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Fairfield Greenwich and Ezra Merkin’s Ascot Partners may have emerged as Bernard Madoff’s most notorious feeder funds, but Cayman Islands-based Harley International, which funneled $2 billion to the Ponzi fraudster, isn’t far behind. Baker & Hostetler’s Irving Picard, in his role as bankruptcy trustee for Bernard L. Madoff Investment Securities, has sued all three feeder funds over money they withdrew from the securities firm before Madoff’s scheme imploded last year. On Wednesday Picard notched a huge win against Harley–at least on paper. In an 11-page order, Manhattan federal bankruptcy court judge Burton Lifland granted the trustee summary judgment against Harley for $1,066,800,000 (yes, billion). He also entered an additional default judgment of $6.02 million after Harley failed to answer Picard’s complaint. In fact, Harley never entered an appearance in the case at all. Baker & Hostetler partners David Sheehan and Marc Hirshfield filed the trustee’s complaint against Harley in May 2009, demanding that the fund repay more than $1 billion it withdrew from its Madoff accounts in the six years before Madoff’s arrest. (The complaint alleged that Harley withdrew $425 million in just the final three months before Madoff’s fraud was uncovered.) Sheehan and Hirschfield filed an Oct. 26 motion for summary judgment against Harley, arguing that, given Harley’s failure to respond, Judge Lifland should treat their factual allegations about Harley’s withdrawals in the two years prior to Madoff’s arrest as true. Judge Lifland’s order grants the Baker & Hostetler motion in full. But is it a hollow victory for the Madoff trustee? Harley, after all, is in the process of being liquidated in the Cayman Islands. We reached out to Sheehan and Hirschfield on Wednesday but didn’t hear back. In an e-mail, a spokesman for Picard told us the trustee “will take such action as we deem appropriate to seek to recover on the judgment.” Picard’s suit against Merkin, meanwhile, is being rather more vigorously contested. Dechert’s Andrew Levander, who’s representing Merkin, has moved to dismiss the trustee’s case; he told us the ruling against Harley has no implications for Merkin, since Harley didn’t fight the trustee’s allegations. Fairfield Greenwich is represented by Simpson Thacher & Bartlett. Peter Kazanoff of Simpson declined to comment on the Harley decision because he hadn’t read it.

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