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A federal judge has blocked litigation that the trustee liquidating Bernard Madoff's firm said could undermine a $7.2 billion settlement meant to benefit the Ponzi schemer's former customers, Reuters reported yesterday. In a decision made public yesterday, U.S. District Judge Gregory Woods in Manhattan said that A&G Goldman Partnership and Pamela Goldman cannot pursue a Florida lawsuit to recover $11 billion from the estate of Jeffry Picower, who they say helped perpetuate Madoff's fraud. The decision is a victory for Irving Picard, the trustee liquidating Bernard L. Madoff Investment Securities LLC, whose settlement with Picower's estate is the largest since Madoff's fraud was uncovered in December 2008. Picard also won a permanent injunction in 2011 barring competing claims against the estate. Picower died in October 2009. In court papers, Picard said that letting the Goldman plaintiffs sue Picower's estate to recoup some $11 billion of customer losses, on top of the $7.2 billion, would create a "shadow" bankruptcy estate and undermine his authority to settle claims.

Societe Generale agreed to pay a $50 million civil fine and admit to misconduct to settle U.S. claims that it fraudulently concealed from investors the poor quality of residential mortgage-backed securities it marketed and sold, Reuters reported on Friday. The U.S. Department of Justice said on Friday that the French bank concealed problems in a $780 million debt issue it arranged in 2006, and which has since left investors with "significant losses" that may grow further. The debt issue, SG Mortgage Securities Trust 2006-OPT2, was backed by subprime loans from Option One Mortgage Corp, then a unit of tax preparer H&R Block Inc. Societe Generale admitted to concealing how many of the loans were not underwritten properly and should not have been securitized, and that no borrowers owed more on their loans than their homes were worth.

A federal appeals court rejected former Sentinel Management Group Inc. chief Eric Bloom's bid to void his conviction and 14-year prison sentence over an estimated $666 million fraud that led to the demise of his suburban Chicago firm and a big writedown for Bank of New York Mellon Corp., Reuters reported. The U.S. Court of Appeals for the Seventh Circuit in Chicago yesterday disagreed with Bloom's contentions that a lack of evidence, prosecutorial misconduct and errors by the trial judge tainted the conviction, and that the sentence was too long because the judge miscalculated the alleged loss. "We are extremely disappointed by the opinion and plan to seek rehearing," Bloom's lawyer Len Goodman said. Bloom had been appealing his March 2014 jury conviction on 19 fraud counts. Prosecutors said Bloom misappropriated assets belonging to dozens of clients, including futures commission merchants, commodity pools and hedge funds, to fund a risky "house" trading portfolio, and concealed mounting liquidity problems that culminated in Sentinel's August 2007 bankruptcy. Read more.

For a further analysis of commercial fraud, make sure to pick up a copy of ABI’s Fraud and Forensics: Piercing Through the Deception in a Commercial Fraud Case. 

The Zohar investment funds at the heart of Lynn Tilton’s $2.5 billion distressed-debt empire sued their founder Monday, accusing Ms. Tilton of pillaging more than $1 billion from investors and the troubled companies she manages, the Wall Street Journal reported. Through a “toxic mix of fraud, theft and mismanagement,” Tilton stole money from the Zohar funds and from the troubled companies, siphoning hundreds of millions of dollars in fees and assets from a souring loan portfolio and failing businesses, according to the lawsuit filed in federal court in New York. Tilton denied the allegations in the suit. The Zohar funds are collateralized loan obligations created by Tilton and packed with loans to troubled companies managed by her and her New York-based Patriarch Partners investment firm. Read more. (Subscription required.) 

For a further analysis of commercial fraud, make sure to pick up a copy of ABI’s Fraud and Forensics: Piercing Through the Deception in a Commercial Fraud Case. 

Over the past two years, the Justice Department, loath to be seen as treating the corporate world with kid gloves, began changing its approach, according to a commentary in the New York Times DealBook blog yesterday. Two prosecutors with specialties in white-collar cases joined the administration and helped spearhead the push: Deputy Attorney General Sally Q. Yates, who created new guidelines for prosecuting corporate employees, and Leslie R. Caldwell, who took over the Justice Department’s criminal division. The changes started with a few big banks pleading guilty and built to a flurry of activity this week, when Yates’s new guidelines appeared to bear fruit. On Tuesday, the Justice Department announced the indictment of three former traders from some of the world’s biggest banks, accusing them of a conspiracy to manipulate prices in a currency market. The next day brought a guilty plea from Volkswagen as well as criminal charges against six Volkswagen executives for their roles in the emissions-cheating scandal, the first major test of Ms. Yates’s new policy. As soon as Friday, the auto parts maker Takata is expected to plead guilty over deadly airbags. But whether these changes set a lasting precedent is not up to Yates or Caldwell, according to the commentary. As expected, the officials announcing the white-collar cases are leaving the Justice Department.