Lawsuit questions conduct of Madoff victims' lawyer
Bernard Madoff exits the Manhattan federal court house in New York in this January 14, 2009 file photo. REUTERS/Brendan McDermid/Files

A new lawsuit accuses a lawyer representing hundreds of victims defrauded by Bernard Madoff of cheating her own clients through overbilling, discouraging settlements and having conflicts of interest.

The proposed class-action complaint was filed on Wednesday against Becker & Poliakoff LLP and Chaitman LLP over the alleged conduct of Helen Chaitman, who has been perhaps the most visible lawyer representing victims of Madoff since his December 2008 arrest. Madoff, 79, is serving a 150-year prison term.

"We have no comment," Chaitman said in an email on behalf of her namesake firm. Becker & Poliakoff, her former employer, did not immediately respond to requests for comment.

The complaint was filed in the U.S. District Court in Manhattan by trustees of the Florence Shulman Pourover Trust, a defendant in a 2010 lawsuit by Irving Picard, a court-appointed trustee liquidating Bernard L. Madoff Investment Securities LLC.

Picard, who has recovered roughly $12.8 billion for former Madoff customers, sought to recover $1.62 million of "fictitious profits" from the Shulman trust and other defendants that he said were derived improperly from Madoff's fraud.

In Wednesday's complaint, the Shulman trustees said Chaitman's "self-promotion as a savior for other Madoff victims paid off" with a large base of clients.

But they said this left Chaitman with an "irreconcilable" conflict because she represents three groups of plaintiffs with competing interests: "net winners" who withdrew more money from Madoff than they put in, "net losers" who lost money, and "early investors" whose alleged profits predated the fraud.

The Shulman trustees also said Chaitman misled net winners by saying Picard would never settle for less than all he sought, enabling her to bill for "unnecessary" and "often unproductive" work, and did not specify on invoices what work she did.

Both law firms "billed and were paid for needless and quixotic legal work, ostensibly for the benefit of FSPT and members of the proposed class, but which in reality only benefited defendants in the form of increased fees," the complaint said.

Dylan Ruga, a lawyer for the Shulman trustees, was not immediately available for comment.

The lawsuit seeks unspecified damages on behalf of people represented by and who paid legal fees to the law firms in connection with the Madoff litigation.

The case is Shulman et al v. Becker & Poliakoff LLP et al, U.S. District Court, Southern District of New York, No. 17-09330.

(Reporting by Jonathan Stempel in New York; Editing by Phil Berlowitz)