DealBook: JPMorgan Chase Nears a $2 Billion Deal in a Case Tied to Madoff

DealBook: Criminal Action Is Expected for JPMorgan in Madoff Case

DealBook: Madoff Trustee Adds Details to Suit Against Financier

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DealBook: Bank in Madoff Suit Settles With Some Plaintiffs

Douglas Healey for The New York TimesWestport National Bank was the custodial bank for Bernard Madoff accounts.Susan AntillaFaye Albert, and her lawyer, Steve Gard, had sued Westport National Bank.

6:19 p.m. | Updated

Westport National Bank and its parent company, Connecticut Community Bank, were not liable for the losses of investors in Bernard Madoff’s vast Ponzi scheme in its role as a custodial bank, a jury found on Wednesday. Separately, the bank agreed to pay $7.5 million to 240 investors in a related case, a lawyer for the bank said.

A federal jury in Hartford had finished hearing eight days of evidence last month in a case before Judge Vanessa L. Bryant of the United States District Court for the District of Connecticut. The case had consolidated three similar lawsuits against the bank. Two of those cases settled before the jury began its deliberations.

After the other cases settled, the jury did evaluate the bank’s custodial duties in a case brought by two Florida investors, but sent a mixed message.

After 14 hours of deliberation, the jury said that the bank was not a fiduciary, and thus owed no fiduciary duty to two elderly Florida investors, Audrey Short and Faye Albert.

The jury ruled that the bank breached its custodian agreements when it calculated its fees based on the Madoff firm’s reports instead of on the actual assets it held. It also said that the two plaintiffs had proved that the bank breached its agreements when it failed to issue accurate annual statements and failed to audit or verify the existence and value of the assets.

But the six jurors determined that neither plaintiff had proved that she suffered any economic loss as a result of the actions.

“They found we failed to maintain accurate records, but they found that nothing the bank did caused any harm,” Tracy A. Miner, one of the bank’s lawyers, said in a telephone interview. Ms. Miner said that the bank’s liabilities involving the accounts that were settled could have reached $70 million to $80 million.

Steve Gard, a lawyer for Mrs. Short and Mrs. Albert, said that he planned to file a motion within two weeks asking for a judgment in the investors’ favor because the jurors findings “are inconsistent.”

Mr. Gard said that the jurors determined that his clients had not suffered a loss as a result of the bank’s inadequate recordkeeping before getting a chance to hear all the evidence.

During the trial, the bank stressed that its contracts with the plaintiffs only obligated it to perform ministerial duties. Lawyers for the bank also made much of the fact that financial regulators, including the Securities and Exchange Commission, had not been able to catch Mr. Madoff, so it would be unrealistic to expect a small Connecticut bank to be able to do so.

For their part, the plaintiffs emphasized that there were cautious investors who stayed away from Mr. Madoff’s firm because of the lack of transparency in his operation.

The case had been watched for its implications on the duties of custodial banks. Investors sometimes assume that a custodian actually takes custody of their assets, but the bank’s obligations can vary widely depending upon how its contract is worded.

Custodial relationships become problematic “when there is ambiguity about the bank’s duties and the customer expects more than the bank thought it had agreed to” said Kathy Bazoian Phelps, a Los Angeles-based lawyer and co-author of “The Ponzi Book: A Legal Resource for Unraveling Ponzi Schemes.”

The interpretation of contractual obligations was “exactly where the trouble lies” in the Connecticut Community Bank case, she said.

Disputes over the obligations of custodians will only get more frequent and more heated, said Edward Siedle, a former S.E.C. lawyer who investigates pension fund abuses.

Investors are increasingly setting up so-called self-directed I.R.A.’s that invest in hedge funds and real estate, Mr. Siedle said. Each of those accounts must be kept with a custodian, which may have no obligation to do more than keep records that it never verifies.

“The risks are getting greater than ever,” he said.

As Madoff Money Is Distributed, Mets Owners Wonder What Might Have Been

Under better circumstances, the owners of the Mets would have an extra $67.3 million in their bank accounts today, money that could help their losing team after another miserable season.

Keep up with the latest news on The Times's baseball blog.

But these are not ordinary times. Fred Wilpon and Saul Katz will not get that $67.3 million or another $94.7 million that they once had reason to expect stemming from losses in 50 of their nearly 500 accounts with Bernard L. Madoff. Those accounts were called “net losers.”

They agreed not to receive the money last March as part of the settlement of a federal case filed by the trustee for Madoff’s victims under which they agreed to repay $162 million in fictitious profits they had withdrawn from other accounts with Madoff between 2002 and 2008.

According to the trustee’s Web site, two distributions totaling $67.3 million were made Friday to the fund that will repay customers who were defrauded by Madoff. The trustee, Irving H. Picard, did not say how long it would take to recover the remaining $94.7 million.

The Mets’ owners, of course, could use the money themselves to rebuild the team. They are heavily in debt. They lost $70 million during the 2011 season. And while they reduced player payroll by about $50 million this season and raised $200 million from outside investors, Citi Field attendance fell again, pushing overall revenue down. Another loss is expected.

Wilpon and Katz might still get some compensation from their Madoff losses, which totaled $178 million. If Picard collects all $162 million, they would get $16 million. But if Picard does not collect all of it within three years, Wilpon and Katz could be liable for up to $29 million.

The trustee’s announcement about recoveries in the Wilpon-Katz case came a week after he said that nearly $2.5 billionwas distributed to eligible Madoff customers, bringing to $3.6 billion the total paid to customers with allowable fraud claims. At the time, David J. Sheehan, Picard’s chief counsel, said in a statement, “In addition to recovering as much stolen money as possible for Madoff’s victims, we are also moving aggressively to resolve litigation and appeals which are delaying further distributions.” Picard has recovered, or reached deals to recover, about $9.15 billion, or 53 percent of the estimated $17.3 billion principal lost in Madoff’s fraud.