Investors continue with plan to force Madoff into bankruptcy

— -- Some of Bernard Madoff's creditors moved to force the convicted Ponzi scheme architect into personal bankruptcy Monday, a legal tactic that could ease the way for some of his victims to seek repayment.

Filed in U.S. Bankruptcy Court in New York, the petition was filed on behalf of five investors who reported almost $64 million in claims against Madoff, who pleaded guilty last month to a long-running fraud involving nearly $65 billion in former clients' accounts.

Jonathan Landers, one of the group's attorneys, said the case would ensure that Madoff's personal assets don't escape forfeiture actions pursued by federal prosecutors and a separate recovery effort by a court-appointed trustee acting under the Securities Investor Protection Act.

"It increases the assets that will be available to victims of the Madoff fraud," said Landers. "I can't tell you absolutely that the other efforts wouldn't have gotten to all the assets. But we don't want to take a chance."

Madoff's attorney, Ira Lee Sorkin, declined to comment, as did spokesmen for both U.S. Attorney Lev Dassin and Irving Picard, the court-appointed trustee.

Picard and federal prosecutors had initially asked U.S. District Court Judge Louis Stanton to deny authorization to file the petition. Dassin argued that federal forfeiture statutes take precedence over bankruptcy law, while Picard said a bankruptcy petition would further complicate recovery efforts and trigger additional fees at the expense of Madoff's thousands of victims.

Stanton, however, disagreed, writing in a Friday opinion that any concern that appointment of a bankruptcy trustee would increase administrative costs or delay recovery by victims "is speculative, and outweighed by the benefits to Mr. Madoff's victims of a bankruptcy trustee's orderly and equitable administration of his individual estate."

Stanton noted that investments placed through so-called feeder funds, rather than directly with Madoff's business, aren't covered by the court-appointed trustee's recovery effort. The new petition would give those investors "a central legal forum" they currently lack, said Stephen Selbst, a bankruptcy expert and law partner at Herrick Feinstein in Manhattan.