Some of the entities operating there have lost money by Bernie’s activities.
Significantly, Bernie had a British subsidiary in London to transact European business, presumably.
Assuming Bernie’s guilt; (he has, allegedly, confessed to running a pyramid, or “Ponzi” scheme), liability for these losses may fall not only on Bernie and/or his corporate creatures but on others also, under the following heads of claim;
A Breach of Contract;
B Negligence and Deceit;
C Breach of Fiduciary Duty;
BREACH OF CONTRACT
Bernie (“Bernie” includes any of his complicit corporate entities) received money under, in each individual instance, a contract. The place of the making of the contract will have varied from case to case. Each contract included express and, usually, implied terms. It was, undoubtedly, an express and, if not express, then implied term that he was to invest received money in asset backed securities. (For the purposes of this post, a definition of “securities” is not necessary; it is sufficient to know that Bernie’s appropriation of the money was not within contemplation).
Many contracts with Bernie were made by agents holding, apparently, discretionary investment powers. Agents are agents under a contract. Those contracts also would contain express and, usually, implied terms. The principal of those agents would have rights under the contract made by the agent with Bernie and also under the contract made with the agent by the principal. That principal might well be a “consumer” under Irish law (assuming that Irish law is the proper law of the relevant contract). Irish law could be the proper law of an agency agreement made by a foreign principal with an Irish resident agent.
There is an obligation on a person who undertakes duties under a contract, to deliver on those duties, irrespective of the level of skill and care actually exercised. If the contract contains an express or an implied term (as found by a court) that an agent, say, will invest, or cause to be invested, money in asset backed securities, there will be a breach of contract if he/she/it does not do this. Bernie, of course, is guilty of that breach. Any agent, from whom Bernie received the money of the agent’s principal, whose contract imposed such a duty will also be in breach.
Bernie was guilty of deceit. The evidence for this, currently, is his (alleged) confession. Presumably his financial records will corroborate this. Normally the heavy burden of proof to prove fraud militates against a finding of deceit in a civil action. Assuming access to the evidence against Bernie, that burden can be discharged and it would thereafter be otiose to consider allegations of negligence against him. More importantly, Bernie’s possession of the money delivered to him was never lawful; it was obtained fraudulently. Therefore he could not pass a good title to that money to any person to whom he, in turn, passed it. The money, in principle, may, therefore, be traced and, when traced, recovered from its subsequent holder/s.
There is, it seems, good evidence of negligence on the part of the agents from whom Bernie received much of the funds he allegedly misappropriated. Bernie divulged little of his investment strategy. He failed to reveal the exact securities in which he was, ostensibly, investing. To credit Bernie in those circumstances was a classic case of “buying a pig in a poke”. Furthermore, the return, offered by him, on the money was not, it appears, credible. The agents from whom he often received the funds were themselves professionals in the same field. They could not find investments in the markets returning the result that Bernie claimed for his “investments”. That is why they passed the money to him. That they believed him trustworthy is irrelevant. They knew, or ought to have known, that he was not, in fact, making his “returns” from investments in any known market. They were, in short, negligent.
BREACH OF FIDUCIARY DUTY
Bernie appears to have breached his fiduciary duties. The facts of each case require examination to determine the identities of the beneficiaries of the duty breached.
Currently, there are no publicly known facts showing breach of fiduciary duty by any agent whose principal has lost money, but that may change.
Conversion is what a thief does when he steals. Essentially, that is what Bernie is reported as having confessed to. The remedy for conversion is the return of the stolen property, or, in default, damages.
A claim of restitution arises where, inter alia, a claim for money had and received can be made. Such a claim would lie against Bernie. The remedy for a claim of money had and received is the return of the property, or, in default, damages. Such a claim would also lie against an agent who believed that Bernie’s formula for generating his “returns” was, although effective, illegal. That they believed he was making the “returns” by trading on insider information, if true, is evidence of knowing receipt.
Financial management is, reputedly, a highly regulated field. Whether that is so in Ireland is already in doubt. The Madoff Mess may show the truth of the situation. That aside, Ireland’s financial regulatory laws make provision for claims in civil law for breaches of certain duties imposed by statute. The facts of each case will determine if these are available to investors to recover their losses.