, 2009, this Court entered an order substantively consolidating the

Chapter 7 estate of Madoff into the BLMIS SIPA proceeding.

THE SETTLING DEFENDANTS

6. The Trustee has alleged in the Adversary Proceeding the following facts as

to the Settling Defendants:

a. The Beacon/Andover Fund Defendants (including claimants Beacon I and

Andover Associates) were feeder funds that invested directly and, in certain cases,

exclusively with BLMIS. The Beacon/Andover Fund Defendants are or were managed,

owned and/or controlled by the Beacon/Andover Management Defendants, all of whom

received fees and/or other benefits in connection with such services.

b. The JPJ Management Defendants provided investment management and/or

consulting services to institutional and individual clients, a number of which invested,

directly or indirectly, in whole or in part, with BLMIS, including the JPJ Initial

Transferees, which as noted above are the subject of the JPJ Funds Adversary Proceedings.

c. Certain of the Ivy Defendants were investment funds that invested directly

with BLMIS during the 1990s. The other Ivy Defendants provided investment and other

services to the Ivy investments funds, the Beacon/Andover Fund Defendants, and the JPJ


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Management Defendants, for which they received fees and/or other benefits in connection

with such services.

THE CLAIMS AGAINST THE DEFENDANTS

7. On December 8, 2010, the Trustee filed the Adversary Proceeding against

the Settling Defendants. The complaint primarily asserts claims seeking (i) the avoidance

and recovery of initial transfers to the Beacon/Andover Fund Defendants and certain of the

Ivy Defendants, (ii) the recovery of subsequent transfers related thereto and to the transfers

that are the subject of the JPJ Funds Adversary Proceedings, and (iii) the disallowance and

equitable subordination of the customer claims filed by Defendants Beacon I and Andover

Associates on account of BLMIS Accounts 1B0118 and 1A0061, respectively. The

Trustee’s claims against the Settling Defendants include, but are not limited to, claims

under Sections 502(d), 544(b), 547, 548, 550 and 551 of the Bankruptcy Code, SIPA §

78fff-2(c)(3), and Sections 270 to 281 of the New York Debtor and Creditor Law for initial

and subsequent transfers (the “Transfers”) within the applicable statutory period

(collectively, the “Avoiding Power Claims”).

8. The Settling Defendants have disputed any liability to the BLMIS estate

under the Complaint.

9. On March 28, 2012, the Stipulating Defendants moved to withdraw the

reference of this action to the Bankruptcy Court. By a series of orders dated April 13, 2012

through June 25, 2012 entered on docket number 12 Misc. 115, the Honorable Jed S.

Rakoff, United States District Judge, withdrew the bankruptcy reference solely as to four of

the issues raised in the Settling Defendants’ withdrawal motion, on a consolidated basis

with other cases for which withdrawal was sought on the same issues and for which


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consolidated briefing was ordered. These issues have not yet been decided by the District

Court.

THE BEACON I AND ANDOVER ASSOCIATES CUSTOMER CLAIMS AGAINST THE BLMIS ESTATE

10. Prior to July 2, 2009, the bar date for filing claims, each of Beacon I and

Andover Associates filed a customer claim with the Trustee; assigned claim numbers 8318

and 8317, respectively (together, the “Customer Claims”), asserting losses based on

account numbers 1B0118 (as to Beacon I) and 1A0061 (as to Andover Associates), as

reflected on their respective BLMIS account statements as of November 30, 2008. Copies

of the Customer Claims are attached as Exhibit B.4 Based on this Court’s decision

upholding the Trustee’s calculation of Net Equity on a Cash In-Cash Out basis (and the

Second Circuit Court of Appeals’ affirmance, and United States Supreme Court’s denial of

certiorari, as to same),5 the Trustee has calculated the aggregate amount of Beacon I’s and

Andover Associates’ respective claims to be $138,324,742 and $2,576,000 (together, the

“Net Equity Claims”).

MEDIATION AND THE TRUSTEE’S INVESTIGATION

11. In late 2011, the Trustee and the Settling Defendants began to engage in

discussions as to possible mediation of the Adversary Proceeding. On February 23, 2012,

this Court approved mediation proceedings and the retention of a JAMS mediator for same

4 Due to the voluminous nature of the schedules and annexures to Beacon I’s and Andover Associates’ customer claims, those documents are not being filed herewith and are not included within Exhibit B.

5 In re Bernard L. Madoff Inv. Sec. LLC, 654 F.3d 229 (2d Cir. 2011), reh’g and reh’g en banc den. (2d Cir. Nov. 08, 2011), cert. dismissed, 132 S. Ct. 2712 (2012), cert. den., 2012 WL 396489, 2012 WL 425188 (Jun. 25, 2012)).


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(the “Mediation Order”). Since that time, the parties have participated in multiple

mediation sessions and extensive negotiations, ultimately resulting in this Settlement.6

12. Both before and during the mediation, the Trustee conducted a

comprehensive investigation of the Settling Defendants’ investments with BLMIS and the

Settling Defendants’ role in the overall BLMIS scheme. The Trustee’s investigation

included, without limitation: the review and analysis of the transactional histories of the

Settling Defendants as reflected in the BLMIS account statements, correspondence, and

other records available to the Trustee, and in various schedules and summaries provided by

the Settling Defendants in connection with the mediation; a substantial review and analysis

of records, documents and other information provided to the Trustee by the Settling

Defendants and certain third parties, pursuant to Bankruptcy Rule 2004, informal discovery

in connection with settlement discussions, and otherwise; and multiple meetings and

discussions with counsel for the Settling Defendants.

13. After a review of the relevant records and a thorough and deliberate

consideration of the uncertainty and risks inherent in all litigation, the Trustee, in the

exercise of his business judgment, has determined that it is appropriate to reach a business

resolution in this matter rather than proceed with litigation.

6 As contemplated in the Mediation Order, the mediation of the Adversary Proceeding has taken place simultaneously with mediation of certain other actions against the Settling Defendants and others currently pending in the United States District Court for the Southern District of New York and consolidated before the Honorable Leonard B. Sand, U.S.D.J., the Honorable Colleen McMahon, U.S.D.J., and the Honorable Andrew J. Peck, U.S.M.J., as described further in the Agreement (collectively, the “District Court Actions”). The Trustee is not a party to such actions but understands that settlement discussions are continuing and that such a settlement would, if concluded, provide payments for the benefit of investors in the Beacon/Andover Fund Defendants and other feeder funds to which the Settling Defendants provided services.


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OVERVIEW OF THE AGREEMENT

14. The principal terms and conditions of the Agreement are generally as

follows:7

The Trustee shall be paid, for the benefit of the Fund of Customer Property, $24,000,000, as follows: (i) Beacon I shall pay $19,766,425.29; (ii) Ivy shall pay $2,000,000.00; and (iii) Andover Associates shall pay $2,233,574.71.8 Ivy’s contribution shall be used to partially fund Beacon I’s and Andover Associates’ total settlement payments, such that the total Beacon Settlement Payment is $21,543,182.62 and the total Andover Settlement Payment is $2,456,817.38 (for a total of $24 million).

Upon the occurrence of Closing, Beacon I and Andover Associates shall have allowed customer claims in the SIPA Proceeding in the amounts of $159,867,924.62 and $5,032,817.38, respectively. These amounts are comprised of such Settling Defendants’ Net Equity Claims of $138,324,742.00 and $2,576,000.00 respectively, plus an increase of $21,543,182.62 and $2,456,817.38 respectively, under Section 502(h) of the Bankruptcy Code. Upon the occurrence of Closing, each of Beacon I and Andover Associates shall be entitled to the full benefit of a SIPC customer advance under SIPA § 78fff-3(a) and payment of its pro rata portion of any distributions by the Trustee on allowed claims to date (in each case subject to Andover Associates’ assignment of same to the Trustee, per the above).

In addition to the Settlement Payment, the Beacon/Andover Management Defendants, the JPJ Management Defendants, and the Ivy Management Defendants agree that neither they nor any of their affiliates or principals shall receive any management or similar fees out of any amounts distributed to the Beacon/Andover Fund Defendants by the BLMIS estate. In addition, the JPJ Management Defendants agree to the same with respect to the Income Plus Fund.

Each of Sandra Simon, wife of Settling Defendant Lawrence Simon, and Joan K. Danziger, wife of Settling Defendant Joel Danziger, agrees to waive any entitlement to, and shall not receive, any distribution otherwise due to her in connection with her account with Beacon I and Andover QP, respectively.

7 Terms not otherwise defined in this section shall have the meaning ascribed in the Agreement. In the event of any inconsistency between the summary of terms provided in this section and the terms of the Agreement, the Agreement shall prevail. 8 Beacon I and Ivy shall make their payments in full via wire transfer of immediately available funds. Andover Associates shall convey and assign to the Trustee the $500,000 advance from SIPC in respect of its allowed claim, plus $1,733,574.71 that Andover Associates is entitled to receive from the distributions from the fund of customer property based on such allowed claim.


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The Trustee will release, remise, and forever discharge the Settling Defendants and certain related persons and entities on the specific terms set forth in the Agreement.

The Settling Defendants will release, remise, and forever discharge the Trustee and all his agents and BLMIS and its consolidated estate on the specific terms set forth in the Agreement.

Within five (5) business days after the Closing, the Trustee shall submit to the Bankruptcy Court a stipulation, motion, or notice requesting the dismissal of the Adversary Proceeding, with prejudice, as against the Settling Defendants, on the specific terms set forth in the Agreement.

Within five (5) business days after the Closing, the Settling Defendants shall withdraw any and all Motions to Withdraw the Reference previously filed in the SDNY with respect to the Adversary Proceeding, and they shall no longer pursue any litigation involving the Trustee or SIPC relating to BLMIS, Madoff, their liquidation proceeding and the BLMIS estate, except for (i) rights and obligations under the Agreement, (ii) Beacon I’s and Andover Associates’ rights as allowed claimholders, and (iii) any new litigation commenced by the Trustee against the Settling Defendants.

The Trustee will retain all rights and causes of action against the JPJ Initial Transferees and any other defendants named in the JPJ Funds Adversary Proceeding.

In contemplation of the potential settlement in the District Court Actions, the Trustee agrees that (i) he will not object to the Beacon/Andover Fund Defendants receiving funds from any of the other Settling Defendants or from certain other persons as recovery for losses due to Madoff, and (ii) any such payment will not affect the allowed claims of Beacon I and Andover Associates.

The Trustee also agrees that he will not object to or oppose the settlement of the District Court Actions, provided that (i) no party to such District Court Actions objects to or opposes the settlement contemplated by the Agreement or this Motion and that (ii) the terms of that settlement do not contradict the terms of the Agreement.9

9 The Agreement also contains certain related provisions with regard to other persons and entities that may be receiving funds from the potential settlement in the District Court action.


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RELIEF REQUESTED

15. By this Motion, the Trustee respectfully requests that the Court enter an

order substantially in the form of the proposed Order attached hereto as Exhibit C

approving the Agreement.

LEGAL BASIS

16. Bankruptcy Rule 9019(a) provides, in pertinent part, that “[o]n motion by

the trustee and after notice and a hearing, the court may approve a compromise or

settlement.” Courts have held that in order to approve a settlement or compromise under

Bankruptcy Rule 9019(a), a bankruptcy court should find that the compromise proposed is

fair and equitable, reasonable, and in the best interests of a debtor’s estate. In re

Ionosphere Clubs, Inc., 156 BR 414, 426 (S.D.N.Y. 1993), aff’d, 17 F.3d 600 (2d Cir.

1994) (citing Protective Comm. for Indep. Stockholders of TMT Trailer Ferry, Inc. v.

Anderson, 390 U.S. 414, 424 (1968)).

17. The Second Circuit has stated that a bankruptcy court, in determining

whether to approve a compromise, should not decide the numerous questions of law and

fact raised by the compromise, but rather should “canvass the issues and see whether the

settlement ‘fall[s] below the lowest point in the range of reasonableness.’” Liu v.

Silverman (In re Liu), 1998 U.S. App. LEXIS 31698, at *3 (2d Cir. Dec. 18, 1998) (quoting

In re W.T. Grant Co., 699 F.2d 599, 608 (2d Cir. 1983)); see also Masonic Hall & Asylum

Fund v. Official Comm. Of Unsecured Creditors (In re Refco, Inc.), 2006 U.S. Dist. LEXIS

85691, at *21-22 (S.D.N.Y. Nov. 16, 2006); In re Ionosphere Clubs, 156 B.R. at 426; In re

Purified Down Prods. Corp., 150 B.R. 519, 522 (S.D.N.Y. 1993) (“[T]he court need not

conduct a ‘mini-trial’ to determine the merits of the underlying litigation”); In re Drexel

Burnham Lambert Group, Inc., 134 B.R. 499, 505 (Bankr. S.D.N.Y. 1991).


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18. In deciding whether a particular compromise falls within the “range of

reasonableness,” courts consider the following factors:

(i) the probability of success in the litigation;

(ii) the difficulties associated with collection, if any;

(iii) the complexity of the litigation, and the attendant expense, inconvenience, and delay; and

(iv) the paramount interests of the creditors (or in this case, customers).

In re Refco, Inc., 2006 U.S. Dist. LEXIS 85691 at *22; Nellis v. Shugrue, 165 B.R. 115,

122 (S.D.N.Y. 1994) (citing In re Drexel Burnham Lambert Group, Inc., 960 F.2d 285, 292

(2d Cir. 1992), cert. denied, 506 U.S. 1088 (1993)).

19. The bankruptcy court may credit and consider the opinions of the trustee or

debtor and their counsel in determining whether a settlement is fair and equitable. See In re

Purified Down Prods., 150 B.R. at 522; In re Drexel Burnham Lambert Group, Inc., 134

B.R. at 505. The competency and experience of counsel supporting the settlement may

also be considered. Nellis, 165 B.R. at 122. Finally, the court should be mindful of the

principle that “the law favors compromise.” In re Drexel Burnham Lambert Group, Inc.,

134 B.R. at 505 (quoting In re Blair, 538 F.2d 849, 851 (9th Cir. 1976)).

20. The Trustee believes that the terms of the Agreement fall well above the

lowest point in the range of reasonableness. The Agreement resolves all claims among the

Parties as to the Adversary Proceeding and as further set forth in the Agreement, and

avoids the cost and delay of what could otherwise be lengthy and contentious litigation of a

significant and complex matter (Affidavit of the Trustee in Support of the Motion (the

“Picard Affidavit”). A true and accurate copy of the Picard Affidavit is attached hereto as

Exhibit D.


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21. The Agreement greatly furthers the interests of the customers of BLMIS by

adding $24,000,000 to the Fund of Customer Property and results in the Trustee recovering

(a) 100% of the direct withdrawals made by the Beacon/Andover Fund Defendants from

BLMIS during the Six-Year Period, (b) additional withdrawals by certain of the Settling

Defendants during the period prior to the Six-Year Period and (c) subsequent transfers

made to various Settling Defendants in connection with such above-referenced

withdrawals, in each case without the delay, expense and uncertainty of recovery through

litigation. Thus, this Settlement provides for a recovery of substantially all that might be

recovered by the Trustee if the litigation were continued to a successful conclusion, after

considerable expense and delay.

CONCLUSION

22. In sum, the Trustee submits that the Agreement should be approved: (a) to

avoid lengthy, burdensome, and expensive litigation and (b) because it represents a fair and

reasonable compromise of the Avoiding Power Claims that greatly benefits the estate and

the customers of BLMIS. Because the Agreement is well within the “range of

reasonableness” and confers a substantial benefit on the estate, the Trustee respectfully

requests that the Court enter an Order approving the Agreement.

NOTICE

23. In accordance with Bankruptcy Rules 2002 and 9019 and that certain Order

Establishing Notice Procedures (SIPA Proceeding, ECF No. 4560), notice of this Motion is

being given to (i) SIPC; (ii) the SEC; (iii) the Internal Revenue Service; (iv) the United

States Attorney for the Southern District of New York; (v) all persons who have filed

notices of appearance in the BLMIS proceeding; and (vi) counsel for all Settling


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Defendants and anyone else who has filed notices of appearance in this Adversary

Proceeding. The Trustee submits that no other or further notice is required.

WHEREFORE, the Trustee respectfully requests entry of an Order substantially in

the form of Exhibit C granting the relief requested in the Motion.

Dated: New York, New York Respectfully submitted, November 9, 2012 /s/ Howard L. Simon Windels Marx Lane & Mittendorf, LLP 156 West 56th Street New York, New York 10019 Telephone: (212) 237-1000 Facsimile: (212) 262-1215 Howard L. Simon Email: [email protected] Clark E. Alpert Email: [email protected] Kim M. Longo Email: [email protected] Attorneys for Irving H. Picard,

Trustee for the SIPA Liquidation of Bernard L. Madoff Investment Securities LLC


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v.


Defendant.

Adv. Pro. No. 08-01789 (BRL)

SIPA Liquidation


In re:

BERNARD L. MADOFF,

Debtor.


Plaintiff,

v.

BEACON ASSOCIATES LLC I, BEACON ASSOCIATES LLC II, BEACON ASSOCIATES LLC, BEACON ASSOCIATES MANAGEMENT CORPORATION, ANDOVER ASSOCIATES, L.P., ANDOVER ASSOCIATES LLC I, ANDOVER ASSOCIATES (QP) LLC,

Adv. Pro. No. 10-05356 (BRL)

10-05356-brl Doc 47-1 Filed 11/09/12 Entered 11/09/12 17:41:24 Notice of Motion Pg 1 of 4

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ANDOVER ASSOCIATES LLC II, ANDOVER ASSOCIATES MANAGEMENT CORPORATION, JOEL DANZIGER, HARRIS MARKHOFF, J.P. JEANNERET ASSOCIATES, INC., JOHN JEANNERET, PAUL PERRY, IVY ASSET MANAGEMENT LLC, LAWRENCE SIMON, HOWARD WOHL, IVY BIRCHWOOD ASSOCIATES, L.P., IVY ENHANCED INCOME FUND, OAKWOOD ASSOCIATES, IVY REGENCY FUND, L.P., IVY ROSEWOOD ASSOCIATES, L.P., IVY ROSEWOOD OFFSHORE FUND, LTD., BIRCHWOOD ASSOCIATES MANAGEMENT, LLC, OAKWOOD ASSOCIATES MANAGEMENT, LLC, ROSEWOOD ASSOCIATES MANAGEMENT, LLC, IVY INTERNATIONAL, LLC AND REGENCY ASSET MANAGEMENT, LLC,

Defendants.

NOTICE OF MOTION FOR ENTRY OF AN ORDER PURSUANT TO SECTION 105(A)

OF THE BANKRUPTCY CODE AND RULES 2002 AND 9019 OF THE FEDERAL RULES OF BANKRUPTCY PROCEDURE APPROVING A SETTLEMENT

AGREEMENT BY AND BETWEEN THE TRUSTEE, ON THE ONE HAND, AND BEACON ASSOCIATES LLC I, BEACON ASSOCIATES LLC II, BEACON

ASSOCIATES LLC, BEACON ASSOCIATES MANAGEMENT CORPORATION, ANDOVER ASSOCIATES, L.P., ANDOVER ASSOCIATES LLC I, ANDOVER

ASSOCIATES (QP) LLC, ANDOVER ASSOCIATES LLC II, ANDOVER ASSOCIATES MANAGEMENT CORPORATION, JOEL DANZIGER, HARRIS MARKHOFF, J.P.

JEANNERET ASSOCIATES, INC., JOHN JEANNERET, PAUL PERRY, IVY ASSET MANAGEMENT LLC, LAWRENCE SIMON, HOWARD WOHL, IVY BIRCHWOOD ASSOCIATES, L.P., IVY ENHANCED INCOME FUND, IVY REGENCY FUND, L.P., IVY ROSEWOOD ASSOCIATES, L.P., IVY ROSEWOOD OFFSHORE FUND, LTD., BIRCHWOOD ASSOCIATES MANAGEMENT, LLC, ROSEWOOD ASSOCIATES

MANAGEMENT, LLC, IVY INTERNATIONAL, LLC AND REGENCY ASSET MANAGEMENT, LLC, ON THE OTHER HAND

PLEASE TAKE NOTICE that Irving H. Picard (the “Trustee”), as trustee for the

substantively consolidated liquidation of Bernard L. Madoff Investment Securities LLC

(“BLMIS”) and Bernard L. Madoff (“Madoff,” and together with BLMIS, collectively, the

“Debtors”), by and through his undersigned counsel, will move before the Honorable Burton R.


{10794723:5}

Lifland, United States Bankruptcy Judge, at the United States Bankruptcy Courthouse at One

Bowling Green, Courtroom 623, New York, New York 10004, on December 4, 2012 at 10:00

a.m., or as soon thereafter as counsel can be heard, for an order, pursuant to section 105(a) of the

United States Bankruptcy Code, 11 U.S.C. §§ 101 et seq., and Rules 2002 and 9019 of the

Federal Rules of Bankruptcy Procedure, approving that certain Settlement Agreement by and

among the Trustee on the one hand and the “Settling Defendants” (as defined in such Settlement

Agreement), on the other hand, as more particularly set forth in the Motion annexed hereto (the

“Motion”).1

PLEASE TAKE FURTHER NOTICE that responses or objections to the Motion, if

any, must be in writing, shall conform to the Bankruptcy Rules and the Local Rules of this Court,

and shall be filed in accordance with General Order M-399 and the electronic filing procedures

for the United States Bankruptcy Court for the Southern District of New York (available at

www.nysb.uscourts.gov), with a courtesy copy delivered to the Chambers of the Honorable

Burton R. Lifland, and shall be served upon (a) Windels Marx Lane & Mittendorf, LLP, 156

West 56th Street, New York, NY 10019, Attn: Howard L. Simon, Esq., (b) Irving H. Picard, c/o

Baker & Hostetler LLP, 45 Rockefeller Plaza New York, NY 10111, (c) Cleary Gottlieb Steen &

Hamilton LLP, One Liberty Plaza, New York, NY 10006, Attn: Lewis J. Liman, Esq., (d)

Rosenfeld & Kaplan, LLP, 535 Fifth Avenue, Suite 1006, New York, NY 10017, Attn: Tab K.

Rosenfeld, Esq., (e) Herrick, Feinstein, LLP, 2 Park Avenue, New York, NY 10016, Attn: Arthur

Jakoby, Esq., (f) Hiscock & Barclay, LLP, One International Place, 26th Floor, Boston, MA

02110, Attn: Brian Whiteley, Esq., and (g) Stillman & Friedman, P.C., 425 Park Avenue, New

York, NY 10022, Attn: John B. Harris, Esq., so as to be received no later than November 27,

1 All defined terms not otherwise defined herein shall have the meaning ascribed in the Motion.


{10794723:5}

2012 at 5:00 p.m. Any objections must specifically state the interest that the objecting party has

in these proceedings and the specific basis of any objection to the Motion.

PLEASE TAKE FURTHER NOTICE that if no responses or objections are timely

filed and served with respect to the Motion, the Motion shall be deemed uncontested and an

order granting the requested relief may be entered with no further notice or opportunity to be

heard offered to any party.

Dated: New York, New York Respectfully submitted, November 9, 2012 /s/ Howard L. Simon Windels Marx Lane & Mittendorf, LLP 156 West 56th Street New York, New York 10019 Telephone: (212) 237-1000 Facsimile: (212) 262-1215 Howard L. Simon Email: [email protected] Clark E. Alpert Email: [email protected] Kim M. Longo Email: [email protected] Attorneys for Irving H. Picard,

Trustee for the SIPA Liquidation of Bernard L. Madoff Investment Securities LLC


{10797845:1}

EXHIBIT A

AGREEMENT

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{10797846:1}

EXHIBIT B

CUSTOMER CLAIMS

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{10797850:1}

EXHIBIT C

PROPOSED ORDER

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{10795144:1}

UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK



v.


Defendant.

Adv. Pro. No. 08-01789 (BRL)

SIPA Liquidation


In re:

BERNARD L. MADOFF,

Debtor.


Plaintiff,

v.

BEACON ASSOCIATES LLC I, BEACON ASSOCIATES LLC II, BEACON ASSOCIATES LLC, BEACON ASSOCIATES MANAGEMENT CORPORATION, ANDOVER ASSOCIATES, L.P., ANDOVER ASSOCIATES LLC I, ANDOVER ASSOCIATES (QP) LLC, ANDOVER ASSOCIATES LLC II, ANDOVER ASSOCIATES MANAGEMENT CORPORATION, JOEL DANZIGER, HARRIS MARKHOFF, J.P. JEANNERET ASSOCIATES, INC., JOHN JEANNERET, PAUL PERRY, IVY ASSET MANAGEMENT LLC, LAWRENCE SIMON, HOWARD WOHL, IVY BIRCHWOOD ASSOCIATES, L.P., IVY ENHANCED INCOME FUND, IVY OAKWOOD ASSOCIATES, L.P., IVY REGENCY FUND, L.P., IVY ROSEWOOD ASSOCIATES, L.P., and IVY ROSEWOOD OFFSHORE FUND, LTD.,

Defendants.

Adv. Pro. No. 10-05356 (BRL)


{10795144:1} 2

ORDER PURSUANT TO SECTION 105(a) OF THE BANKRUPTCY CODE AND RULES 2002 AND 9019 OF THE FEDERAL RULES OF BANKRUPTCY

PROCEDURE APPROVING A SETTLEMENT AGREEMENT BY AND BETWEEN THE TRUSTEE, ON THE ONE HAND, AND BEACON ASSOCIATES LLC I,

BEACON ASSOCIATES LLC II, BEACON ASSOCIATES LLC, BEACON ASSOCIATES MANAGEMENT CORPORATION, ANDOVER ASSOCIATES, L.P., ANDOVER ASSOCIATES LLC I, ANDOVER ASSOCIATES (QP) LLC, ANDOVER

ASSOCIATES LLC II, ANDOVER ASSOCIATES MANAGEMENT CORPORATION, JOEL DANZIGER, HARRIS MARKHOFF, J.P. JEANNERET

ASSOCIATES, INC., JOHN JEANNERET, PAUL PERRY, IVY ASSET MANAGEMENT LLC, LAWRENCE SIMON, HOWARD WOHL, IVY

BIRCHWOOD ASSOCIATES, L.P., IVY ENHANCED INCOME FUND, IVY REGENCY FUND, L.P., IVY ROSEWOOD ASSOCIATES, L.P., IVY ROSEWOOD OFFSHORE FUND, LTD., BIRCHWOOD ASSOCIATES MANAGEMENT, LLC,

ROSEWOOD ASSOCIATES MANAGEMENT, LLC, IVY INTERNATIONAL, LLC AND REGENCY ASSET MANAGEMENT, LLC, ON THE OTHER HAND

Upon the motion (ECF Number __, the “Motion”)1 of Irving H. Picard, Esq. (the

“Trustee”) as trustee for the substantively consolidated liquidation of Bernard L. Madoff

Investment Securities LLC and Bernard L. Madoff, seeking entry of an order, pursuant to

section 105(a) of the United States Bankruptcy Code, 11 U.S.C. §§ 101 et seq. and Rules

2002 and 9019 of the Federal Rules of Bankruptcy Procedure, approving the agreement, by

and between the Trustee, on the one hand, and the Settling Defendants, as defined therein, on

the other hand, as more particularly set forth in the Agreement annexed thereto (the

“Agreement”); and it appearing that due and sufficient notice has been given to all parties in

interest as required by Rules 2002 and 9019 of the Federal Rules of Bankruptcy Procedure

and that certain Order Establishing Notice Procedures (SIPA Proceeding, ECF No. 4560); and

the Court having considered the Affidavit of Irving Picard in support of the Motion; and

it further appearing the relief sought in the Motion is appropriate based upon the record of the

hearing held before this Court to consider the Motion; and it further appearing that this Court

has jurisdiction to consider the Motion and the relief requested therein pursuant to 28 U.S.C.

1 All capitalized terms not otherwise defined herein shall have the meaning ascribed to them in the

Motion.


{10795144:1} 3

§§ 157 and 1334; and after due deliberation; and sufficient cause appearing therefor; it is

ORDERED, that the Motion is granted in its entirety; and it is further

ORDERED, that the Agreement between the Trustee, on the one hand, and the Settling

Defendants, on the other hand, is hereby approved and authorized (including without limitation

the provisions of section 3 as to the Settlement Payment, sections 4(a) and (b) as to the

Allowed Claims, and section 8 as to the Released Claims); and it is further

ORDERED, that the Trustee and the Settling Defendants (including for the sake of

clarity Sandra Simon and Joan K. Danziger, as applicable) shall each comply with and carry

out the terms of the Agreement.

ORDERED, that this Order shall be binding upon and inure to the benefit of the

Trustee and the Settling Defendants and their respective successors and permitted assigns.

ORDERED, that this Court shall have exclusive jurisdiction over any and all disputes

between or among the Parties arising out of or relating to the Agreement, as set forth more

fully in the Agreement.

Dated: New York, New York

December __, 2012 __________________________________ HONORABLE BURTON R. LIFLAND UNITED STATES BANKRUPTCY JUDGE


{10797858:1}

EXHIBIT D

AFFIDAVIT OF IRVING H. PICARD

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{10795294:3}


SECURITIES INVESTOR PROTECTION CORPORATION, Adv. Pro. No. 08-01789 (BRL)

Plaintiff-Applicant, SIPA Liquidation v. (Substantively Consolidated) BERNARD L. MADOFF INVESTMENT SECURITIES LLC,

Defendant.

In re: BERNARD L. MADOFF,

Debtor. IRVING H. PICARD, Trustee for the Liquidation of Bernard L. Madoff Investment Securities LLC,

Adv. Pro. No. 10-05356 (BRL) Plaintiff,

v. BEACON ASSOCIATES LLC I, BEACON ASSOCIATES LLC II, BEACON ASSOCIATES LLC, BEACON ASSOCIATES MANAGEMENT CORPORATION, ANDOVER ASSOCIATES, L.P., ANDOVER ASSOCIATES LLC I, ANDOVER ASSOCIATES (QP) LLC, ANDOVER ASSOCIATES LLC II, ANDOVER ASSOCIATES MANAGEMENT CORPORATION, JOEL


{10795294:3} 2

DANZIGER, HARRIS MARKHOFF, J.P. JEANNERET ASSOCIATES, INC., JOHN JEANNERET, PAUL PERRY, IVY ASSET MANAGEMENT LLC, LAWRENCE SIMON, HOWARD WOHL, IVY BIRCHWOOD ASSOCIATES, L.P., IVY ENHANCED INCOME FUND, OAKWOOD ASSOCIATES, IVY REGENCY FUND, L.P., IVY ROSEWOOD ASSOCIATES, L.P., IVY ROSEWOOD OFFSHORE FUND, LTD., BIRCHWOOD ASSOCIATES MANAGEMENT, LLC, OAKWOOD ASSOCIATES MANAGEMENT, LLC, ROSEWOOD ASSOCIATES MANAGEMENT, LLC, IVY INTERNATIONAL, LLC AND REGENCY ASSET MANAGEMENT, LLC,

Defendants. STATE OF NEW YORK ) ) ss: COUNTY OF NEW YORK ) Irving H. Picard, being duly sworn, hereby attests as follows:

1. I am the trustee for the substantively consolidated liquidation of Bernard L.

Madoff Investment Securities LLC (“BLMIS”) and Bernard L. Madoff (“Madoff,” and together

with BLMIS, collectively, the “Debtors”). I am familiar with the affairs of the Debtors. I

respectfully submit this Affidavit in support of the motion (the “Motion”) seeking entry of an

order, pursuant to section 105(a) of the United States Bankruptcy Code, 11 U.S.C. §§ 101 et seq.,

and Rules 2002 and 9019 of the Federal Rules of Bankruptcy Procedure, approving a settlement

agreement (the “Agreement”) by and among the Trustee on the one hand, and the Settling

Defendants, as defined in the Agreement, on the other hand.

2. I make this Affidavit based upon my own personal knowledge or upon

information that I believe to be true.


{10795294:3} 3

3. All capitalized terms not defined herein have the meaning ascribed to them in the

Motion.

4. I believe that the terms of the Agreement fall well above the lowest point in the

range of reasonableness and, accordingly, the Agreement should be approved by this Court. The

Agreement resolves all claims against the Settling Defendants as to the Adversary Proceeding

and as further set forth in the Agreement, without the need for protracted, costly, and uncertain

litigation. I recognize that litigating these claims would undoubtedly be extremely complex,

create significant delay, and would involve both litigation risk and difficulties associated with

collection. This complexity and delay is further heightened given the motions to withdraw the

reference that have been filed by the Settling Defendants, which motions are being withdrawn as

a part of the settlement.

5. This settlement, including the $24 million settlement payment, is a global

settlement that resolves all issues regarding the Trustee's Avoiding Power Claims against Settling

Defendants without the need for protracted, costly, and uncertain litigation. As part of this

settlement, the Trustee, on the one hand, and the Settling Defendants, on the other hand, have

reached a good faith, complete, and total compromise as to any and all claims the Trustee has

asserted against the Settling Defendants, including, but not limited to, claims the Trustee has for

avoidable direct transfers and recoverable indirect transfers by BLMIS during the two year and

six year periods (the “Six-Year Period”) prior to the Filing Date and the period prior to such Six-

Year Period, and other claims the Trustee had against the Settling Defendants.

6. The Agreement also greatly furthers the interests of the customers of BLMIS with

allowed claims by adding $24 million in cash to the Fund of Customer Property.


{10795294:3} 4

7. Given the potential impact of the above issues, and the complexities involved in

proceeding with litigation, I have determined, in my business judgment, that the Agreement

represents a fair compromise of the Avoiding Power Claims.

8. In sum, I respectfully submit that the Agreement should be approved (a) to avoid

lengthy and burdensome litigation, and (b) because the Agreement represents a reasonable

compromise of the Avoiding Power Claims.

/s/ Irving H. Picard IRVING H. PICARD

Sworn to before me this 8th day of November, 2012 /s/ Sonya M. Graham Sonya M. Graham Notary Public, State of New York No. 01GR6133214 Qualified in Westchester County Commission Expires September 12, 2013


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