HSBC Paid off Wealthy Madoff Investors

HSBC not only failed in their duty of care in the Stanford case they also failed in the Madoff case, the difference being HSBC reimbursed their wealthy clients. It appears if you are wealthy and can afford a barrister HSBC will pay but if your a pensioner who lost all your money because of HSBC negligence they are not going to pay.

More than 720,000 victims of the fraudster Bernard Madoff have won an estimated $15.5bn (£11bn) back from non-American banks that had channelled the victims' money towards the corrupt Wall Street investment manager.

An alliance of victims' lawyers yesterday said that 14 months on from Madoff's conviction, dozens of European banks including Santander and HSBC had made partial reimbursement, for fear of losing long-standing and often lucrative customers. About 80% of Madoff investors represented by the alliance have struck deals with their banks. The average profile of a victim is a 54-year-old male who invested $35,000 in Madoff's phoney Wall Street fund management business.

Javier Cremades of Spanish law firm Cremades & Calvo-Sotelo, who is co-ordinating the victims' network, said customers were typically getting their original investment without the false profits the jailed financier claimed to have added. "Client confidence is banks' most important asset," he said at a press conference in New York. "They're facing a huge reputational problem at a time when confidence is not particularly abundant."

Generally speaking, banks are not refunding their customers in cash, but are using a variety of forms of credit or convertible paper intended to tie in victims as ongoing clients. Santander, one of the biggest sources of money to Madoff outside the US, has offered its clients a form of convertible paper redeemable in 10 years and has settled 98% of claims.

When asked about settlements in Britain, Cremades named HSBC as one of the banks involved in deals. The British bank has taken charges of $1.05bn to cover Madoff-related losses, and revealed in its annual report that it was the subject of litigation with "numerous defendants" over the Madoff scandal in jurisdictions including the US, Ireland and Luxembourg. However, sources close to HSBC expressed scepticism, saying they were not aware of such settlements.

Cremades said victims' lawyers had been surprised at the willingness of banks to settle: "In Europe, one year later, most of the victims have solved their problems through settlements. It has been easier than we thought."

An exception, however, is Switzerland, where the situation has been complicated by its banking privacy laws. Some victims had secret accounts and are unwilling to air their losses in litigation.

Regarded as the biggest financial crime in Wall Street history, Madoff Investment Securities claimed to have $65bn of assets under management. But the financial crisis led to attempts by investors to withdraw money, exposing Madoff's firm as a vast Ponzi scheme. He is serving a 150-year sentence in North Carolina.

Within the US, most of his victims were either direct investors or had channelled money through boutique firms that acted as so-called feeder funds. They face a longer struggle for recompense as a court-appointed trustee, Irving Picard, sorts through claims. European banks will wait in line with US victims to get their own share of any distribution, though they are not likely to get back anything close to the sums that they are reimbursing clients.

"They can't expect to get back much of what they've given," said Gaytri Kaychoo, a lawyer for US victims. "They [European banks]looked at their own situation and rationalised making their settlements with wealthy, very good clients, because they can't afford to lose them."