Irving H. Picard, Trustee for the Liquidation of B v. The Gerald and Barbara Keller Family Trust et al

FOR PUBLICATION
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
--------------------------------------------------------------X
: 	SIPA LIQUIDATION
SECURITIES INVESTOR PROTECTION CORP., :
: 	Case No. 08-01789 (CGM)
Plaintiff–Applicant, 	:
: 	(Substantively Consolidated)
v. 	:
:
BERNARD L. MADOFF INVESTMENT 	:
SECURITIES LLC, 	:
:
Defendant. 	:
:
--------------------------------------------------------------X
:
In re: 	:
:
BERNARD L. MADOFF, 	:
:
Debtor. 	:
:
--------------------------------------------------------------X
:
IRVING H. PICARD, Trustee for the Substantively :
Consolidated SIPA Liquidation of Bernard L. 	: 	Case No. 10-04539 (CGM)
Madoff Investment Securities LLC and Bernard L. 	:
Madoff, 	:
:
Plaintiff, 	:
:
v. 	:
:
THE GERALD AND BARBARA KELLER 	:
FAMILY TRUST, GERALD E. KELLER, 	:
individually and in his capacity as Trustee of the 	:
Gerald and Barbara Keller Family Trust, 	:
BARBARA KELLER, individually and in her 	:
capacity as Trustee of the Gerald and Barbara 	:
Keller Family Trust, 	:
:
Defendants. 	:
:
--------------------------------------------------------------X
10-04539-cgm Doc 136 Filed 09/30/21 Entered 09/30/21 16:03:07 Main Document
Pg 1 of 22

Page 2 of 22
MEMORANDUM DECISION
GRANTING SIPA TRUSTEE’S MOTION FOR SUMMARY JUDGMENT
AND DENYING DEFENDANTS’ CROSS MOTION FOR SUMMARY JUDGMENT
A P P E A R A N C E S :
MARIE L. CARLISLE
NICHOLAS J. CREMONA
Baker & Hostetler LLP
45 Rockefeller Plaza
New York, NY 10111
Attorneys for Irving H. Picard, Trustee for the Substantively Consolidated SIPA Liquidation of
Bernard L. Madoff Investment Securities LLC and Bernard L. Madoff
HELEN DAVIS CHAITMAN
Chaitman LLP
465 Park Avenue
New York, NY 10022
Attorney for Defendants
CECELIA G. MORRIS
CHIEF UNITED STATES BANKRUPTCY JUDGE
Irving H. Picard (“SIPA Trustee”), Trustee for the Substantively Consolidated SIPA
Liquidation of Bernard L. Madoff Investment Securities LLC (“BLMIS”) and Bernard L. Madoff
(“Madoff”), brought this adversary proceeding to avoid and recover fictitious profits received by
the Gerald and Barbara Family Trust (“Family Trust”) and Gerald and Barbara Keller, in their
capacities as trustees of the Gerald and Barbara Family Trust (collectively, “Defendants”),1 on
account of their investment in BLMIS’s Ponzi scheme. The parties have filed cross motions for
summary judgment. For the reasons that follow, the Court dismisses the Family Trust as a
defendant, grants the SIPA Trustee’s motion, and denies the Defendants’ motion.
1 The SIPA Trustee also sued Gerald and Barbara Keller in their individual capacities as
subsequent transferees. Those counts were dismissed by July 16, 2015 order of the Court (ECF
No. 39).
10-04539-cgm Doc 136 Filed 09/30/21 Entered 09/30/21 16:03:07 Main Document
Pg 2 of 22

Page 3 of 22
Jurisdiction
This Court has jurisdiction over these adversary proceedings pursuant to 28 U.S.C.
§§ 1334(b) and 157(a), the District Court's Standing Order of Reference dated July 10, 1984, and
the Amended Standing Order of Reference dated January 31, 2012. In addition, the District
Court removed the SIPA2 liquidation to this Court pursuant to SIPA § 78eee(b)(4), see Order,
Civ. 08-01789 (Bankr. S.D.N.Y. Dec. 15, 2008), at ¶ IX, ECF No. 1, and this Court has
jurisdiction under the latter provision. As the district court case has been dismissed and the
reference has not been withdrawn, the Court has authority to enter a final order in these cases. To
the extent that it does not, the Court asks the District Court to construe this decision as proposed
findings of fact and conclusions of law, pursuant to the Amended Standing Order of Reference
dated January 31, 2012.
Background
For background of these SIPA cases and the BLMIS Ponzi scheme, please refer to the
findings of fact in Picard v. Nelson (In re BLMIS), 610 B.R. 197, 206–14 (Bankr. S.D.N.Y.
2019). Unless discussed below, the relevant facts noted are not in dispute here.
Undisputed Facts
At all relevant times, Gerald and Barbara Keller were residents of Great Neck, New York
and Rancho Mirage, California. Answer ¶ 8, ECF No. 40. In 1998, they created the Family Trust
under California law and have served as its trustees. Id. at ¶ 7–8; Chaitman Decl., Ex. AD, ECF
No. 115. In 1997, Gerald Keller opened Account No. 1ZB3143 (“Family Trust BLMIS
Account”) with Madoff’s Investment Advisory Business (“IA Business”) in his own name with
an initial investment of $1,000,000. Greenblatt Decl., Attach. B., Ex. 4, ECF No. 105; Keller
2 Securities Investor Protection Act of 1970, 15 U.S.C. § 78aaa et seq.
10-04539-cgm Doc 136 Filed 09/30/21 Entered 09/30/21 16:03:07 Main Document
Pg 3 of 22

Page 4 of 22
Decl., Ex. 1, ECF No. 114. In 1999, Gerald Keller renamed the account “Gerald E. Keller,
Trustee The Gerald and Barbara Keller Family Trust U/A June 2, 1998” and then “Gerald E.
Keller (Gerald E. Keller Separate Property) The Gerald and Barbara Keller Family Trust U/A
June 2, 1998.” Id., Ex. 4. Additional investments into the Family Trust BLMIS Account totaling
$1,898,852 were made on January 4, 1999 and August 24, 2006. Greenblatt Decl., Attach B., Ex.
4, ECF No. 105.
At least the latter two deposits were made into a specific JP Morgan Chase bank account
ending in 703 (“703 Account”). Collura Decl., Attach. A ¶ 20–24, ECF No. 103; id. Attach. B,
Ex. 6. Expert analysis shows that money in the 703 Account was then transferred to another JP
Morgan Chase bank account ending in 509 (“509 Account”), from which payments were made to
BLMIS’s customers. Id., Attach. A, ¶ 25–27.
During the two-year period prior to the initiation of this SIPA case on December 11, 2008
(“Two-Year Period”), there were thirteen withdrawals from the Family Trust BLMIS Account
totaling $2,125,000. Greenblatt Decl., Attach B, Ex. 4, ECF No. 105. Prior to the Two-Year
Period, $2,670,000 had been withdrawn from the Family Trust BLMIS Account, meaning that
the account had a positive balance of $228,852 at the start of the Two-Year Period. See id. The
$2,125,000 withdrawn during the Two-Year Period thus represents withdrawals of $1,896,148 in
excess of principal deposited with Madoff and BLMIS. See id.
All withdrawal checks came from the 509 Account and were issued to “Gerald E Keller
Tstee.” Keller Decl., Ex. 5, ECF No. 114. Either Gerald Keller himself or Marianne Jannace
(with Gerald Keller’s authorization) would endorse the checks with Gerald Keller’s signature
and deposit the funds into accounts for Keller International Publishing, LLC and Keller
10-04539-cgm Doc 136 Filed 09/30/21 Entered 09/30/21 16:03:07 Main Document
Pg 4 of 22

Page 5 of 22
International Publishing Corp. (together, “Keller Publishing”). Id.; Keller Decl., ¶ 10, ECF No.
114; Collura Decl. Attach. B, Ex. 5, ECF No. 103.
The SIPA Trustee filed this adversary proceeding on December 1, 2010. Complaint, ECF
No. 1. After the claims against Gerald and Barbara Keller in their individual capacities were
dismissed, Order, ECF No. 39, the Defendants answered the Complaint on September 17, 2015.
Answer, ECF No. 40. The SIPA Trustee filed his motion for summary judgment on July 22,
2021 (ECF No. 99) seeking judgment on Count One of the Complaint.3 The Defendants filed
their cross motion for summary judgment on August 17, 2021 (ECF No. 110). After replies were
filed by both sides (ECF Nos. 119 and 124) and the Securities Investor Protection Corporation
(ECF No. 122), the Court heard oral argument on September 15, 2021.
Discussion
Under Rule 56(a) of the Federal Rules of Civil Procedure, as applied by Rule 7056(c) of
the Federal Rules of Bankruptcy Procedure: “The court shall grant summary judgment if the
movant shows that there is no genuine dispute as to any material fact and the movant is entitled
to judgment as a matter of law.” The materiality of facts must be determined with reference to
the governing substantive law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). “A
fact is material only if it affects the result of the proceeding and a fact is in dispute only when the
opposing party submits evidence such that a trial would be required to resolve the differences.”
In re CIS Corp., 214 B.R. 108, 118 (Bankr. S.D.N.Y. 1997).
A movant has the initial burden of establishing the absence of any genuine issue of
material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 322–23 (1986). A moving party may obtain
3 Count One alleges that each of the transfers made during the Two-Year Period
“constitutes a fraudulent transfer avoidable by the [SIPA] Trustee pursuant to section
548(a)(1)(A) of the Bankruptcy Code and recoverable from Defendants pursuant to section
550(a) of the Bankruptcy Code and section 78fff-2(c)(3) of SIPA.”
10-04539-cgm Doc 136 Filed 09/30/21 Entered 09/30/21 16:03:07 Main Document
Pg 5 of 22

Page 6 of 22
summary judgment by showing that little or no evidence may be found in support of the
nonmoving party's case. Gallo v. Prudential Residential Servs. Ltd. P'ship, 22 F.3d 1219, 1223–
24 (2d Cir.1994). The nonmoving party “must do more than simply show that there is some
metaphysical doubt as to material facts.” Repp v. Webber, 132 F.3d 882, 889 (2d Cir. 1997). The
nonmoving party should oppose the motion for summary judgment with evidence that is
admissible at trial. See Fed. R. Civ. P. 56(e)(1); Crawford v. Dep't of Investigation, 324 F. App'x
139, 143 (2d Cir. 2009) (affirming award of summary judgment in favor of defendant, where
plaintiff presented testimony from uncorroborated source, as well as “speculation, hearsay and
other inadmissible rumor, and conclusory allegations”). “If there are cross-motions for summary
judgment, the Court must assess each of the motions and determine whether either party is
entitled to judgment as a matter of law.” Dish Network Corp. v. Ace Am. Ins. Co., 431 F. Supp.
3d 415, 421 (S.D.N.Y. 2019) (cleaned up). “The court must evaluate each party’s motion on its
own merits, taking care in each instance to draw all reasonable inferences against the party
whose motion is under consideration.” Heublein, Inc. v. United States, 996 F.2d 1455, 1461 (2d
Cir. 1993) (cleaned up).
I. 	The SIPA Trustee Satisfies 11 U.S.C. § 548(a)(1)(A)
The SIPA Trustee seeks to avoid and recover transfers of fictitious profits to the
Defendants under 11 U.S.C. § 548(a)(1)(A). The elements of this claim are: (i) a transfer of an
interest of the debtor in property (ii) made within two years of the petition date (iii) with “actual
intent to hinder, delay, or defraud” a creditor. Adelphia Recovery Tr. v. Bank of Am., N.A., 2011
WL 141967, at *2 (S.D.N.Y. Apr. 7, 2011), aff’d 748 F.3d 110 (2d Cir. 2014). SIPA § 78fff-
2(c)(3) allows the SIPA Trustee to “invoke the fraudulent transfer provisions in the Bankruptcy
10-04539-cgm Doc 136 Filed 09/30/21 Entered 09/30/21 16:03:07 Main Document
Pg 6 of 22

Page 7 of 22
Code to recover customer property.” Picard v. Gettinger (In re BLMIS), 976 F.3d 184, 199 (2d
Cir. 2020).
a. 	Transfer of an Interest of the Debtor in Property
The Defendants cite Picard v. Avellino (In re BLMIS), 557 B.R. 89 (Bankr. S.D.N.Y.
2016), arguing that the SIPA Trustee cannot recover from the Defendants, as the IA Business
was run by Madoff and that Avellino is binding on the SIPA Trustee. The Defendants’ argument
is misplaced. Avellino does not firmly establish when the IA Business became part of BLMIS.
Instead, it holds that the SIPA Trustee may not recover transfers made by Madoff prior to
January 1, 2001, when the IA Business was indisputably part of Madoff’s sole proprietorship, as
the SIPA liquidation only concerns BLMIS. Id. at 107–10. That case also does not hold that the
SIPA Trustee cannot recover customer property transferred by BLMIS from an account
technically owned by Madoff. Thus, even were the 509 Account Madoff’s, the reasoning of
Avellino would not preclude recovery of transfers made by BLMIS from the 509 Account so
long as the SIPA Trustee can establish that those funds are customer property within the
definition of SIPA § 78lll(4), meaning he must establish conclusively that the IA Business was
part of BLMIS at the time of the Two-Year Transfers.
Were the Court, as the Defendants argues it should, to ignore the “law of the case”
doctrine, neither res judicata nor claim preclusion apply, as the Avellino adversary proceeding
has not reached final judgment. See Taylor v. Sturgell, 553 U.S. 880, 892 (2008) (“Under the
doctrine of claim preclusion, a final judgment forecloses successive litigation of the very same
claim”); Arizona v. California, 530 U.S. 392, 414 (2000) (“It is the general rule that issue
preclusion attaches only when an issue of fact or law is actually litigated and determine by a
valid and final judgment”).
10-04539-cgm Doc 136 Filed 09/30/21 Entered 09/30/21 16:03:07 Main Document
Pg 7 of 22

Page 8 of 22
The Defendants nevertheless persist in pressing that Madoff, not BLMIS, ran the IA
Business. Whether this was true in 2001 when Madoff submitted Form BD, Chaitman Decl., Ex.
D., ECF No. 115, to the Securities and Exchange Commission is unnecessary to determine, as
the IA Business was indisputably part of BLMIS before the Two-Year Period began.4 See id.,
Ex. BA (SEC Form ADV, registering IA Business with BLMIS on August 25, 2006). This is
corroborated by both the letters Madoff sent to banks in 2001 saying that his business had shifted
to BLMIS, id., Ex. E, BLMIS’s Amended and Restated Operating Agreement, Cremona Decl.,
Ex. 4, at ¶ 3, ECF No. 102 (BLMIS “formed to receive as of January 1, 2001, all of the assets,
subject to liabilities, associated with the business being conducted by” Madoff and to conduct
that business), the 2002 change of the 509 Account’s name from “Bernard L. Madoff” to
“Bernard L. Madoff Investment Securities.” Collura Decl., Attach. A, at 12 n. 9, ECF No. 103;
Chaitman Decl., Exs. U and Z, ECF No. 115.5 The Defendants can hardly claim surprise, as
every letter sent to withdraw funds from the Family Trust BLMIS Account was sent to BLMIS,
not Madoff. See Keller Decl., Ex. 4, ECF No. 114. A review of the correspondence submitted by
Gerald Keller affirms what is evident. In 1999, Gerald Keller sent two letters to Frank Di Pascali
at Bernard L. Madoff Investment Securities—i.e., the sole proprietorship—regarding the name of
the Family Trust BLMIS Account. Id. All other letters were for withdrawals, with the earliest
being dated March 5, 2004, and all were addressed to BLMIS. Id. The only rational inference
4 On this basis, it is unnecessary to determine the admissibility of the Form BD submitted
by Madoff and BLMIS to the Securities and Exchange Commission in 2001, which the
Defendants have contested.
5 To the extent that the Defendants argue that the SEC Form BD proves that Madoff did
not transfer the IA Business to BLMIS, as he did not check the box indicating that BLMIS
engaged in investment advisory services, that form clearly states that, “effective January 1, 2001,
[Madoff] will transfer to [BLMIS] all of [Madoff’s] assets and liabilities, related to [Madoff’s]
business.” (emphasis added). The Defendants’ argument is also belied by the aforementioned
bank records and is rendered moot by the 2006 Form ADV.
10-04539-cgm Doc 136 Filed 09/30/21 Entered 09/30/21 16:03:07 Main Document
Pg 8 of 22

Page 9 of 22
from this is that at some point between 1999 and 2004, Gerald Keller was informed that the
Family Trust BLMIS Account was being managed by BLMIS.
The Defendants persist, pointing to the 1099-B forms issued to them as proof that Madoff
retained the IA Business, as the relevant forms listed “Bernard L. Madoff” as the payer. None of
those forms is from the Two-Year Period, making them irrelevant, nonprobative, and, thus,
immaterial. Even considering Gerald Keller’s statement that all 1099 forms he received were
from Madoff and not BLMIS, Keller Decl., at ¶ 3, ECF No. 114, proves nothing either way, as
the “PAYER’S Federal identification number” listed is the same as BLMIS’s: 13-1997126.
Compare id., Ex. 3 with Chaitman Decl., Ex. M, ECF No. 115. The 1099 forms are thus not
probative of the IA Business’s ownership. At the end of the day, none of the Defendants’
proffers can trump that they admitted that the Family Trust BLMIS Account was with BLMIS.
Answer, at ¶ 7, ECF No. 40 (Defendants admit having BLMIS account, with “BLMIS” being
identified as Bernard L. Madoff Investment Securities LLC in introduction).
Under SIPA § 78lll(4): “The term ‘customer property’ means cash and securities . . . at
any time received, acquired, or held by or for the account of a debtor from or for the securities
accounts of a customer, and the proceeds of any such property transferred by the debtor,
including property unlawfully converted.” SIPA protects cash and securities deposited with the
debtor. SIPA § 78lll(2). The Eleventh Circuit has held that “[w]hether a claimant deposited cash
with the debtor . . . does not . . . depend simply on to whom the claimant handed her cash or
made her check payable, or even where the funds were initially deposited. Instead, the question
is whether there was actual receipt, acquisition or possession of the property of a claimant by the
brokerage firm under liquidation.” Focht v. Heebner (In re Old Naples Sec., Inc.), 223 F.3d
1296, 1302 (11th Cir. 2000). Here, by the time the Two-Year Period commenced, it was BLMIS
10-04539-cgm Doc 136 Filed 09/30/21 Entered 09/30/21 16:03:07 Main Document
Pg 9 of 22

Page 10 of 22
that filtered cash received from customers in the 703 Account through the 509 Account to send
fictitious payments to those customers. Collura Decl., Attach. A., at ¶¶ 20–27, ECF No. 103. It
does not matter whether these accounts were owned by Madoff or BLMIS.6 BLMIS used them to
pay customers fictitious profits. The funds sent from them are customer property under SIPA.
b. 	Made within Two Years of the Petition Date
The SIPA Trustee seeks to recover the fictitious profits that BLMIS transferred to the
Defendants within the two-year period between December 11, 2006 and December 11, 2008.
Greenblatt’s evidence shows that the Defendants withdrew an additional $1,896,148 of funds
within two years of the petition date. Greenblatt Decl., Attach. B, Ex. 4, ECF No. 105.
c. 	Actual Intent to Hinder, Delay, or Defraud
Intent to defraud is established as Madoff operated a Ponzi scheme. Picard v. Citibank,
N.A. (In re BLMIS), ___ F.4th ____, ____, 2021 WL 3854761, at *3 (2d Cir. Aug. 30, 2021); see
also Cremona Decl., Ex. 7 at 23 (Madoff admits running Ponzi scheme through BLMIS). The
SIPA Trustee has met his burden of proof for summary judgment on this issue. See id.; Picard v.
Legacy Capital Ltd. (In re BLMIS), 603 B.R. 682, 688–93 (Bankr. S.D.N.Y. 2019) (discussing in
detail that BLMIS was a Ponzi scheme and why the SIPA Trustee is permitted to rely on the
Ponzi scheme presumption to prove intent as a matter of law).
The SIPA Trustee has met his burden on every element of his prima facie case. The
Defendants did not rebut any of the SIPA Trustee’s experts’ opinions and the unrebutted reports
are admissible. There is no genuine dispute regarding BLMIS’s (i) interest in the transferred
6 The Court thus need not address the Defendants’ argument that Madoff’s plea
allocutions are inadmissible to prove anything about BLMIS’s structure or ownership of the 509
Account.
10-04539-cgm Doc 136 Filed 09/30/21 Entered 09/30/21 16:03:07 Main Document
Pg 10 of 22

Page 11 of 22
funds; (ii) payment of fictitious profits within the two-year period to or for the benefit of the
Defendants; and (iii) actual intent to hinder, delay, or defraud its creditors.
II. Defendants’ Arguments
The Court now considers the Defendants’ defenses to the SIPA Trustee’s motion and
arguments in support of their cross motion for summary judgment.
a. 	Proper Defendants
The Court next addresses the Defendants’ argument that the SIPA Trustee has sued the
wrong parties. The Defendants contend that the SIPA Trustee has waived all claims against
Barbara Keller and that the Family Trust was a mere conduit and not a transferee. For the reasons
that follow, the Court holds that, except for the Family Trust, the proper parties have been sued,
that Barbara Keller’s death does not affect the liability of the Family Trust, and that the Family
Trust was the initial transferee of the payments made by BLMIS.
i. 	The Family Trust Itself Is Not a Proper Party
Before addressing the Defendants’ specific arguments, the Court sua sponte addresses a
glaring issue. The SIPA Trustee named the Family Trust as one of the Defendants. Under Rule
17(b)(3) of the Federal Rules of Civil Procedure, the law of the state where the court is located
governs whether the Family Trust has the capacity to be sued. “Under New York law, an express
trust vests in the trustee the legal estate, and the trustee is the party with capacity to sue on behalf
of the trust.” Revitalizing Auto Communities Environmental Response Tr. v. National Grid USA,
10 F.4th 87, 97–98 (2d Cir. 2021) (cleaned up); see also Liveo v. Hausman, 61 Misc. 3d 1043,
10-04539-cgm Doc 136 Filed 09/30/21 Entered 09/30/21 16:03:07 Main Document
Pg 11 of 22

Page 12 of 22
1044, 86 N.Y.S.3d 378, 379 (N.Y. Sup. Ct. 2018) (“A trust . . . is a legal fiction, and cannot sue
or be sued itself.” [cleaned up]).7
No party specifically addressed the Family Trust’s capacity to be sued. “Capacity to sue
is non-jurisdictional in nature and can be waived.” Id. As the SIPA Trustee also named the
trustees of the Family Trust, there is no concern that dismissal of the Family Trust would result
in “a completely wasteful repetition of proceedings that have already occurred.” Id. The Court
dismisses the Family Trust.
ii. 	Barbara Keller Will Not Be Dismissed at This Time
The Defendants argue that the SIPA Trustee has forfeited his claims against Barbara
Keller, who apparently died in June 2019. The Defendants claim to have notified the SIPA
Trustee and that the SIPA Trustee did not amend the Complaint to name her estate within ninety
days of this notice. The SIPA Trustee counters that the Defendants failed to formally notify the
SIPA Trustee of Barbara Keller’s death by filing a suggestion of death on the docket and serving
the same on the SIPA Trustee.
This issue is nothing more than a red herring. As the counts against Barbara Keller in her
individual capacity were dismissed, there is absolutely no reason that her estate needs to be
substituted into the case. The appropriate party for substitution would instead be whoever
succeeded her in her role as trustee of the Family Trust. The declaration of trust for the Family
Trust clearly states that “[i]f BARBARA KELLER is unable or unwilling to serve or to continue
to serve as Trustee or as co-Trustee of any portion of the trust estate, GERALD E. KELLER
shall serve of sole Trustee of said portion.” Chaitman Decl., Ex. AD, art. 5, ¶ 1.(a), ECF No. 115.
7 Were California law to apply, the result would be the same. See Greenspan v. LADT,
LLC, 191 Cal. App. 4th 486, 521 (2010) (“because a trust is not a legal entity, it cannot sue or be
sued, but rather legal proceedings are properly directed at the trustee”).
10-04539-cgm Doc 136 Filed 09/30/21 Entered 09/30/21 16:03:07 Main Document
Pg 12 of 22

Page 13 of 22
Gerald Keller, in his capacity as trustee of the Family Trust, is already a party to this action.
There was no need for the SIPA Trustee to substitute in another party. The Family Trust liability
through Gerald Keller as its trustee is not affected by Barbara Keller’s death.
To the extent Rule 25(a)(1) does require substitution, the Defendants have not filed a
formal suggestion of death on the record, meaning that the ninety-day window has not been
triggered. See Fed. R. Civ. P. 25, advisory committee notes (1963 am.) (The . . . rule establishes
a time limit for the motion to substitute based not upon the time of death, but rather upon the
time information of the death as provided by the means of a suggestion of death upon the
record[.]” [emphasis added]); see also Unicorn Tales, Inc. v. Banerjee, 138 F.3d 467, 469 (2d
Cir. 1998) (same).
Defendants’ counsel’s states that “[a]t some point early in the litigations, there was a
discussion with Judge Bernstein concerning notification to the [SIPA] Trustee of the death of a
defendant. In that discussion, it was agreed that email notification to the [SIPA] Trustee’s
counsel of the death of a defendant would be sufficient.” Chaitman Suppl. Decl., at ¶ 3, ECF No.
125. Absent a record of this “agreement,” the Court follows the text and commentary of Rule 25,
which makes clear that a suggestion of death on the record is required to trigger the ninety-day
window to substitute in the proper party. While the SIPA Trustee and the Defendants’ counsel
may have agreed to be more informal in substituting other parties in other matters in this SIPA
liquidation as a matter of expediency, this course of action cannot override the baseline
requirements of the Federal Rules of Civil Procedure without a court order.
Should the SIPA Trustee be satisfied that Barbara Keller has indeed died and that Gerald
Keller has subsumed her role as trustee of the Family Trust, the SIPA Trustee may withdraw his
10-04539-cgm Doc 136 Filed 09/30/21 Entered 09/30/21 16:03:07 Main Document
Pg 13 of 22

Page 14 of 22
claims against her and have judgment entered Gerald Keller in his capacity as trustee of the
Family Trust alone. Otherwise, the Court declines to dismiss Barbara Keller at this time.
iii. 	The Family Trust Was the Initial Transferee
The Defendants next argue that the Family Trust was a mere conduit of the funds and that
Keller Publishing was the transferee. The Court disagrees with the Defendants.
According to the Defendants, under an oral agreement with Keller Publishing’s Chief
Financial Officer, Irwin Levine, Gerald Keller asked for withdrawals from its account with
BLMIS only when Mr. Levine told Gerald Keller that Keller Publishing needed funds and that
no funds were ever deposited into a Family Trust bank account. Keller Decl., at ¶ 13, ECF No.
114. All checks were payable to “Gerald E Keller TSTEE.” Id., Ex. 5. The Defendants’ argument
that Gerald Keller never held dominion and control of the checks is meritless, whether the Court
takes the Defendants’ suggestion that Marianne Jannace endorsed the checks or that Gerald
Keller himself did (as he admitted in his deposition testimony); Brown Decl., Ex. 3, at 6 (Tr.
24:15–17), ECF No. 121; in both instances, Gerald Keller’s signature was used to endorse the
checks and redirect them to Keller Publishing.8
Under 11 U.S.C. § 550(a), the SIPA Trustee may recover avoided transfers from the
initial transferee. To be a “transferee” and not a “mere conduit,” the party must have “dominion
over the money or other asset, the right to put the money to one’s own purpose.” Christy v.
Alexander & Alexander of N.Y., Inc. (In re Finley, Kumble, Wagner, Heine, Underberg, Manly,
Myerson & Casey), 130 F.3d 52, 57 (2d Cir. 1997). One way in which a party may be a mere
8 The Court finds incredible the Defendants’ contention that Gerald Keller withdrew
funds as an individual on Keller Publishing stationary. See Keller Decl., at ¶ 4, ECF No. 114.
The BLMIS account belonged to the Family Trust, not Gerald Keller personally; all checks were
issued to Gerald Keller in his role as trustee of the Family Trust. Tellingly, the letter Gerald
Keller sent to change the account from his personally to the Family Trust’s was also sent on
Keller Publishing letterhead, see id., Ex. 4, rendering the argument even more unreasonable.
10-04539-cgm Doc 136 Filed 09/30/21 Entered 09/30/21 16:03:07 Main Document
Pg 14 of 22

Page 15 of 22
conduit is that it has “no discretion or authority to do anything else but transmit the money” to
another, like a contractual obligation. See id. at 59 (citing Danning v. Miller (In re Bullion
Reserve of N. Am.), 922 F.2d 544, 549 (9th Cir. 1991)). “An initial transferee is the person who
has dominion and control over the subject of the initial transfer to the extent that he or she may
dispose of it as he or she pleases, such as investing the whole amount in lottery tickets or
uranium stocks.” Miller v Porush, 234 B.R. 293, 313 (Bankr. S.D.N.Y. 1999) (cleaned up).
The Defendants have presented two declarations discussing the nature of the agreement
for Keller Publishing to receive the withdrawals from the Family Trust’s BLMIS account. These
two declarations are inconsistent. In Gerald Keller’s declaration, he states that, based on an oral
agreement between Mr. Levine and himself, Mr. Levine was allowed to take money from the
Family Trust’s BLMIS account when Keller Publishing needed working capital. Keller Decl., at
¶ 5, ECF No. 115. Gerald Keller does not state that there was an agreement between the Family
Trust and Keller Publishing. See id. In the prior paragraph, Gerald Keller insisted that he made
these withdrawals as an individual. Id., at ¶ 4. The only reasonable inference is that Gerald Keller
made this agreement with Mr. Levine in his personal capacity, which would mean that there was
no binding agreement between the Family Trust and Keller Publishing.
Mr. Levine’s declaration, though, characterizes this agreement as one in which the
Family Trust agreed to make loans to Keller Publishing. Levine Decl., at ¶ 2, ECF No. 126.
Levine states that these loans were noted on Keller Publishing’s financial statements, pointing to
two attached to his declaration. Id., at ¶ 4. Those financial records do not show any loans from
the Family Trust to Keller Publishing. See id., Ex. A. One statement for December 31, 2008
shows an obligation on a loan from “J. Keller,” which is presumably Gerald Keller. Id. The other
statement, which shows a date of June 30, 2021—and thus is not even remotely relevant—shows
10-04539-cgm Doc 136 Filed 09/30/21 Entered 09/30/21 16:03:07 Main Document
Pg 15 of 22

Page 16 of 22
loans from other trusts and GEK (again, presumably Gerald Keller). Id. Neither mentions a loan
from the Family Trust. See id.
“To establish the existence of an enforceable agreement, a [party] must establish an offer,
acceptance of the offer, consideration, mutual assent, and an intent to be bound. That meeting of
the minds must include agreement on all essential terms.” Kowalchuk v. Stroup, 61 A.D.3d 118,
121, 873 N.Y.S.2d 43, 46 (N.Y. App. Div., 1st Dep’t 2009). “Under New York law, an oral
agreement is not enforceable unless there is a manifestation of mutual assent sufficiently definite
to assure that the parties are truly in agreement with respect to all material terms.” Anderson v.
Greene, 774 F. App'x 694, 697 (2d Cir.) (cleaned up), cert. denied, 140 S. Ct. 556 (2019).
As no written agreement has been produced, the Court is left with the pieces that the
Defendants have presented to determine whether a contract actually existed. Neither the Keller
nor the Levine declarations demonstrate an offer and acceptance. Gerald Keller states that he and
Mr. Levine had an agreement. Mr. Levine states that the Family Trust and Keller Publishing had
an agreement. Neither states what was the offer and what was the acceptance. Gerald Keller’s
declaration does not show that there was any consideration for this supposed agreement. Mr.
Levine’s declaration states that the Family Trust loaned the money to Keller Publishing (without
any indication of the terms of the loan), and yet this is not borne out by the financial statements
he attaches to his declaration, which only show loans from Gerald Keller and other trusts. The
two declarations do not show mutual assent, as their recitations of the parties to the oral
agreement are inconsistent. Nor do they show an intent to be bound by this agreement. All
withdrawals from the Family Trust’s BLMIS account indisputably went to Keller Publishing.
There is no indication that this arrangement was binding, that the Family Trust could not
otherwise use the money in the BLMIS account, or that Keller Publishing would have had any
10-04539-cgm Doc 136 Filed 09/30/21 Entered 09/30/21 16:03:07 Main Document
Pg 16 of 22

Page 17 of 22
remedy against the Family Trust should it not receive money. Instead, this arrangement has all
the hallmarks of Gerald Keller using one asset at his disposal—the Family Trust BLMIS
Account—to prop up his business, which is consistent with his statement that so many
withdrawals were made in 2007 and 2008 due to Keller Publishing “not doing well financially.”
Keller Decl., at ¶ 6, ECF No. 114.
The Court notes its obligation to construe this evidence in the light mot favorable to the
Defendants. This requirement only requires the Court to draw “all justifiable inferences” in the
Defendants’ favor. Tolan v. Cotton, 572 U.S. 650, 651 (2014). There is simply no way to read
Gerald Keller’s and Mr. Levine’s declarations harmoniously. The Court is justified in ignoring
all contradictory parts of the declarations. Cf. Hayes v. N.Y.C. Dep’t of Corr., 84 F.3d 614, 619
(2d Cir. 1996) (“factual issues created solely by an affidavit crafted to oppose a summary
judgment motion are not genuine issues for trial.”). Gerald Keller’s declaration clearly
contradicts his deposition testimony, in which he states unequivocally that he made all decisions
to withdraw funds from the Family Trust’s BLMIS account. See Brown Decl., Ex. 3, at 8 (Tr.
26:4–6). ECF No. 121.9 “[F]actual allegations that might otherwise defeat a motion for summary
judgment will not be permitted to do so when they are made for the first time in the plaintiff's
affidavit opposing summary judgment and that affidavit contradicts her own prior deposition
testimony.” Brown v. Henderson, 257 F.3d 246, 252 (2d Cir. 2001). Even taking the declarations
at face value—and disregarding the contradictory parts—there is no support for the Defendants’
argument that there was a binding contract between the Family Trust and Keller Publishing. All
of the information regarding the supposed oral contract is at the Defendants’ disposal. The
Defendants “must provide concrete particulars showing that a trial is needed, and it is not
9 “Q. . . . In making a decision to make a withdrawal, was that made by you? A. Yes.”
10-04539-cgm Doc 136 Filed 09/30/21 Entered 09/30/21 16:03:07 Main Document
Pg 17 of 22

Page 18 of 22
sufficiently merely to assert a conclusion without supplying supporting arguments or facts in
opposition to [a summary judgment] motion.” R.G. Group, Inc. v. Horn & Hardart Co., 751 F.2d
59, 77 (2d Cir. 1984); see also Innomed Labs, LLC. v. Alza Corp, 98 F. App’x 51, 54 (2d Cir.
2004) (affirming summary judgment where party alleging oral contract did not establish terms of
supposed contract, meaning that the trier of fact would have to “speculat[e] as to the scope of
[the] obligations under the contract”).
The Court is left with the evidence that Gerald Keller made all decisions to withdraw
funds from the BLMIS account, endorsed the checks sent (whether personally or through
Marianne Jannace), and directed that the funds go to Keller Publishing. In other words, he had
“the right to put the money to [his] own purpose.” In re Finley, 130 F.3d at 57. The notion that
Gerald Keller made the withdrawals as an individual is unsubstantiated, as every single check in
the two-year period was made to Gerald Keller as trustee of the Family Trust for the Family
Trust’s account and Gerald Keller could only make withdrawals in his capacity as trustee of the
Family Trust. That he did so only upon the request of Keller Publishing and immediately gave
the money to Keller Publishing was his own decision. As Gerald Keller, as trustee of the Family
Trust, had complete discretion over the use of the funds (and lacking evidence of a binding
agreement), the Defendants’ “mere conduit” argument is meritless.
b. 	The Purchase of U.S. Treasury Bills Is Not Material
The Defendants also contend that Madoff invested IA customers’ funds in U.S. Treasury
bills (“T-Bills”). The SIPA Trustee counters with evidence that the T-Bills appearing on
customer statements were fictitious. Dubinsky Decl., Attach. A., at ¶¶ 224–40, ECF No. 104.
The Defendants offer no more than speculation that T-Bills were allocated to the Family Trust.
The Court sees no reason to depart from earlier cases holding this issue immaterial. See Picard v.
10-04539-cgm Doc 136 Filed 09/30/21 Entered 09/30/21 16:03:07 Main Document
Pg 18 of 22

Page 19 of 22
Estate of Seymour Epstein (In re BLMIS), No. 10-04438, slip op. at 7–8 (Bankr. S.D.N.Y. Jan.
27, 2021); see also Picard v. JABA Assocs. LP (In re BLMIS), ___ F. Supp. 3d ____, ____, 2021
WL 1112342, at *13 (S.D.N.Y. Mar. 24, 2021) (“there is . . . no dispute of material fact that
BLMIS did not legitimately trade equities for its IA Business customers”).
c. 	All Defenses Not Addressed by the Defendants Are Abandoned
The Defendants pleaded forty-six affirmative defenses in the Answer. Few of these
defenses were addressed in the Defendants’ papers. “If a party fails to assert a legal reason why
summary judgment should not be granted, that ground is waived[.]” Vaughner v. Pulito, 804
F.2d 873, 877 n.2 (5th Cir. 1986); cf. Edward B. Marks Music Corp. v. Continental Record Co.,
222 F.2d 488, 492 (2d Cir. 1955) (“[parties] in [their] opposition to a motion for summary
judgment cannot abandon an issue and then, after an unpalatable decision by the trial judge, on
appeal, by drawing on the pleadings resurrect the abandoned issue”). The Court thus addressed
only those defenses discussed by the Defendants in their opposing papers. Every other defense is
waived for purposes of summary judgment.
III. Prejudgment Interest Is Warranted
The SIPA Trustee has requested prejudgment interest from the filing date through the
date of the entry of judgment at the rate of 4%. The Defendants resist this request with a panoply
of arguments. This Court has considered this issue on multiple prior occasions. See, e.g., Picard
v. BAM L.P. (In re BLMIS), 624 B.R. 55, 62–66 (Bankr. S.D.N.Y. 2020).
To determine whether prejudgment interest should be awarded, the Court must consider
“(i) the need to fully compensate the wronged party for actual damages suffered,
(ii) considerations of fairness and the relative equities of the award, (iii) the remedial purpose of
the statute involved, and/or (iv) such other general principles as are deemed relevant by the
10-04539-cgm Doc 136 Filed 09/30/21 Entered 09/30/21 16:03:07 Main Document
Pg 19 of 22

Page 20 of 22
court.” Wickham Contracting Co. v. Local Union No. 3, Int'l Brotherhood of Elec. Workers,
AFL-CIO, 955 F.2d 831, 834 (2d Cir. 1992). The purpose of prejudgment interest is to make the
Plaintiff whole rather than to punish Defendants or to provide Plaintiff with a windfall. Jones v.
UNUM Life Ins. Co. of Am., 223 F.3d 130, 139 (2d Cir. 2000) (citations and quotations omitted).
“Courts in the Second Circuit and in this district have recognized that the award of prejudgment
interest is discretionary, and absent a sound reason to deny prejudgment interest, such interest
should be awarded.” McHale v. Boulder Capital LLC (In re 1031 Tax Grp., LLC), 439 B.R. 84,
87 (Bankr. S.D.N.Y. 2010) (citations omitted). “The court must, however, explain and articulate
its reasons for any decision regarding prejudgment interest.” Henry v. Champlain Enter., Inc.,
445 F.3d 610, 623 (2d Cir. 2006).
Prejudgment interest is “normally” awarded in avoided transfer cases “to compensate for
the value over time of the amount recovered.” Geltzer v. Artists Mktg. Corp. (In re Cassandra
Grp.), 338 B.R. 583, 599 (S.D.N.Y. 2006) (“To fully and fairly compensate Cassandra's creditors
for their loss—not only of $300,000 that was fraudulently conveyed to the Defendants, but of the
use of that money since the date of the demand—the Trustee should be permitted to recover
prejudgment interest.”); see also Messer v. McGee (In re FKF 3, LLC), 2018 WL 5292131, at
*13 (S.D.N.Y. Oct. 24, 2018) (awarding prejudgment interest to compensate for “loss of interest,
the diminished value of the damages award due to the passage of time, and Plaintiff's lost
opportunity to make use of the lost funds”).
Prejudgment interest is warranted in this instance. The SIPA Trustee is charged with
collecting fictitious profits from net winners so that net losers in BLMIS’s Ponzi scheme can be
adequately compensated for their losses. He has spent more than ten years prosecuting this case
and cannot be made whole without an award of prejudgment interest. The SIPA Trustee has
10-04539-cgm Doc 136 Filed 09/30/21 Entered 09/30/21 16:03:07 Main Document
Pg 20 of 22

Page 21 of 22
requested interest from the date that the SIPA action was commenced. Consistent with other
decisions that have awarded prejudgment interest, the Court holds that interest is awarded in the
amount of 4%, without compounding, commencing on December 1, 2010 through the date of the
entry of judgment in this case. See JABA Associates L.P, ___ F. Supp. 3d at ___, 2021 WL
1112342, at *19–20 (applying 4% interest rate); BAM, L.P., 624 B.R. at 65–66 (same).10
In reaching this conclusion the Court is reminded that the Defendants are victims. The
Defendants, like so many others, believed their account to be making legitimate investments.
While the court sympathizes with the Defendants, they have recovered their principal
investment. Other victims have not been so fortunate.
10 The Court has previously invited the SIPA Trustee to argue for prejudgment interest
from the filing date of the underlying SIPA case “where the facts warrant it.” Picard v. Miller (In
re BLMIS), ___ B.R. ____, ____ n. 13, 2021 WL 2787604, at *12 n.13 (Bankr. S.D.N.Y. July 2,
2021). As the Court has not relied on the law of the case doctrine in this decision, the SIPA
Trustee has presented no compelling rationale to deviate from prior decisions awarding
prejudgment interest from the date the respective adversary proceedings were filed.
10-04539-cgm Doc 136 Filed 09/30/21 Entered 09/30/21 16:03:07 Main Document
Pg 21 of 22

Page 22 of 22
Conclusion
For the foregoing reasons, the Family Trust is dismissed as a defendant, the SIPA
Trustee’s Motion for Summary Judgment is GRANTED as to the remaining Defendants, and the
Defendants’ Cross Motion for Summary Judgment is DENIED. Judgment shall enter in favor of
the SIPA Trustee and against Gerald and Barbara Keller as trustees of the Family Trust on Count
One of the Complaint. The SIPA Trustee shall submit a proposed order within fourteen days of
the issuance of this decision, directly to chambers (via E-Orders), upon not less than two days’
notice to all parties, as required by Local Bankruptcy Rule 9074-1(a).
Dated: September 30, 2021
Poughkeepsie, New York
/s/ Cecelia G. Morris
_______________________
Hon. Cecelia G. Morris
Chief U.S. Bankruptcy Judge
10-04539-cgm Doc 136 Filed 09/30/21 Entered 09/30/21 16:03:07 Main Document
Pg 22 of 22