Connecticut Joins Madoff Lawsuit Fray
The town of Fairfield, Conn., has joined a growing list of aggrieved parties seeking restitution from Ponzi mastermind Bernard L. Madoff.
Members of Fairfield's pension fund are suing several executives at "feeder funds" that invested millions with Madoff. The lawsuit (Fairfield Retirement Program v. Madoff) names executives at Tremont Group Holdings, Maxam Capital Management and Fairfield Greenwich Group, along with the Madoff and his wife, brother and two sons.
According to David Golub, a lawyer representing Fairfield, the town gained $20 million on a $42 million investment with Madoff through the Maxam fund. "This is the first complaint to say these feeder funds were involved in the criminal activity," Golub told Bloomberg. "We're saying they may not have known he was operating a Ponzi scheme, but there's no way that Madoff could have gotten those results with any legal effort."
According to a related complaint filed by the Massachusetts Secretary of State, Fairfield Greenwich exercised "complete disregard" for its financial responsibilities to investors by misrepresenting its "knowledge and comfort" level with Madoff's operations.
The complaint also cites "the lack of an arms-length relationship between Fairfield and Madoff Investments and the failure of Fairfield to disclose to investors the interconnected relationship between Fairfield and Madoff Investments. Fairfield's complete disregard of its fiduciary duties ... rises to the level of fraud."
According to the state complaint (PDF), Fairfield Greenwich fund managers invested nearly $7.2 billion with Madoff through three so-called "Sentry funds," which posted gains 92 percent of the time over 15 years. Jeffrey Tucker, a Fairfield principal named in the complaint, said the fund earned $100 million annually in fees attached to those gains from 2006 to 2008, though another fund manager put the figure higher.
The state is seeking restitution for all Massachusetts investors who lost money in the Sentry funds as a result of the Madoff scheme. On Monday, a Connecticut judge granted a temporary freeze on the assets of Madoff's two sons along with the executives accused in the pension fund lawsuit.
Madoff pleaded guilty March 12 in U.S. District Court to 11 felony charges, including securities fraud, mail fraud and money laundering, for swindling investors in a $50 billion scheme. He is scheduled to be sentenced June 16.
By Amanda Zamora |
April 1, 2009; 4:42 PM ET
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