Participants in the Madoff investment scandal
Encyclopedia
Investigators are looking for other participants in the Madoff investment scandal besides Bernard Madoff
who were involved in the Madoff investment scheme
, despite Madoff's assertion that he alone was responsible for the large-scale operation. Harry Sussman, an attorney representing several clients of the firm, stated that "someone had to create the appearance that there were returns," and further suggested that there must have been a team buying and selling stocks, forging books, and filing reports. James Ratley, president of the Association of Certified Fraud Examiners
said, “In order for him to have done this by himself, he would have had to have been at work night and day, no vacation and no time off. He would have had to nurture the Ponzi scheme daily. What happened when he was gone? Who handled it when somebody called in while he was on vacation and said, ‘I need access to money’?”
“Simply from an administrative perspective, the act of putting together the various account statements, which did show trading activity, has to involve a number of people. ... You would need office and support personnel, people who actually knew what the market price
s were for the securities that were being traded. You would need accountants so that the internal documents reconcile with the documents being sent to customers at least on a superficial basis,” said Tom Dewey, a securities lawyer.
, one of the money manager's oldest friends, are among at least eight Madoff investors and associates being scrutinized by the U.S. attorney's office in Manhattan. Prosecutors are continuing to probe Madoff family members and employees. Others include: Frank Avellino, a Florida accountant who ran an investment fund that invested client money; Noel Levine, a real-estate investor who works out of a two-room office on the 17th floor, next door to Madoff's fraudulent investment operation, and Palm Beach investor Robert Jaffe, a son-in-law of Mr. Shapiro who referred potential investors to Madoff.
On March 24, 2009 Judge Louis L. Stanton
granted power of attorney
to Irving Picard
, trustee, over Madoff's controlling stake in London.
Authorities in the U.K. are seeking evidence of money laundering
involving the London business, Madoff Securities International Ltd., which opened in 1983 as a separate legal entity from Mr. Madoff's U.S. New York office. He allegedly sent more than $250 million beginning as early as 2002, from his New York-based firm, Bernard L. Madoff Investment Securities LLC, to the U.K. office and then back to accounts in the U.S.
In 2000, Madoff began to add staff and expand the operation, and loaned the business $62.5 million. He had a staff of 25, including traders, managers and support. Instructions to staff was that they communicate with Madoff Securities through personal e-mail accounts, not through company e-mail.
There were nine directors. Family members with shares included Mark and Andrew Madoff, Peter Madoff, and Bernard himself. Ruth Madoff, Bernard Madoff's wife, also held shares.
Non-family members with shares included Maurice J. "Sonny" Cohn. Madoff and Cohn were shareholders in Cohmad Securities
, which steered investors to Mr. Madoff's advisory business. In 1987, Mr. Cohn had shares of Madoff Holdings Ltd., a predecessor to the current London firm. In 1998, Mr. Cohn held 35,624 non-voting shares, some of which he transferred to "BL Madoff" in 1998, and the rest that he "disposed of" in 2004.
A general ledger of Madoff accounts listed Konigsberg, of the reputable accounting firm of Konigsberg, Wolf & Co., as receiving $30,000 a month to advise the MSIL operations, and funnel client checks to the London office for Madoff's own use.
Clients were often directed to Mr. Konigsberg by Mr. Madoff and his family. Mr. Konigsberg prepared the tax returns of foundations of six other families, many of which have lost millions, even hundreds of millions, of dollars. He also represented scores of individual Madoff investors. Mr. Konigsberg's firm has received a civil subpoena from the SEC. His Madoff-related clients included Carl and Ruth Shapiro, Boston philanthropists whose foundation lost $145 million, and whose son-in-law, Robert M. Jaffe, under investigation, is a Madoff business partner.
Konigsberg held Madoff accounts under his name including two in the name of the Westlake Foundation. Paul J. and Judith Konigsberg are officers and directors of the foundation. He owns homes in his wife, Judith's name in Greenwich, Connecticut and Palm Beach Gardens, Florida.
On April 20, 2009, Steven Leber filed a $4 million lawsuit against Konigsberg and his accounting firm for negligence
, and breach of fiduciary duty. Konigsberg answered the charges with affirmative defense
s.
Ruth and Bernie Madoff had an intimate relationship with Levy and his wife, Betty. Madoff was long known to have been Levy's "fixer," obtaining everything from choice restaurant reservations to emergency medical care. Levy had offices one floor below Madoff's in New York’s Lipstick Building. It was Levy who introduced high-profile investors to Madoff.
Jeanne Levy-Church's losses forced her to shut her JEHT Foundation and her parents’ foundation, the Betty and Norman F. Levy Foundation, lost $244 million. JEH helped the less fortunate, especially ex-convicts.
Following the death of his wife, Levy's girlfriend, model Carmen Dell'Orefice
, an investor, said Levy was Madoff's "father figure". When Levy died in 2005 at the age of 93, Madoff extolled him as a man whose friendship he had cherished and who had "taught me so much." Levy's son Francis said his father believed in Madoff: "If there's one honorable person,” he said, “it's Bernie."
automobile worth an estimated $200,000. In March and May 2008, Madoff International wire-transferred 135,000 pounds ($198,207) to buy a car for Peter Madoff, and delivered it to him at his residence in Palm Beach
. Madoff International's listed assets are as much as $500 million and debt of more than $1 billion in its bankruptcy petition. The bankruptcy is designed to block U.S. lawsuits against foreign companies with U.S. operations while they reorganize overseas. Investors who filed an involuntary personal bankruptcy
petition against Madoff want his business’s U.K. unit's bankruptcy moved to New York because “overlapping discovery, related assets and common creditors” among the various cases mean they should be in the same court.
The Chapter 15 case is In re Madoff Securities International Ltd., 09-16751, U.S. Bankruptcy Court, Southern District of Florida (West Palm Beach).
On June 8, 2009 the Chapter 15 case was transferred to the Southern District of New York as Madoff Securities International Limited, Stephen John Akers, Mark Richard Byers, and Andrew Laurence as the Joint Provisional Liquidators, 09-12998, so it can be administered more effectively with the related involuntary bankruptcies against Madoff, and his companies, also filed in New York. The associated adversary proceeding was also moved to the Southern District of New York as Akers et al. v. Madoff, 09-1186, demanding $235,000 against Peter B. Madoff.
, 49, the sole practitioner at Friehling & Horowitz CPAs, waived indictment and pleaded not guilty to criminal charges on July 10, 2009. He agreed to proceed without having the evidence in the criminal case against him reviewed by a grand jury at a hearing before U.S. District Judge Alvin Hellerstein in Manhattan. Friehling was charged on March 18, 2009, with securities fraud
, aiding and abetting investment adviser fraud, and four counts of filing false audit reports with the Securities and Exchange Commission.
He faces up to 105 years in prison on all of the charges. Federal prosecutors had until about June 17, 2009 to produce a grand jury
indictment against him, or a plea bargain to end the case.
Madoff's firm paid Friehling between $12,000 and $14,500 a month for his services between 2004 and 2007.
Although required, Friehling was not registered with the Public Company Accounting Oversight Board
, which was created under the Sarbanes-Oxley Act
of 2002 to help detect fraud. Nor was the firm "peer reviewed," in which auditors check out one another for quality control
. According to the American Institute of Certified Public Accountants
(AICPA), Friehling was enrolled in their peer-review program, but was not required to participate because he advised the group that he had not conducted audits for 15 years.
The case is US v David G. Friehling 09-mJ-729 U.S. District Court for the Southern District of New York (Manhattan).
, he has been director of the National Stock Exchange
(Cincinnati Stock Exchange) since 1980. He stepped down from the Board of Directors of the Securities Industry and Financial Markets Association (SIFMA) in December 2008, as news of the Ponzi scheme broke. Peter owns a home in Old Westbury, valued between $3–5 million, and a $4.2 million home in Palm Beach
, Fla., the title of which was transferred on November 8, 2006 to his wife, Marion, and a vintage Aston Martin
.
Peter also owns between 5% and 10% of, and is a director of, Cohmad Securities
Corp. He has been subpoenaed by Massachusetts
's Secretary of State
William Galvin
On April 3, 2009, his temporarily frozen assets previously ordered were modified to be allowed to spend up to $10,000 per month for living expenses, including mortgage loans and insurance premiums.
Peter served as a trustee
for law student Andrew Samuels' $470,000 inheritance from his grandfather who worked for Madoff and created a trust for him. Andrew's lawsuit, claiming $2 million for breach his fiduciary duty by investing his inheritance with Bernard Madoff was settled in late July, 2009. The case is Ross v. Madoff, 09-5534, New York State Supreme Court for Nassau County
(Mineola
).
On April 13, 2009, Judge Arthur Hiller in Bridgeport
, Connecticut, dissolved the temporary order he imposed March 30 freezing his assets. Madoff agreed to attachments of $2.5 million to his Long Island
home. His attorney is H. James Pickerstein. The pension fund case is Retirement Program for Employees of the Town of Fairfield v. Madoff, FBT-CV-09-5023735-S, Superior Court of Connecticut (Bridgeport)
On April 30, 2009, Peter demanded a $500,000 licensing fee as part of the sale of BLMIS for intellectual property used by the market-making business, but it was rejected by the bankruptcy trustee who maintains that the patents are the property of the business. Members of the Madoff family, including Madoff, own holding companies that own Primex LLC, which holds intellectual property licensed to the Nasdaq stock market. The patents are used for electronic trading.
Senator
Frank Lautenberg
's family foundation, which invested more than $7 million, also filed a lawsuit against Peter Madoff.
, was sued in Decmember, 2010, for $1 billion by trustee Picard. Wilpon owns the New York Mets
baseball team, a sports network
and extensive real estate holdings. Picard charged that "red flags" were ignored, and there was no due diligence
. He claimed that the Mets owners “were simply in too deep -- having substantially supported their businesses with Madoff money -- to do anything but ignore the gathering clouds." On 10 February, 2011, former N.Y. governor Mario Cuomo
was appointed as a mediator in the dispute between the trustee and Sterling.
As part of her husband's sentencing terms, she agreed to give up all of her possessions in return for a promise that federal prosecutors would not go after the $2.5 million she can keep. The money is not protected from civil legal actions pursued by a court-appointed trustee liquidating Madoff's assets or by investor lawsuits.
On July 29, 2009, she was sued by trustee, Irving Picard
for $45 million, which supported her "life of splendor". According to court filings, she received more than $3 million from the business over the last six years to pay personal expenses charged to her American Express
card, and $2 million in payments to a business called PetCare RX. “Ruth Madoff was never an employee of BLMIS yet millions of dollars belonging to BLMIS and its customers found their way into her personal accounts and investments without any legitimate business purpose or any value to BLMIS, simply because of her relationship with Bernard Madoff.” She is also required to itemize all expenditures over $100.
The case is Picard v. Madoff, 1:09-ap-1391, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
She has been named in several civil actions. She is represented by attorney Peter Chavkin and David Barres.
Ruth has not been charged with any crime, and has not been questioned by prosecutors. On June 26, 2009, as part of his sentencing preliminaries, she has agreed to keep $2.5 million of her claim of more than $80 million in assets. She has been seen riding the N.Y. subway and apparently did not attend her husband's June 29, 2009 sentencing hearing.
Ruth Madoff's combined assets with her husband had a net worth of between $823 million and $826 million. She had $92.6 million in assets listed in her own name: the $7 million Upper East Side penthouse; an $11 million mansion in Palm Beach, Fla.; Antibes and France totaling $19 million; $45 million in municipal bonds and $17 million in cash; $8.8 million worth of yachts; and $2.6 million worth of jewelry. The SEC is working with federal prosecutors, who have filed a notice with the Federal Court to seek forfeiture of all listed ill-gotten assets.
She withdrew $5.5 million on November 25, 2008, and $10 million on December 10, 2008, from her brokerage account at Cohmad, a feeder fund which had an office in Madoff’s headquarters and was part-owned by him. In November, she also received $2 million from her husband's London office, Madoff Securities International Ltd.
On April 13, 2009, Judge Arthur Hiller in Bridgeport
, Connecticut, dissolved the temporary order he imposed March 30 freezing her assets, because they’re already frozen by the federal government. The pension fund case is Retirement Program for Employees of the Town of Fairfield v. Madoff, FBT-CV-09-5023735-S, Superior Court of Connecticut (Bridgeport)
On January 30, 2009, a CBS News
investigation discovered that the Madoffs were moving assets during the 2006 SEC investigation. Madoff had purchased their $9.5 million Palm Beach mansion in March 1994 in his wife's name. Not until December 10, 2006, did she apply for "homestead
" status, shielding their home from creditor
s. Her initial application was rejected because there was no proof it was her primary residence, which protects homeowners who have obtained the exemption from seizure.
On September 18, 2008, she reapplied for Homestead
Exemption, and it was granted on January 12, 2009, after Madoff's arrest.
On March 2, 2009, U.S. District Judge Louis Stanton, presiding over the SEC case, filed an order modifying the property asset freeze. Ruth Madoff's lawyers asserted that "Only Ruth Madoff has a beneficial ownership
” to a Manhattan apartment; about $45 million in municipal bond
s deposited at Cohmad Securities
Corp., and approximately $17 million in cash in another account, at Wachovia Bank NA. Ruth Madoff says these assets are “unrelated” to the alleged fraud, Stanton wrote without ruling on her claim.
In 1998, the sons became directors of the London office, Madoff Securities International Ltd. and took stakes in the business. They were given loans by the New York office to buy their shares. Interest on the loans was paid by dividends made by the London operation. Andrew had several million dollars invested with his father at the time the fraud was revealed.
At the time of Mark's divorce, in 2000, his interest in the London office was valued at $5 million. Other family members with shares in the London business were Bernard's wife, Ruth, and brother, Peter.
The New York business paid Mark $770,000 in 1999 and rewarded him with a deferred-compensation plan valued at $5 million, but he withdrew his personal funds he had invested with his father's investment-advisory operation some time before his divorce. He remarried Stephanie in 2003 in Nantucket.
Prosecutors intend to seize promissory notes given to the Madoffs by Andrew and Mark from 2001 to October 2008. Mark Madoff owes his parents $22 million, and Andrew Madoff owes $9.5 million. There were two loans in 2008 from Bernard Madoff to Andrew Madoff: $4.3 million on Oct. 6, and $250,000 on Sept. 21.
On April 13, 2009, Judge Arthur Hiller in Bridgeport
, Connecticut, dissolved the temporary order he imposed March 30 freezing their assets. They agreed to attachments of $2.5 million each to their Greenwich
homes. The pension fund case is Retirement Program for Employees of the Town of Fairfield v. Madoff, FBT-CV-09-5023735-S, Superior Court of Connecticut (Bridgeport)
On June 16, 2009, former employees Richard Stahl and Reed Abend, filed separate lawsuits against Madoff's sons claiming nearly $2 million in deferred compensation. Stahl, a former vice president at Cantor Fitzgerald, claims $1.34 million for 2008, when he earned more than $5 million for Madoff Securities. Abend wants $473,940.
On October 2, 2009 a civil lawsuit was filed against them by trustee, Picard, for a judgment in the aggregate amount of at least, $198,743,299. Peter Madoff and daughter, Shana, are also defendants.
On March 15, 2010 the defendants filed a motion to dismiss, citing they were also victims, that lawsuit is "predicated on the faulty assumption" that the sons exercised a compliance function over the investment advisory business.
On December 11, 2010, on the second anniversary of his father's arrest, Mark Madoff was found dead in his NYC apartment from an apparent suicide.
was an industrialist and philanthropist who seemed to be a favored Madoff beneficiary, and made outlandish profits from his investments with Madoff. From 1996-2007 there were 14 instances of greater than 100% yearly returns and 25 of greater than 50%. From 1996-1999 his regular trading account made from 120-550% a year. Some evidence of backdating trades, instituted by Picower, has been presented by trustee Irving Picard
. In December, 2010, his estate returned $7.2 billion in profits to the government. Picower died before the settlement.
, 52, who referred to himself as "director of option
s trading" and as "chief financial officer
" at Madoff Securities, pleaded guilty on August 11, 2009, to 10 counts: conspiracy
, securities fraud
, investment advisor fraud
, mail fraud, wire fraud
, perjury
, income tax evasion, international money laundering
, falsifying books and records of a broker-dealer and an investment advisor. He admitted to the Court that he learned in the late 1980s or early 1990s that no trading was occurring in Mr. Madoff's investment-advisory client accounts. About 2002, he set up an account for himself at the firm named after his fishing yacht, Dorothy Jo. Having never made a contribution, he withdrew more than $5 million. His salary and bonuses were over $2 million annually. He has agreed in a plea agreement and the signed Information document to connect the dots and to name names, with sentencing anticipated in May, 2010. He faces a maximum of 125 years in prison. Prosecutors are seeking more than $170 billion in forfeiture, the same amount sought from Madoff, which represents about double the funds deposited by investors and later disbursed to other investors. The same day, a Securities and Exchange Commission civil complaint was filed against DiPascali.
A college dropout, he joined Madoff's firm in 1975 at age 18 and eventually oversaw the day-to-day operations of Madoff's investment-advisory business. He was the person many of Madoff's investors dealt with regarding their accounts. Madoff told investors DiPascali executed trades. However, a court-appointed trustee found that no trading had occurred for at least 13 years. Prosecutors have asked at least three employees, Eric Lipkin, JoAnn Crupi, and Robert Cardile, who is Mr. DiPascali's brother-in-law, about his role in the firm.
Investors spoke to these other employees and would fax orders if they needed to withdraw money. DiPascali's name was sometimes given as an alternate contact. According to an SEC memo, DiPascali "responded evasively" to questioning following Madoff's arrest.
at Bernard L. Madoff Investment Securities LLC, but not a licensed certified public accountant
. Her signature is on checks from BMIS to Cohmad Securities
Corp. representing commission payments. She was the liaison between the SEC and BLMIS regarding the firm's financial statements. The SEC has removed the BMIS statements from its website.
During the 1980s, Bongiorno recruited small investors from Howard Beach, Queens, where she grew up next door to Frank DiPascali. Their money was held in accounts called "RuAnn" (named after Annette and her husband Rudy). Madoff paid for her honeymoon airfare. She owns homes in Manhasset, New York
and Boca Raton, Florida
, with a combined assessment of $3.85 million.
Bongiorno was arrested in November 2010 and charged with conspiracy, securities fraud and tax evasion. She faces up to 75 years in jail.
worked as one-time company director of operations and as an account for Madoff since the 1960s. He was arrested in 2010 and charged with allegedly having created false and fraudulent books and records, conspiracy, securities fraud, and tax-related charges. He is also being sued by the SEC for falsifying records. He may be sentenced to a maximum of 77 years in prison if convicted.
On February 25, 2010, he was freed on a $5 million bond.
accounting firm in the early 1990s, Madoff and his affiliate, Cohmad Securities, encouraged hundreds of individual investors to retain the firm for an annual fee of $800 for routine recordkeeping to handle their monthly statements. The firm compiled profits, losses, and gains, and prepared tax-summary statements and schedules to be used by a client's regular accountant for income tax
returns, producing one-page monthly statements and a quarterly statement.
, based in Greenwich, Connecticut
, had a "Fairfield Sentry" fund which was one of many feeder funds that gave investors portals to Madoff. Fairfield, in turn, set up further feeder funds such as "Lion Fairfield Capital Management" in Singapore
and "Stellar US Absolute Return," all conduits to Madoff, directing a total of $7.5 billion.
Madoff was able to pitch his business in Europe and South America
indirectly through Fairfield fund's founder, Walter Noel's son-in-law Andrés Piedrahita. Another Noel son-in-law's territory included Asia
. Madoff began advertising openly, contrary to his initial strategy of handpicking investors. The company is listed as a defendant in an investor lawsuit filed in Miami.
In August, 2008, JPMorgan Chase, pulled $250 million from this Madoff feeder fund account. Chase had become "concerned about lack of transparency," and due-diligence which had "raised doubts" about Madoff's operation.
On April 1, 2009, the Commonwealth of Massachusetts filed a civil action charging Fairfield Greenwich with fraud, breaching its fiduciary duty to clients by failing to provide promised due diligence on its investments. The complaint seeks a fine and restitution to Massachusetts investors for losses and disgorgement of performance fees paid to Fairfield by those investors. It alleges that in 2005 Mr. Madoff coached Fairfield staff about ways to answer questions from SEC attorneys who were looking into Harry Markopolos
' complaint about Madoff's operations.
The Secretary of State has no plans to settle the lawsuit in spite of the fact that Fairfield Greenwich has offered to repay all Massachusetts investors, and is expected to force Fairfield to explain e-mails and other evidence he has uncovered that appear to show company officials knew about potential problems with Madoff but failed to disclose them to clients.
On April 13, 2009, Judge Arthur Hiller in Bridgeport
, Connecticut, dissolved the temporary order he imposed March 30 freezing Noel's and Tucker's assets. Noel agreed to attachments of $10 million to his Greenwich home, and $2 million from Jeffrey Tucker. Noel's attorney is Glenn Kurtz, and Tucker's is Stanley Tawdry, Jr.. The pension fund case is Retirement Program for Employees of the Town of Fairfield v. Madoff, FBT-CV-09-5023735-S, Superior Court of Connecticut (Bridgeport)
On May 18, 2009, the hedge fund was sued by bankruptcy trustee, Irving Picard
. The complaint seeks a return of $3.2 billion during the period from 2002 - Madoff's arrest in December, 2008. However, the money may already be in the hands of Fairfield’s own clients, who are likely off-limits to Picard, since they weren’t direct investors with Madoff.
On May 29, 2009, Fairfield Sentry, based in the British Virgin Islands, filed a lawsuit seeking to recover more than $919 million in investment management and performance fees that it paid to Fairfield. The lawsuit alleges breach of fiduciary duty, and unjust enrichment
. It is “the largest victim of the fraud perpetrated by Bernard L. Madoff,” losing $7 billion.
The defendants include founders Walter Noel and Jeffrey Tucker and other fund partners who the plaintiffs allege “failed to fulfill their contractual obligations to use best efforts to supervise the operations” of Madoff-related investments and to “oversee the day-to-day investment activities of the fund.” The case is Fairfield Sentry Ltd. v. Fairfield Greenwich Group, 601687/2009, New York State Supreme Court (Manhattan).
On July 20, 2009, Justice Edward Alexander Bannister granted the request to liquidate the Fairfield Sentry funds, worth more than $7.2 billion in December, 2008, now less than $70 million, incorporated in 1990 under the mutual fund statutes of the British Virgin Islands and technically under the control of their local directors.
sued Sonja Kohn
and her bank, Bank Medici
, for $58.8 billion, accusing Kohn of being a "criminal soul mate" of Madoff. She was accused of directing $9.1 billion to Madoff's fraud, about half of the actual money lost.
, a prominent investment advisor
and philanthropist, has been sued for his role in running a "feeder fund" for Madoff. Merkin informed investors in his $1.8 billion Ascot Partners fund on December 11 that he was among those who suffered substantial personal losses, since all of the fund's money was invested with Madoff. The Connecticut
Attorney General
Richard Blumenthal
is examining the role boards of nonprofits played, in possibly not conducting due diligence on donors' contributions.
On April 6, 2009, New York Attorney General
Andrew Cuomo
filed civil fraud
charges
against J. Ezra Merkin alleging he "betrayed hundreds of investors" by moving $2.4 billion of clients' money to Bernard Madoff without their knowledge. The complaint states, he lied about putting the money with Madoff, failed to disclose conflicts of interest, and collected over $470 million in fees for his three hedge funds, Ascot Partners LP with Ascot Fund Ltd., Gabriel Capital Corp. and Ariel Fund Ltd. He promised he would actively manage the money, but instead, he misguided investors about his Madoff investments in quarterly reports, in investor presentations, and in conversations with investors. "Merkin held himself out to investors as an investing guru...In reality, Merkin was but a master marketer."
In addition, the complaint accused Merkin of improperly commingling his personal funds with his hedge fund accounts and using some of the money to buy artwork worth more than $91 million. Mr. Cuomo’s office is seeking restitution and unspecified damages from Mr. Merkin.
On May 7, 2009, Madoff Bankruptcy Trustee, Irving Picard
filed a lawsuit
against Merkin seeking to recover almost $500 million withdrawn from Madoff accounts in the last six years. The complaint alleges that since 1995, Merkin steered more than $1 billion to Madoff through three private hedge funds, Ascot Partners, Ariel Fund and Gabriel Capital. Since 2002, the funds withdrew at least $494 million from Madoff — returns that Merkin “knew or should have known” were fraudulent.
As of May 18, 2009, Merkin's control of Ascot, Gabriel and Ariel hedge funds are to be placed into receivership
for liquidation
by Guidepost Partners. One receiver will be responsible for managing the remaining money, nearly $1 billion, in the Gabriel and Ariel funds, and another will be responsible for overseeing Ascot, whose entire $1.8 billion in assets was lost to Madoff's Ponzi scheme.
, whose name combines “Cohn” and “Madoff,” founded in 1985 by Madoff and Cohn, Madoff’s friend and former neighbor. Maurice "Sonny" Cohn owned 48% of Cohmad, and his daughter Marcia, who served as president and chief compliance officer owned 25%. Madoff owned 15%. Mr. Madoff's brother, Peter owned 9%, and Mr. Cohn's brother owned 1%, and another unnamed Cohmad employee owned 1%.
The brokerage firm lists its address as Madoff's firm's address in New York City. Cohmad employs Robert Jaffe
, as vice president. Jaffe is married to Ellen Shapiro, daughter of Boston philanthropist Carl J. Shapiro
, the founder and former chairman of apparel company Kay Windsor Inc., and an early investor and close friend of Madoff. Jaffe reportedly convinced the elder Shapiro to invest $250 million with Madoff just 10 days before Madoff's arrest.
Jaffe, a philanthropist, "worked the Palm Beach, Florida
circuit, and attracted many Palm Beach Country Club members as investors." Jaffe brought in 150 accounts and more than $1 billion to Madoff. Madoff paid Jaffe directly through accounts he kept with Madoff at much higher returns than earned by other investors. Between 1996 and 2008, Jaffe withdrew at least $150 million, and the SEC claims he was aware Madoff was engaged in fictitious trading. Jaffe has said he received a commission of 1% to 2% from an investor's first profit, and he paid commissions to financial advisers who steered cash to Madoff's fund.
Richard Spring, of Boca Raton, Florida
, received payments from Cohmad for many years in exchange for bringing investors and investment ideas to Madoff.
Alvin J. "Sonny" Delaire, Jr. of Far Hills, New Jersey
also recruited clients for Madoff's advisory business. Delaire has been sued by Dr. Martin and Suzanne Schulman of Nassau County
, New York, claiming they were induced by Delaire to make investments with Madoff "based on fraudulent misrepresentations by Delaire and his omissions to disclose material facts." The lawsuit seeks a minimum of $9.6 million in damages since 2002 from Delaire.
The case is Martin Schulman, M.D. and Suzanne Schulman v Alvin J. Delaire, Jr. 09-3871U.S. District Court for the Southern District of New York (Manhattan).
Cohmad had fewer than 650 client accounts, and made 99.7% of its sales from brokerage services to Madoff's larger broker-dealer. In its audited financial statements for the 12 months ending June 30, 2008, Cohmad said revenue from Madoff Securities totaled $3,736,829. Its total sales for the same period were $3,748,397.
On January 14, 2009, William Galvin, Secretary of the Commonwealth of Massachusetts, who is in charge of the state's securities issues, filed suit against Jaffe, who promoted Madoff's funds to wealthy investors in Massachusetts
and Florida
. On February 4, compelled to testify, Jaffe invoked his Fifth Amendment
right. Marcia Cohn, Maurice Cohn, and Alvin Delaire, Jr. failed to appear. On February 11, 2009, Galvin filed a complaint seeking to revoke the Massachusetts license of Cohmad Securities Corp., an accounting of all Massachusetts investors Cohmad referred to Madoff’s company, all the fees it earned doing so (more than $67 million), and a fine. It cited $526,000 in referral fees paid from Madoff Investments, to Cohmad, to Vienna Bank Medici
majority owner, Sonja Kohn
, which she subsequently denied. On May 28, 2009, Bank Medici lost its Austrian banking license. Kohn and the Bank are under investigation.
On May 8, 2009, the Commonwealth of Massachusetts found the firm to be in “default” for not assisting regulators. Cohmad’s securities registration has been revoked, and they must provide an accounting of all fees the company or its agents earned for referring Massachusetts investors to Mr. Madoff's firm as well as, pay a $100,000 fine for failing to cooperate with the state securities investigation.
On March 15, 2009, Federal prosecutors filed a notice in federal court declaring its intent to seek the forfeiture of the Madoffs' interests in Cohmad Securities.
On June 22, 2009, Madoff Trustee, Irving Picard
filed a claim against Cohmad, founder Maurice “Sonny” Cohn, daughter Marcia Cohn, and Robert Jaffe, among more than two dozen individuals and trusts in U.S. Bankruptcy Court in New York. The lawsuit claims that up to 90 percent of Cohmad’s income came from referring clients and that the firm had a “symbiotic” relationship with Madoff, having earned hundreds of millions of dollars from the fraud. The lawsuit seeks more than $100 million paid to Cohmad six years prior to Madoff’s firm declaring bankruptcy, and more than $105 million in profits Cohmad employees and their families withdrew from the investment accounts they held with Madoff.
On June 22, 2009, the U.S. Securities and Exchange Commission (SEC) also filed civil fraud charges
against co-founder Maurice "Sonny" Cohn, president Marcia Cohn, and Robert Jaffe. The lawsuit alleges the company was Madoff's "in-house marketing arm" and critical to Madoff's scam. Cohmad representatives were paid for funds they brought into the firm but not for any increase in the investments' value. Withdrawals were treated as a loss, which "suggested that profits generated by Madoff were fictitious", although Madoff changed the arrangement for Maurice Cohn in 2002, to pay him a flat $2 million a year.
Jaffe has filed requests with the Courts to dismiss the SEC and the Picard cases. The cases are Picard v. Cohmad Securities Corp., 09-AP- 1305, U.S. Bankruptcy Court, Southern District of New York (Manhattan), and SEC v. Cohmad, 09-cv-5680, U.S. District Court, (Southern District of New York.).
was a wealthy investment advisor from Beverly Hills, California
who was accused of steering money to private interests, including Madoff, through Chais's Brighton Co., a limited partnership
formed to manage money. He took about 3.8% of the profits as management fees. His Chais Family Foundation, which in 2007 reported assets of $178 million and charitable contributions of nearly $8.2 million, was wiped out and has shut down. He had a home in Beverly Hills, and an apartment in New York.
On May 1, 2009, Irving Picard
, bankruptcy trustee, filed a lawsuit against Stanley Chais, 82. The complaint alleges he "knew or should have known" he was deep in a Ponzi scheme when his family investments with Madoff averaged 40% and sometimes soared as high as 300%. It also claims Chais was a primary beneficiary of the scheme for at least 30 years, allowing his family to withdraw more than $1 billion from their accounts since 1995 - money that belonged to Madoff victims. The case number is Picard v. Chais, 09-01172.
On June 22, 2009, the SEC filed civil fraud charges against Chais. According to the complaint, Chais told Madoff he didn't want to see any losses on the funds' trades.
Michael Chaleff, a former Justice Department
lawyer, was part of a 50-member investment group named CMG that lost $75 million to $80 million it gave to Chais' Brighton Co. Chaleff has filed a $250-million class action
federal lawsuit against Chais in Los Angeles, as has screenwriter
Eric Roth
. New Jersey
State Senator Loretta Weinberg
lost her entire life savings in Chais' "Arbitrage Partnerships" fund.
Chais died on September 26, 2010 at age 84 in Manhattan
, where he and his wife had moved to further the treatment of a blood disorder that eventually took his life.
, Conn., is seeking the recovery of fees, and the assets of Robert Schulman, who once ran Tremont Group Holdings have been temporarily frozen.
Lawsuits filed have been consolidated into three categories: federal security laws, insurance actions, and state law actions. They are: Lange, et al. v. Mass. Mutual Life Ins. Co., et al. (08 CV 11117, S.D. N.Y.); Finkelstein v. Tremont Group Holdings, Inc. (08 CV 11141, S.D. N.Y.); Peshkin v. Tremont Group Holdings, et al. (08 CV 11183, S.D.N.Y.).; Arthur M. Brainson IRA R/O v. Rye Select Broad Market Fund, L.P., et al. (No. 08 CV 11212, S.D.N.Y.); and Group Defined Pension Plan & Trust v. Tremont Market Neutral Fund, L.P., et al. (No. 08 CV 11359, S.D.N.Y.). The plaintiffs are all investors in hedge funds with assets that they entrusted to Madoff for investment.
Four state law cases have been consolidated with Hagens Berman Sobol Shapiro as co-lead counsel. They initially filed a class-action lawsuit on behalf of investors and groups that invested capital with Tremont Group Holdings, alleging the company and others grossly neglected fiduciary duties and lost a total of $3.3 billion in assets, $3.1 billion from the Rye Funds invested with Bernard Madoff Investment Securities, relinquishing management to Madoff while continuing to receive client management fees. The complaint names Tremont Group Holdings, its Rye Investment Funds, Oppenheimer Acquisition Corporation, OppenheimerFunds, which owns Tremont, Massachusetts Mutual Life Insurance Company
, a majority owner of OppenheimerFunds and KPMG LLP, Tremont's auditor, as defendants.
On April 13, 2009, Judge Arthur Hiller in Bridgeport
, Connecticut, dissolved the temporary order he imposed March 30 freezing assets, in exchange for a pledge of $2.5 million in total from Tremont Entities and Robert Shulman and $500,000 from Oppenheimer Acquisition Corporation. The pension fund case is Retirement Program for Employees of the Town of Fairfield v. Madoff, FBT-CV-09-5023735-S, Superior Court of Connecticut (Bridgeport)
The Tremont Group is represented by Michael Gruenglas of Skadden, Arps, Slate, Meagher & Flom
in New York.
invested in Madoff through the Return Fund created by Maxam Capital Management LLC, based in Darien, Connecticut
. The Maxam fund in turn invested in Madoff through Tremont. Sandra L. Manzke, the founder of Maxam Capital, has had her assets temporarily frozen by the same Connecticut court.
Maxam Absolute Return Fund LP has filed a lawsuit in Connecticut Superior Court
in Fairfield County
against auditors Goldstein Golub Kessler LLP and McGladrey & Pullen LLP to recover losses, claiming they relied on the auditors for their expertise in examining Madoff's firm.
On April 13, 2009, Judge Arthur Hiller in Bridgeport
, Connecticut, dissolved the temporary order he imposed March 30 freezing assets, and ordered Sandra Manzke, to provide a $2.5 million mortgage on a piece of property she owns in Vermont. Maxam's attorney, Jonathan D. Cogan said,“The Town of Fairfield’s suit is an outrageous publicity stunt to divert attention from the town’s own decision to invest in Madoff, which was made long before it did business with Maxam." The pension fund case is Retirement Program for Employees of the Town of Fairfield v. Madoff, FBT-CV-09-5023735-S, Superior Court of Connecticut (Bridgeport)
, Inc. of Brookfield, Wisconsin whose subsidiaries were custodians for pension
or IRA
accounts and invested with Madoff. The complaint alleges Fiserv failed "to hold and safeguard assets entrusted to it" by about 800 Madoff customers who had been told to hire Fiserv to handle their accounts with him. Fiserv is accused of breach of fiduciary duty, fraud
, negligence
and aiding and abetting breach of fiduciary. Fiserv sold its investment account administration business in 2007 to TD Ameritrade
, also a defendant. The lawsuit estimates Fiserv generated at least $25 million annually from Madoff investors and claims it wasn't diligent because "Fiserv had too much revenue at stake to risk upsetting Madoff."
Bernard Madoff
Bernard Lawrence "Bernie" Madoff is a former American businessman, stockbroker, investment advisor, and financier. He is the former non-executive chairman of the NASDAQ stock market, and the admitted operator of a Ponzi scheme that is considered to be the largest financial fraud in U.S...
who were involved in the Madoff investment scheme
Madoff investment scandal
The Madoff investment scandal broke in December 2008 when former NASDAQ chairman Bernard Madoff admitted that the wealth management arm of his business was an elaborate Ponzi scheme....
, despite Madoff's assertion that he alone was responsible for the large-scale operation. Harry Sussman, an attorney representing several clients of the firm, stated that "someone had to create the appearance that there were returns," and further suggested that there must have been a team buying and selling stocks, forging books, and filing reports. James Ratley, president of the Association of Certified Fraud Examiners
Association of Certified Fraud Examiners
Established in 1988 the Association of Certified Fraud Examiners is the professional organization that governs professional fraud examiners. Its activities include producing fraud information, tools and training. It also governs the professional designation of Certified Fraud Examiner...
said, “In order for him to have done this by himself, he would have had to have been at work night and day, no vacation and no time off. He would have had to nurture the Ponzi scheme daily. What happened when he was gone? Who handled it when somebody called in while he was on vacation and said, ‘I need access to money’?”
“Simply from an administrative perspective, the act of putting together the various account statements, which did show trading activity, has to involve a number of people. ... You would need office and support personnel, people who actually knew what the market price
Market price
In economics, market price is the economic price for which a good or service is offered in the marketplace. It is of interest mainly in the study of microeconomics...
s were for the securities that were being traded. You would need accountants so that the internal documents reconcile with the documents being sent to customers at least on a superficial basis,” said Tom Dewey, a securities lawyer.
Criminal investigation
Stanley Chais, a philanthropist who invested heavily with Mr. Madoff, and Carl J. ShapiroCarl J. Shapiro
Carl J. Shapiro is a Boston philanthropist and entrepreneur. He and his wife, Ruth live in Boston and Palm Beach. In 1939, he founded Kay Windsor, Inc., in New Bedford, Massachusetts, and built it into one of the largest women's apparel companies in the country...
, one of the money manager's oldest friends, are among at least eight Madoff investors and associates being scrutinized by the U.S. attorney's office in Manhattan. Prosecutors are continuing to probe Madoff family members and employees. Others include: Frank Avellino, a Florida accountant who ran an investment fund that invested client money; Noel Levine, a real-estate investor who works out of a two-room office on the 17th floor, next door to Madoff's fraudulent investment operation, and Palm Beach investor Robert Jaffe, a son-in-law of Mr. Shapiro who referred potential investors to Madoff.
Madoff Securities International Ltd.
In 2008, about $1 billion was transferred last between Madoff’s U.S. firm and Madoff Securities International Ltd. in London.On March 24, 2009 Judge Louis L. Stanton
Louis L. Stanton
Louis Lee Stanton is a federal judge for the United States District Court for the Southern District of New York.Stanton received a B.A. from Yale University in 1950, a J.D. from the University of Virginia School of Law in 1955, and an LL.B from University of Virginia School of Law in 1955...
granted power of attorney
Power of attorney
A power of attorney or letter of attorney is a written authorization to represent or act on another's behalf in private affairs, business, or some other legal matter...
to Irving Picard
Irving Picard
Irving H. Picard is a partner in the law firm Baker Hostetler. He graduated from the Wharton School, University of Pennsylvania, with a B.S. degree , from Boston University School of Law with a J.D. degree , and from the New York University School of Law with an LL.M. degree in 1967, and was...
, trustee, over Madoff's controlling stake in London.
Authorities in the U.K. are seeking evidence of money laundering
Money laundering
Money laundering is the process of disguising illegal sources of money so that it looks like it came from legal sources. The methods by which money may be laundered are varied and can range in sophistication. Many regulatory and governmental authorities quote estimates each year for the amount...
involving the London business, Madoff Securities International Ltd., which opened in 1983 as a separate legal entity from Mr. Madoff's U.S. New York office. He allegedly sent more than $250 million beginning as early as 2002, from his New York-based firm, Bernard L. Madoff Investment Securities LLC, to the U.K. office and then back to accounts in the U.S.
In 2000, Madoff began to add staff and expand the operation, and loaned the business $62.5 million. He had a staff of 25, including traders, managers and support. Instructions to staff was that they communicate with Madoff Securities through personal e-mail accounts, not through company e-mail.
There were nine directors. Family members with shares included Mark and Andrew Madoff, Peter Madoff, and Bernard himself. Ruth Madoff, Bernard Madoff's wife, also held shares.
Non-family members with shares included Maurice J. "Sonny" Cohn. Madoff and Cohn were shareholders in Cohmad Securities
Cohmad Securities
Cohmad Securities, whose name combines “Cohn” and “Madoff,” founded in 1985 by Bernard Madoff and Maurice Cohn, Madoff’s friend and former neighbor. It is in the Business Services, N.E.C. industry in NEW YORK, NY...
, which steered investors to Mr. Madoff's advisory business. In 1987, Mr. Cohn had shares of Madoff Holdings Ltd., a predecessor to the current London firm. In 1998, Mr. Cohn held 35,624 non-voting shares, some of which he transferred to "BL Madoff" in 1998, and the rest that he "disposed of" in 2004.
Paul Konigsberg
Paul Konigsberg, a New York City accountant and a longtime friend for more than 25 years, prepared two Madoff Family Foundation tax returns, and received the non-voting shares, valued at $35,000. He did work for the London office when it was first opened.A general ledger of Madoff accounts listed Konigsberg, of the reputable accounting firm of Konigsberg, Wolf & Co., as receiving $30,000 a month to advise the MSIL operations, and funnel client checks to the London office for Madoff's own use.
Clients were often directed to Mr. Konigsberg by Mr. Madoff and his family. Mr. Konigsberg prepared the tax returns of foundations of six other families, many of which have lost millions, even hundreds of millions, of dollars. He also represented scores of individual Madoff investors. Mr. Konigsberg's firm has received a civil subpoena from the SEC. His Madoff-related clients included Carl and Ruth Shapiro, Boston philanthropists whose foundation lost $145 million, and whose son-in-law, Robert M. Jaffe, under investigation, is a Madoff business partner.
Konigsberg held Madoff accounts under his name including two in the name of the Westlake Foundation. Paul J. and Judith Konigsberg are officers and directors of the foundation. He owns homes in his wife, Judith's name in Greenwich, Connecticut and Palm Beach Gardens, Florida.
On April 20, 2009, Steven Leber filed a $4 million lawsuit against Konigsberg and his accounting firm for negligence
Negligence
Negligence is a failure to exercise the care that a reasonably prudent person would exercise in like circumstances. The area of tort law known as negligence involves harm caused by carelessness, not intentional harm.According to Jay M...
, and breach of fiduciary duty. Konigsberg answered the charges with affirmative defense
Affirmative defense
A defendant offers an affirmative defense when responding to a plaintiff's claim in common law jurisdictions, or, more familiarly, in criminal law. Essentially, the defendant affirms that the condition is occurring or has occurred but offers a defense that bars, or prevents, the plaintiff's claim. ...
s.
Norman F. Levy
Evidence is being gathered by investigators on a U.S.-U.K. task force that Konigsberg and Levy, a real-estate mogul and philanthropist are believed to be involved in an international transfer of money. Levy is believed to have helped Paul Konigsberg funnel checks to London. And investigators in New York say there were billions of dollars worth of checks going back and forth between Madoff and Levy.Ruth and Bernie Madoff had an intimate relationship with Levy and his wife, Betty. Madoff was long known to have been Levy's "fixer," obtaining everything from choice restaurant reservations to emergency medical care. Levy had offices one floor below Madoff's in New York’s Lipstick Building. It was Levy who introduced high-profile investors to Madoff.
Jeanne Levy-Church's losses forced her to shut her JEHT Foundation and her parents’ foundation, the Betty and Norman F. Levy Foundation, lost $244 million. JEH helped the less fortunate, especially ex-convicts.
Following the death of his wife, Levy's girlfriend, model Carmen Dell'Orefice
Carmen Dell'Orefice
Carmen Dell’Orefice is an American model and actress, born in New York, NY. She is known within the fashion industry for being the world's oldest working model as of the Spring/Summer 2012 season. She covered Vogue at the mere age of 15, and has been modelling ever since.-Early life:Carmen’s...
, an investor, said Levy was Madoff's "father figure". When Levy died in 2005 at the age of 93, Madoff extolled him as a man whose friendship he had cherished and who had "taught me so much." Levy's son Francis said his father believed in Madoff: "If there's one honorable person,” he said, “it's Bernie."
Chapter 15 Bankruptcy Protection
On April 14, 2009, the liquidators of Madoff International Limited of London filed for Chapter 15 bankruptcy recognition in West Palm Beach, Florida, and sued Peter Madoff, to recover a 1964 Aston Martin DB2/4Aston Martin DB2/4
The DB2/4 is a grand tourer sold by Aston Martin from 1953 through 1957. It was based on the DB2 it replaced, available as a Drophead coupe and 2+2 hatchback well ahead of the times. Other changes included a wraparound windscreen, larger bumpers, and repositioned headlights...
automobile worth an estimated $200,000. In March and May 2008, Madoff International wire-transferred 135,000 pounds ($198,207) to buy a car for Peter Madoff, and delivered it to him at his residence in Palm Beach
Palm Beach, Florida
The Town of Palm Beach is an incorporated town in Palm Beach County, Florida, United States. The Intracoastal Waterway separates it from the neighboring cities of West Palm Beach and Lake Worth...
. Madoff International's listed assets are as much as $500 million and debt of more than $1 billion in its bankruptcy petition. The bankruptcy is designed to block U.S. lawsuits against foreign companies with U.S. operations while they reorganize overseas. Investors who filed an involuntary personal bankruptcy
Personal bankruptcy
Personal bankruptcy is a procedure which, in certain jurisdictions, allows an individual to declare bankruptcy. In other jurisdictions, bankruptcies are reserved for corporations.-Canada:...
petition against Madoff want his business’s U.K. unit's bankruptcy moved to New York because “overlapping discovery, related assets and common creditors” among the various cases mean they should be in the same court.
The Chapter 15 case is In re Madoff Securities International Ltd., 09-16751, U.S. Bankruptcy Court, Southern District of Florida (West Palm Beach).
On June 8, 2009 the Chapter 15 case was transferred to the Southern District of New York as Madoff Securities International Limited, Stephen John Akers, Mark Richard Byers, and Andrew Laurence as the Joint Provisional Liquidators, 09-12998, so it can be administered more effectively with the related involuntary bankruptcies against Madoff, and his companies, also filed in New York. The associated adversary proceeding was also moved to the Southern District of New York as Akers et al. v. Madoff, 09-1186, demanding $235,000 against Peter B. Madoff.
David G. Friehling
Madoff's "listed" accountant, David G. FriehlingDavid G. Friehling
David G. Friehling is an American accountant who was arrested and charged in March 2009 for his role in the Madoff investment scandal. He later plead guilty to these charges.-Early life:...
, 49, the sole practitioner at Friehling & Horowitz CPAs, waived indictment and pleaded not guilty to criminal charges on July 10, 2009. He agreed to proceed without having the evidence in the criminal case against him reviewed by a grand jury at a hearing before U.S. District Judge Alvin Hellerstein in Manhattan. Friehling was charged on March 18, 2009, with securities fraud
Securities fraud
Securities fraud, also known as stock fraud and investment fraud, is a practice that induces investors to make purchase or sale decisions on the basis of false information, frequently resulting in losses, in violation of the securities laws....
, aiding and abetting investment adviser fraud, and four counts of filing false audit reports with the Securities and Exchange Commission.
He faces up to 105 years in prison on all of the charges. Federal prosecutors had until about June 17, 2009 to produce a grand jury
Grand jury
A grand jury is a type of jury that determines whether a criminal indictment will issue. Currently, only the United States retains grand juries, although some other common law jurisdictions formerly employed them, and most other jurisdictions employ some other type of preliminary hearing...
indictment against him, or a plea bargain to end the case.
Madoff's firm paid Friehling between $12,000 and $14,500 a month for his services between 2004 and 2007.
Although required, Friehling was not registered with the Public Company Accounting Oversight Board
Public Company Accounting Oversight Board
The Public Company Accounting Oversight Board is a private-sector, non-profit corporation created by the Sarbanes–Oxley Act, a 2002 United States federal law, to oversee the auditors of public companies. Its stated purpose is to 'protect the interests of investors and further the public interest...
, which was created under the Sarbanes-Oxley Act
Sarbanes-Oxley Act
The Sarbanes–Oxley Act of 2002 , also known as the 'Public Company Accounting Reform and Investor Protection Act' and 'Corporate and Auditing Accountability and Responsibility Act' and commonly called Sarbanes–Oxley, Sarbox or SOX, is a United States federal law enacted on July 30, 2002, which...
of 2002 to help detect fraud. Nor was the firm "peer reviewed," in which auditors check out one another for quality control
Quality control
Quality control, or QC for short, is a process by which entities review the quality of all factors involved in production. This approach places an emphasis on three aspects:...
. According to the American Institute of Certified Public Accountants
American Institute of Certified Public Accountants
Founded in 1887, the American Institute of Certified Public Accountants is the national professional organization of Certified Public Accountants in the United States, with more than 370,000 CPA members in 128 countries in business and industry, public practice, government, education, student...
(AICPA), Friehling was enrolled in their peer-review program, but was not required to participate because he advised the group that he had not conducted audits for 15 years.
The case is US v David G. Friehling 09-mJ-729 U.S. District Court for the Southern District of New York (Manhattan).
Peter B. Madoff
Peter, 63, Chief Compliance Officer, worked with his brother Bernie for more than 40 years, and ran the daily operations for the past 20 years. He helped create the computerized trading system. Peter co-signed Bernie's bail bond. A 1970 graduate of Fordham University School of LawFordham University School of Law
Fordham University School of Law is a part of Fordham University in the United States. The School is located in the Borough of Manhattan in New York City, and is one of eight ABA-approved law schools in that city.-Overview:According to the U.S. News & World Report, 1,516 J.D. students attend...
, he has been director of the National Stock Exchange
National Stock Exchange
The National Stock Exchange is an electronic stock exchange located in Chicago, Illinois. It was founded March 1885 in Cincinnati, Ohio, as the Cincinnati Stock Exchange. In 1976, it closed its physical trading floor and became an all-electronic stock market...
(Cincinnati Stock Exchange) since 1980. He stepped down from the Board of Directors of the Securities Industry and Financial Markets Association (SIFMA) in December 2008, as news of the Ponzi scheme broke. Peter owns a home in Old Westbury, valued between $3–5 million, and a $4.2 million home in Palm Beach
Palm Beach, Florida
The Town of Palm Beach is an incorporated town in Palm Beach County, Florida, United States. The Intracoastal Waterway separates it from the neighboring cities of West Palm Beach and Lake Worth...
, Fla., the title of which was transferred on November 8, 2006 to his wife, Marion, and a vintage Aston Martin
Aston Martin
Aston Martin Lagonda Limited is a British manufacturer of luxury sports cars, based in Gaydon, Warwickshire. The company name is derived from the name of one of the company's founders, Lionel Martin, and from the Aston Hill speed hillclimb near Aston Clinton in Buckinghamshire...
.
Peter also owns between 5% and 10% of, and is a director of, Cohmad Securities
Cohmad Securities
Cohmad Securities, whose name combines “Cohn” and “Madoff,” founded in 1985 by Bernard Madoff and Maurice Cohn, Madoff’s friend and former neighbor. It is in the Business Services, N.E.C. industry in NEW YORK, NY...
Corp. He has been subpoenaed by Massachusetts
Massachusetts
The Commonwealth of Massachusetts is a state in the New England region of the northeastern United States of America. It is bordered by Rhode Island and Connecticut to the south, New York to the west, and Vermont and New Hampshire to the north; at its east lies the Atlantic Ocean. As of the 2010...
's Secretary of State
Secretary of State (U.S. state government)
Secretary of State is an official in the state governments of 47 of the 50 states of the United States, as well as Puerto Rico and other U.S. possessions. In Massachusetts, Pennsylvania, and Virginia, this official is called the Secretary of the Commonwealth...
William Galvin
On April 3, 2009, his temporarily frozen assets previously ordered were modified to be allowed to spend up to $10,000 per month for living expenses, including mortgage loans and insurance premiums.
Peter served as a trustee
Trustee
Trustee is a legal term which, in its broadest sense, can refer to any person who holds property, authority, or a position of trust or responsibility for the benefit of another...
for law student Andrew Samuels' $470,000 inheritance from his grandfather who worked for Madoff and created a trust for him. Andrew's lawsuit, claiming $2 million for breach his fiduciary duty by investing his inheritance with Bernard Madoff was settled in late July, 2009. The case is Ross v. Madoff, 09-5534, New York State Supreme Court for Nassau County
Nassau County, New York
Nassau County is a suburban county on Long Island, east of New York City in the U.S. state of New York, within the New York Metropolitan Area. As of the 2010 census, the population was 1,339,532...
(Mineola
Mineola, New York
Mineola is a village in Nassau County, New York, USA. The population was 18,799 at the 2010 census. The name is derived from a Native American word meaning a "pleasant place"....
).
On April 13, 2009, Judge Arthur Hiller in Bridgeport
Bridgeport
Bridgeport is the most populous city in the U.S. state of Connecticut.Bridgeport may also refer to:-Places:In Canada:* Bridgeport, Nova ScotiaIn the United States:* Bridgeport, Alabama* Bridgeport, California, in Mono County...
, Connecticut, dissolved the temporary order he imposed March 30 freezing his assets. Madoff agreed to attachments of $2.5 million to his Long Island
Long Island
Long Island is an island located in the southeast part of the U.S. state of New York, just east of Manhattan. Stretching northeast into the Atlantic Ocean, Long Island contains four counties, two of which are boroughs of New York City , and two of which are mainly suburban...
home. His attorney is H. James Pickerstein. The pension fund case is Retirement Program for Employees of the Town of Fairfield v. Madoff, FBT-CV-09-5023735-S, Superior Court of Connecticut (Bridgeport)
On April 30, 2009, Peter demanded a $500,000 licensing fee as part of the sale of BLMIS for intellectual property used by the market-making business, but it was rejected by the bankruptcy trustee who maintains that the patents are the property of the business. Members of the Madoff family, including Madoff, own holding companies that own Primex LLC, which holds intellectual property licensed to the Nasdaq stock market. The patents are used for electronic trading.
Senator
United States Senate
The United States Senate is the upper house of the bicameral legislature of the United States, and together with the United States House of Representatives comprises the United States Congress. The composition and powers of the Senate are established in Article One of the U.S. Constitution. Each...
Frank Lautenberg
Frank Lautenberg
Frank Raleigh Lautenberg is the senior United States Senator from New Jersey and a member of the Democratic Party. Previously, he was the Chairman and Chief Executive Officer of Automatic Data Processing, Inc.-Early life, career, and family:...
's family foundation, which invested more than $7 million, also filed a lawsuit against Peter Madoff.
Fred Wilpon
Sterling Equities, a group of companies owned by Fred WilponFred Wilpon
Fred Wilpon is a real estate developer, baseball executive and the majority owner of the New York Mets.-Biography:...
, was sued in Decmember, 2010, for $1 billion by trustee Picard. Wilpon owns the New York Mets
New York Mets
The New York Mets are a professional baseball team based in the borough of Queens in New York City, New York. They belong to Major League Baseball's National League East Division. One of baseball's first expansion teams, the Mets were founded in 1962 to replace New York's departed National League...
baseball team, a sports network
SportsNet New York
SportsNet New York is a New York City-based regional sports cable network which airs in the New York metro area and all of New York state, and nationwide via satellite. It is owned jointly by the New York Mets, Time Warner Cable, and NBCUniversal...
and extensive real estate holdings. Picard charged that "red flags" were ignored, and there was no due diligence
Due diligence
"Due diligence" is a term used for a number of concepts involving either an investigation of a business or person prior to signing a contract, or an act with a certain standard of care. It can be a legal obligation, but the term will more commonly apply to voluntary investigations...
. He claimed that the Mets owners “were simply in too deep -- having substantially supported their businesses with Madoff money -- to do anything but ignore the gathering clouds." On 10 February, 2011, former N.Y. governor Mario Cuomo
Mario Cuomo
Mario Matthew Cuomo served as the 52nd Governor of New York from 1983 to 1994, and is the father of Andrew Cuomo, the current governor of New York.-Early life:...
was appointed as a mediator in the dispute between the trustee and Sterling.
Ruth Madoff
Ruth Madoff did not attend her husband's sentencing.As part of her husband's sentencing terms, she agreed to give up all of her possessions in return for a promise that federal prosecutors would not go after the $2.5 million she can keep. The money is not protected from civil legal actions pursued by a court-appointed trustee liquidating Madoff's assets or by investor lawsuits.
On July 29, 2009, she was sued by trustee, Irving Picard
Irving Picard
Irving H. Picard is a partner in the law firm Baker Hostetler. He graduated from the Wharton School, University of Pennsylvania, with a B.S. degree , from Boston University School of Law with a J.D. degree , and from the New York University School of Law with an LL.M. degree in 1967, and was...
for $45 million, which supported her "life of splendor". According to court filings, she received more than $3 million from the business over the last six years to pay personal expenses charged to her American Express
American Express
American Express Company or AmEx, is an American multinational financial services corporation headquartered in Three World Financial Center, Manhattan, New York City, New York, United States. Founded in 1850, it is one of the 30 components of the Dow Jones Industrial Average. The company is best...
card, and $2 million in payments to a business called PetCare RX. “Ruth Madoff was never an employee of BLMIS yet millions of dollars belonging to BLMIS and its customers found their way into her personal accounts and investments without any legitimate business purpose or any value to BLMIS, simply because of her relationship with Bernard Madoff.” She is also required to itemize all expenditures over $100.
The case is Picard v. Madoff, 1:09-ap-1391, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
She has been named in several civil actions. She is represented by attorney Peter Chavkin and David Barres.
Ruth has not been charged with any crime, and has not been questioned by prosecutors. On June 26, 2009, as part of his sentencing preliminaries, she has agreed to keep $2.5 million of her claim of more than $80 million in assets. She has been seen riding the N.Y. subway and apparently did not attend her husband's June 29, 2009 sentencing hearing.
Ruth Madoff's combined assets with her husband had a net worth of between $823 million and $826 million. She had $92.6 million in assets listed in her own name: the $7 million Upper East Side penthouse; an $11 million mansion in Palm Beach, Fla.; Antibes and France totaling $19 million; $45 million in municipal bonds and $17 million in cash; $8.8 million worth of yachts; and $2.6 million worth of jewelry. The SEC is working with federal prosecutors, who have filed a notice with the Federal Court to seek forfeiture of all listed ill-gotten assets.
She withdrew $5.5 million on November 25, 2008, and $10 million on December 10, 2008, from her brokerage account at Cohmad, a feeder fund which had an office in Madoff’s headquarters and was part-owned by him. In November, she also received $2 million from her husband's London office, Madoff Securities International Ltd.
On April 13, 2009, Judge Arthur Hiller in Bridgeport
Bridgeport
Bridgeport is the most populous city in the U.S. state of Connecticut.Bridgeport may also refer to:-Places:In Canada:* Bridgeport, Nova ScotiaIn the United States:* Bridgeport, Alabama* Bridgeport, California, in Mono County...
, Connecticut, dissolved the temporary order he imposed March 30 freezing her assets, because they’re already frozen by the federal government. The pension fund case is Retirement Program for Employees of the Town of Fairfield v. Madoff, FBT-CV-09-5023735-S, Superior Court of Connecticut (Bridgeport)
On January 30, 2009, a CBS News
CBS News
CBS News is the news division of American television and radio network CBS. The current chairman is Jeff Fager who is also the executive producer of 60 Minutes, while the current president of CBS News is David Rhodes. CBS News' flagship program is the CBS Evening News, hosted by the network's main...
investigation discovered that the Madoffs were moving assets during the 2006 SEC investigation. Madoff had purchased their $9.5 million Palm Beach mansion in March 1994 in his wife's name. Not until December 10, 2006, did she apply for "homestead
Homestead exemption
Homestead exemption is a legal regime designed to protect the value of the homes of residents from property taxes, creditors, and circumstances arising from the death of the homeowner spouse...
" status, shielding their home from creditor
Creditor
A creditor is a party that has a claim to the services of a second party. It is a person or institution to whom money is owed. The first party, in general, has provided some property or service to the second party under the assumption that the second party will return an equivalent property or...
s. Her initial application was rejected because there was no proof it was her primary residence, which protects homeowners who have obtained the exemption from seizure.
On September 18, 2008, she reapplied for Homestead
Homestead exemption
Homestead exemption is a legal regime designed to protect the value of the homes of residents from property taxes, creditors, and circumstances arising from the death of the homeowner spouse...
Exemption, and it was granted on January 12, 2009, after Madoff's arrest.
On March 2, 2009, U.S. District Judge Louis Stanton, presiding over the SEC case, filed an order modifying the property asset freeze. Ruth Madoff's lawyers asserted that "Only Ruth Madoff has a beneficial ownership
Beneficial ownership
Beneficial ownership is enjoyed by anyone who has the benefits of ownership of a Security or property, and yet does not nominally own the asset itself....
” to a Manhattan apartment; about $45 million in municipal bond
Municipal bond
A municipal bond is a bond issued by a city or other local government, or their agencies. Potential issuers of municipal bonds includes cities, counties, redevelopment agencies, special-purpose districts, school districts, public utility districts, publicly owned airports and seaports, and any...
s deposited at Cohmad Securities
Cohmad Securities
Cohmad Securities, whose name combines “Cohn” and “Madoff,” founded in 1985 by Bernard Madoff and Maurice Cohn, Madoff’s friend and former neighbor. It is in the Business Services, N.E.C. industry in NEW YORK, NY...
Corp., and approximately $17 million in cash in another account, at Wachovia Bank NA. Ruth Madoff says these assets are “unrelated” to the alleged fraud, Stanton wrote without ruling on her claim.
Mark and Andrew Madoff
Madoff's sons Mark, 45, and Andrew, 42 worked in the trading arm in the New York office, but also raised money marketing the Madoff funds. Their assets were frozen on March 31, 2009. Madoff has contended that his sons were not involved in the fraud, but that has been viewed with skepticism. The two have been estranged from their father, since December 10, 2008, and haven't spoken with their mother.In 1998, the sons became directors of the London office, Madoff Securities International Ltd. and took stakes in the business. They were given loans by the New York office to buy their shares. Interest on the loans was paid by dividends made by the London operation. Andrew had several million dollars invested with his father at the time the fraud was revealed.
At the time of Mark's divorce, in 2000, his interest in the London office was valued at $5 million. Other family members with shares in the London business were Bernard's wife, Ruth, and brother, Peter.
The New York business paid Mark $770,000 in 1999 and rewarded him with a deferred-compensation plan valued at $5 million, but he withdrew his personal funds he had invested with his father's investment-advisory operation some time before his divorce. He remarried Stephanie in 2003 in Nantucket.
Prosecutors intend to seize promissory notes given to the Madoffs by Andrew and Mark from 2001 to October 2008. Mark Madoff owes his parents $22 million, and Andrew Madoff owes $9.5 million. There were two loans in 2008 from Bernard Madoff to Andrew Madoff: $4.3 million on Oct. 6, and $250,000 on Sept. 21.
On April 13, 2009, Judge Arthur Hiller in Bridgeport
Bridgeport
Bridgeport is the most populous city in the U.S. state of Connecticut.Bridgeport may also refer to:-Places:In Canada:* Bridgeport, Nova ScotiaIn the United States:* Bridgeport, Alabama* Bridgeport, California, in Mono County...
, Connecticut, dissolved the temporary order he imposed March 30 freezing their assets. They agreed to attachments of $2.5 million each to their Greenwich
Greenwich
Greenwich is a district of south London, England, located in the London Borough of Greenwich.Greenwich is best known for its maritime history and for giving its name to the Greenwich Meridian and Greenwich Mean Time...
homes. The pension fund case is Retirement Program for Employees of the Town of Fairfield v. Madoff, FBT-CV-09-5023735-S, Superior Court of Connecticut (Bridgeport)
On June 16, 2009, former employees Richard Stahl and Reed Abend, filed separate lawsuits against Madoff's sons claiming nearly $2 million in deferred compensation. Stahl, a former vice president at Cantor Fitzgerald, claims $1.34 million for 2008, when he earned more than $5 million for Madoff Securities. Abend wants $473,940.
On October 2, 2009 a civil lawsuit was filed against them by trustee, Picard, for a judgment in the aggregate amount of at least, $198,743,299. Peter Madoff and daughter, Shana, are also defendants.
On March 15, 2010 the defendants filed a motion to dismiss, citing they were also victims, that lawsuit is "predicated on the faulty assumption" that the sons exercised a compliance function over the investment advisory business.
On December 11, 2010, on the second anniversary of his father's arrest, Mark Madoff was found dead in his NYC apartment from an apparent suicide.
Jeffry Picower
Jeffry PicowerJeffry Picower
Jeffry M. Picower was an American investor and noted philanthropist involved in the Madoff investment scandal...
was an industrialist and philanthropist who seemed to be a favored Madoff beneficiary, and made outlandish profits from his investments with Madoff. From 1996-2007 there were 14 instances of greater than 100% yearly returns and 25 of greater than 50%. From 1996-1999 his regular trading account made from 120-550% a year. Some evidence of backdating trades, instituted by Picower, has been presented by trustee Irving Picard
Irving Picard
Irving H. Picard is a partner in the law firm Baker Hostetler. He graduated from the Wharton School, University of Pennsylvania, with a B.S. degree , from Boston University School of Law with a J.D. degree , and from the New York University School of Law with an LL.M. degree in 1967, and was...
. In December, 2010, his estate returned $7.2 billion in profits to the government. Picower died before the settlement.
Frank DiPascali
Frank DiPascaliFrank DiPascali
Frank DiPascali, Jr. worked for Bernard L. Madoff Investment Securities LLC for 33 years and was a key lieutenant of Bernard Madoff. He referred to himself as "director of options trading" and as "chief financial officer". On August 11, 2009, he pled guilty to ten counts related to the Madoff...
, 52, who referred to himself as "director of option
Option (finance)
In finance, an option is a derivative financial instrument that specifies a contract between two parties for a future transaction on an asset at a reference price. The buyer of the option gains the right, but not the obligation, to engage in that transaction, while the seller incurs the...
s trading" and as "chief financial officer
Chief financial officer
The chief financial officer or Chief financial and operating officer is a corporate officer primarily responsible for managing the financial risks of the corporation. This officer is also responsible for financial planning and record-keeping, as well as financial reporting to higher management...
" at Madoff Securities, pleaded guilty on August 11, 2009, to 10 counts: conspiracy
Conspiracy (crime)
In the criminal law, a conspiracy is an agreement between two or more persons to break the law at some time in the future, and, in some cases, with at least one overt act in furtherance of that agreement...
, securities fraud
Securities fraud
Securities fraud, also known as stock fraud and investment fraud, is a practice that induces investors to make purchase or sale decisions on the basis of false information, frequently resulting in losses, in violation of the securities laws....
, investment advisor fraud
Fraud
In criminal law, a fraud is an intentional deception made for personal gain or to damage another individual; the related adjective is fraudulent. The specific legal definition varies by legal jurisdiction. Fraud is a crime, and also a civil law violation...
, mail fraud, wire fraud
Wire fraud
Mail and wire fraud is a federal crime in the United States. Together, 18 U.S.C. §§ 1341, 1343, and 1346 reach any fraudulent scheme or artifice to intentionally deprive another of property or honest services with a nexus to mail or wire communication....
, perjury
Perjury
Perjury, also known as forswearing, is the willful act of swearing a false oath or affirmation to tell the truth, whether spoken or in writing, concerning matters material to a judicial proceeding. That is, the witness falsely promises to tell the truth about matters which affect the outcome of the...
, income tax evasion, international money laundering
Money laundering
Money laundering is the process of disguising illegal sources of money so that it looks like it came from legal sources. The methods by which money may be laundered are varied and can range in sophistication. Many regulatory and governmental authorities quote estimates each year for the amount...
, falsifying books and records of a broker-dealer and an investment advisor. He admitted to the Court that he learned in the late 1980s or early 1990s that no trading was occurring in Mr. Madoff's investment-advisory client accounts. About 2002, he set up an account for himself at the firm named after his fishing yacht, Dorothy Jo. Having never made a contribution, he withdrew more than $5 million. His salary and bonuses were over $2 million annually. He has agreed in a plea agreement and the signed Information document to connect the dots and to name names, with sentencing anticipated in May, 2010. He faces a maximum of 125 years in prison. Prosecutors are seeking more than $170 billion in forfeiture, the same amount sought from Madoff, which represents about double the funds deposited by investors and later disbursed to other investors. The same day, a Securities and Exchange Commission civil complaint was filed against DiPascali.
A college dropout, he joined Madoff's firm in 1975 at age 18 and eventually oversaw the day-to-day operations of Madoff's investment-advisory business. He was the person many of Madoff's investors dealt with regarding their accounts. Madoff told investors DiPascali executed trades. However, a court-appointed trustee found that no trading had occurred for at least 13 years. Prosecutors have asked at least three employees, Eric Lipkin, JoAnn Crupi, and Robert Cardile, who is Mr. DiPascali's brother-in-law, about his role in the firm.
Investors spoke to these other employees and would fax orders if they needed to withdraw money. DiPascali's name was sometimes given as an alternate contact. According to an SEC memo, DiPascali "responded evasively" to questioning following Madoff's arrest.
Enrica Cotellessa-Pitz
Enrica Cotellessa-Pitz, was a controllerComptroller
A comptroller is a management level position responsible for supervising the quality of accounting and financial reporting of an organization.In British government, the Comptroller General or Comptroller and Auditor General is in most countries the external auditor of the budget execution of the...
at Bernard L. Madoff Investment Securities LLC, but not a licensed certified public accountant
Certified Public Accountant
Certified Public Accountant is the statutory title of qualified accountants in the United States who have passed the Uniform Certified Public Accountant Examination and have met additional state education and experience requirements for certification as a CPA...
. Her signature is on checks from BMIS to Cohmad Securities
Cohmad Securities
Cohmad Securities, whose name combines “Cohn” and “Madoff,” founded in 1985 by Bernard Madoff and Maurice Cohn, Madoff’s friend and former neighbor. It is in the Business Services, N.E.C. industry in NEW YORK, NY...
Corp. representing commission payments. She was the liaison between the SEC and BLMIS regarding the firm's financial statements. The SEC has removed the BMIS statements from its website.
Annette Bongiorno
Annette Bongiorno is a long time personal secretary and aide to Madoff. She is accused of directing two assistants, Semone Anderson and Winnie Jackson, to generate fictitious trading tickets for customer accounts.During the 1980s, Bongiorno recruited small investors from Howard Beach, Queens, where she grew up next door to Frank DiPascali. Their money was held in accounts called "RuAnn" (named after Annette and her husband Rudy). Madoff paid for her honeymoon airfare. She owns homes in Manhasset, New York
Manhasset, New York
Manhasset is a hamlet and neighborhood in Nassau County, New York, on the North Shore of Long Island. As of the United States 2010 Census, the population was 8,080....
and Boca Raton, Florida
Boca Raton, Florida
Boca Raton is a city in Palm Beach County, Florida, USA, incorporated in May 1925. In the 2000 census, the city had a total population of 74,764; the 2006 population recorded by the U.S. Census Bureau was 86,396. However, the majority of the people under the postal address of Boca Raton, about...
, with a combined assessment of $3.85 million.
Bongiorno was arrested in November 2010 and charged with conspiracy, securities fraud and tax evasion. She faces up to 75 years in jail.
Daniel Bonventre
Daniel BonventreDaniel Bonventre
Daniel Bonventre is one of five former Madoff employees charged in the Madoff investment scandal.He had worked as one-time company director of operations and as an accountant for Madoff since the 1960s...
worked as one-time company director of operations and as an account for Madoff since the 1960s. He was arrested in 2010 and charged with allegedly having created false and fraudulent books and records, conspiracy, securities fraud, and tax-related charges. He is also being sued by the SEC for falsifying records. He may be sentenced to a maximum of 77 years in prison if convicted.
On February 25, 2010, he was freed on a $5 million bond.
Sosnik Bell and Co.
Even before Sosnik and Bell took over a small New JerseyNew Jersey
New Jersey is a state in the Northeastern and Middle Atlantic regions of the United States. , its population was 8,791,894. It is bordered on the north and east by the state of New York, on the southeast and south by the Atlantic Ocean, on the west by Pennsylvania and on the southwest by Delaware...
accounting firm in the early 1990s, Madoff and his affiliate, Cohmad Securities, encouraged hundreds of individual investors to retain the firm for an annual fee of $800 for routine recordkeeping to handle their monthly statements. The firm compiled profits, losses, and gains, and prepared tax-summary statements and schedules to be used by a client's regular accountant for income tax
Income tax
An income tax is a tax levied on the income of individuals or businesses . Various income tax systems exist, with varying degrees of tax incidence. Income taxation can be progressive, proportional, or regressive. When the tax is levied on the income of companies, it is often called a corporate...
returns, producing one-page monthly statements and a quarterly statement.
Fairfield Greenwich Group
Fairfield Greenwich GroupFairfield Greenwich Group
Fairfield Greenwich Group is an investment firm founded in 1983 in New York City. The firm had among the largest exposures to the Bernard Madoff fraud.-History of the Firm:...
, based in Greenwich, Connecticut
Greenwich, Connecticut
Greenwich is a town in Fairfield County, Connecticut, United States. As of the 2010 census, the town had a total population of 61,171. It is home to many hedge funds and other financial service companies. Greenwich is the southernmost and westernmost municipality in Connecticut and is 38+ minutes ...
, had a "Fairfield Sentry" fund which was one of many feeder funds that gave investors portals to Madoff. Fairfield, in turn, set up further feeder funds such as "Lion Fairfield Capital Management" in Singapore
Singapore
Singapore , officially the Republic of Singapore, is a Southeast Asian city-state off the southern tip of the Malay Peninsula, north of the equator. An island country made up of 63 islands, it is separated from Malaysia by the Straits of Johor to its north and from Indonesia's Riau Islands by the...
and "Stellar US Absolute Return," all conduits to Madoff, directing a total of $7.5 billion.
Madoff was able to pitch his business in Europe and South America
South America
South America is a continent situated in the Western Hemisphere, mostly in the Southern Hemisphere, with a relatively small portion in the Northern Hemisphere. The continent is also considered a subcontinent of the Americas. It is bordered on the west by the Pacific Ocean and on the north and east...
indirectly through Fairfield fund's founder, Walter Noel's son-in-law Andrés Piedrahita. Another Noel son-in-law's territory included Asia
Asia
Asia is the world's largest and most populous continent, located primarily in the eastern and northern hemispheres. It covers 8.7% of the Earth's total surface area and with approximately 3.879 billion people, it hosts 60% of the world's current human population...
. Madoff began advertising openly, contrary to his initial strategy of handpicking investors. The company is listed as a defendant in an investor lawsuit filed in Miami.
In August, 2008, JPMorgan Chase, pulled $250 million from this Madoff feeder fund account. Chase had become "concerned about lack of transparency," and due-diligence which had "raised doubts" about Madoff's operation.
On April 1, 2009, the Commonwealth of Massachusetts filed a civil action charging Fairfield Greenwich with fraud, breaching its fiduciary duty to clients by failing to provide promised due diligence on its investments. The complaint seeks a fine and restitution to Massachusetts investors for losses and disgorgement of performance fees paid to Fairfield by those investors. It alleges that in 2005 Mr. Madoff coached Fairfield staff about ways to answer questions from SEC attorneys who were looking into Harry Markopolos
Harry Markopolos
Harry M. Markopolos is a former securities industry executive and independent financial fraud investigator for institutional investors and others seeking forensic accounting expertise. He has received public acclaim for uncovering evidence over a period of nine years that Bernard Madoff's wealth...
' complaint about Madoff's operations.
The Secretary of State has no plans to settle the lawsuit in spite of the fact that Fairfield Greenwich has offered to repay all Massachusetts investors, and is expected to force Fairfield to explain e-mails and other evidence he has uncovered that appear to show company officials knew about potential problems with Madoff but failed to disclose them to clients.
On April 13, 2009, Judge Arthur Hiller in Bridgeport
Bridgeport
Bridgeport is the most populous city in the U.S. state of Connecticut.Bridgeport may also refer to:-Places:In Canada:* Bridgeport, Nova ScotiaIn the United States:* Bridgeport, Alabama* Bridgeport, California, in Mono County...
, Connecticut, dissolved the temporary order he imposed March 30 freezing Noel's and Tucker's assets. Noel agreed to attachments of $10 million to his Greenwich home, and $2 million from Jeffrey Tucker. Noel's attorney is Glenn Kurtz, and Tucker's is Stanley Tawdry, Jr.. The pension fund case is Retirement Program for Employees of the Town of Fairfield v. Madoff, FBT-CV-09-5023735-S, Superior Court of Connecticut (Bridgeport)
On May 18, 2009, the hedge fund was sued by bankruptcy trustee, Irving Picard
Irving Picard
Irving H. Picard is a partner in the law firm Baker Hostetler. He graduated from the Wharton School, University of Pennsylvania, with a B.S. degree , from Boston University School of Law with a J.D. degree , and from the New York University School of Law with an LL.M. degree in 1967, and was...
. The complaint seeks a return of $3.2 billion during the period from 2002 - Madoff's arrest in December, 2008. However, the money may already be in the hands of Fairfield’s own clients, who are likely off-limits to Picard, since they weren’t direct investors with Madoff.
On May 29, 2009, Fairfield Sentry, based in the British Virgin Islands, filed a lawsuit seeking to recover more than $919 million in investment management and performance fees that it paid to Fairfield. The lawsuit alleges breach of fiduciary duty, and unjust enrichment
Unjust enrichment
Unjust enrichment is a legal term denoting a particular type of causative event in which one party is unjustly enriched at the expense of another, and an obligation to make restitution arises, regardless of liability for wrongdoing.Definition:...
. It is “the largest victim of the fraud perpetrated by Bernard L. Madoff,” losing $7 billion.
The defendants include founders Walter Noel and Jeffrey Tucker and other fund partners who the plaintiffs allege “failed to fulfill their contractual obligations to use best efforts to supervise the operations” of Madoff-related investments and to “oversee the day-to-day investment activities of the fund.” The case is Fairfield Sentry Ltd. v. Fairfield Greenwich Group, 601687/2009, New York State Supreme Court (Manhattan).
On July 20, 2009, Justice Edward Alexander Bannister granted the request to liquidate the Fairfield Sentry funds, worth more than $7.2 billion in December, 2008, now less than $70 million, incorporated in 1990 under the mutual fund statutes of the British Virgin Islands and technically under the control of their local directors.
Sonja Kohn
On 10 December, 2010, Irving PicardIrving Picard
Irving H. Picard is a partner in the law firm Baker Hostetler. He graduated from the Wharton School, University of Pennsylvania, with a B.S. degree , from Boston University School of Law with a J.D. degree , and from the New York University School of Law with an LL.M. degree in 1967, and was...
sued Sonja Kohn
Sonja Kohn
Sonja Kohn is an Austrian banker.-Biography:Sonja Kohn was born to Jewish refugees from Eastern Europe. She grew up in Vienna in a small Jewish community....
and her bank, Bank Medici
Bank Medici
Bank Medici AG was a bank based in Vienna, Austria. It was founded in 1994 by banker Sonja Kohn and incorporated as a bank in 2003.Bank Medici's president and majority stakeholder is Sonja Kohn. Its main institutional shareholder is Bank Austria Creditanstalt, Austria's largest banking group...
, for $58.8 billion, accusing Kohn of being a "criminal soul mate" of Madoff. She was accused of directing $9.1 billion to Madoff's fraud, about half of the actual money lost.
J. Ezra Merkin
J. Ezra MerkinJ. Ezra Merkin
Jacob Ezra Merkin is a former money manager and financier. He was a close business associate of Bernard Madoff, and is alleged to have played a significant part in the Madoff fraud. He served as the Non-executive Chairman of GMAC until his resignation on January 9, 2009, at the insistence of the...
, a prominent investment advisor
Investment Advisor
The term Investment Advisor is an individual or firm who, for compensation, engages in the business of advising others, either directly or through publications or writings, as to the value of securities or as to the advisability of investing in, purchasing, or selling securities...
and philanthropist, has been sued for his role in running a "feeder fund" for Madoff. Merkin informed investors in his $1.8 billion Ascot Partners fund on December 11 that he was among those who suffered substantial personal losses, since all of the fund's money was invested with Madoff. The Connecticut
Connecticut
Connecticut is a state in the New England region of the northeastern United States. It is bordered by Rhode Island to the east, Massachusetts to the north, and the state of New York to the west and the south .Connecticut is named for the Connecticut River, the major U.S. river that approximately...
Attorney General
Attorney General
In most common law jurisdictions, the attorney general, or attorney-general, is the main legal advisor to the government, and in some jurisdictions he or she may also have executive responsibility for law enforcement or responsibility for public prosecutions.The term is used to refer to any person...
Richard Blumenthal
Richard Blumenthal
Richard Blumenthal is the junior United States Senator from Connecticut and a member of the Democratic Party. Previously, he served as Attorney General of Connecticut....
is examining the role boards of nonprofits played, in possibly not conducting due diligence on donors' contributions.
On April 6, 2009, New York Attorney General
Attorney General
In most common law jurisdictions, the attorney general, or attorney-general, is the main legal advisor to the government, and in some jurisdictions he or she may also have executive responsibility for law enforcement or responsibility for public prosecutions.The term is used to refer to any person...
Andrew Cuomo
Andrew Cuomo
Andrew Mark Cuomo is the 56th and current Governor of New York, having assumed office on January 1, 2011. A member of the Democratic Party, he was the 64th New York State Attorney General, and was the 11th United States Secretary of Housing and Urban Development...
filed civil fraud
Fraud
In criminal law, a fraud is an intentional deception made for personal gain or to damage another individual; the related adjective is fraudulent. The specific legal definition varies by legal jurisdiction. Fraud is a crime, and also a civil law violation...
charges
against J. Ezra Merkin alleging he "betrayed hundreds of investors" by moving $2.4 billion of clients' money to Bernard Madoff without their knowledge. The complaint states, he lied about putting the money with Madoff, failed to disclose conflicts of interest, and collected over $470 million in fees for his three hedge funds, Ascot Partners LP with Ascot Fund Ltd., Gabriel Capital Corp. and Ariel Fund Ltd. He promised he would actively manage the money, but instead, he misguided investors about his Madoff investments in quarterly reports, in investor presentations, and in conversations with investors. "Merkin held himself out to investors as an investing guru...In reality, Merkin was but a master marketer."
In addition, the complaint accused Merkin of improperly commingling his personal funds with his hedge fund accounts and using some of the money to buy artwork worth more than $91 million. Mr. Cuomo’s office is seeking restitution and unspecified damages from Mr. Merkin.
On May 7, 2009, Madoff Bankruptcy Trustee, Irving Picard
Irving Picard
Irving H. Picard is a partner in the law firm Baker Hostetler. He graduated from the Wharton School, University of Pennsylvania, with a B.S. degree , from Boston University School of Law with a J.D. degree , and from the New York University School of Law with an LL.M. degree in 1967, and was...
filed a lawsuit
against Merkin seeking to recover almost $500 million withdrawn from Madoff accounts in the last six years. The complaint alleges that since 1995, Merkin steered more than $1 billion to Madoff through three private hedge funds, Ascot Partners, Ariel Fund and Gabriel Capital. Since 2002, the funds withdrew at least $494 million from Madoff — returns that Merkin “knew or should have known” were fraudulent.
As of May 18, 2009, Merkin's control of Ascot, Gabriel and Ariel hedge funds are to be placed into receivership
Receivership
In law, receivership is the situation in which an institution or enterprise is being held by a receiver, a person "placed in the custodial responsibility for the property of others, including tangible and intangible assets and rights." The receivership remedy is an equitable remedy that emerged in...
for liquidation
Liquidation
In law, liquidation is the process by which a company is brought to an end, and the assets and property of the company redistributed. Liquidation is also sometimes referred to as winding-up or dissolution, although dissolution technically refers to the last stage of liquidation...
by Guidepost Partners. One receiver will be responsible for managing the remaining money, nearly $1 billion, in the Gabriel and Ariel funds, and another will be responsible for overseeing Ascot, whose entire $1.8 billion in assets was lost to Madoff's Ponzi scheme.
Cohmad Securities Corp.
Cohmad SecuritiesCohmad Securities
Cohmad Securities, whose name combines “Cohn” and “Madoff,” founded in 1985 by Bernard Madoff and Maurice Cohn, Madoff’s friend and former neighbor. It is in the Business Services, N.E.C. industry in NEW YORK, NY...
, whose name combines “Cohn” and “Madoff,” founded in 1985 by Madoff and Cohn, Madoff’s friend and former neighbor. Maurice "Sonny" Cohn owned 48% of Cohmad, and his daughter Marcia, who served as president and chief compliance officer owned 25%. Madoff owned 15%. Mr. Madoff's brother, Peter owned 9%, and Mr. Cohn's brother owned 1%, and another unnamed Cohmad employee owned 1%.
The brokerage firm lists its address as Madoff's firm's address in New York City. Cohmad employs Robert Jaffe
Robert Jaffe (stockbroker)
Robert M. Jaffe , an American stockbroker, and long-time associate of Bernard Madoff, promoted Madoff's fund to wealthy investors in Massachusetts and Florida. Jaffe has homes in Weston, Massachusetts and in Palm Beach, Florida, Cohmad Securities Corporation employs Robert Jaffe, as...
, as vice president. Jaffe is married to Ellen Shapiro, daughter of Boston philanthropist Carl J. Shapiro
Carl J. Shapiro
Carl J. Shapiro is a Boston philanthropist and entrepreneur. He and his wife, Ruth live in Boston and Palm Beach. In 1939, he founded Kay Windsor, Inc., in New Bedford, Massachusetts, and built it into one of the largest women's apparel companies in the country...
, the founder and former chairman of apparel company Kay Windsor Inc., and an early investor and close friend of Madoff. Jaffe reportedly convinced the elder Shapiro to invest $250 million with Madoff just 10 days before Madoff's arrest.
Jaffe, a philanthropist, "worked the Palm Beach, Florida
Palm Beach, Florida
The Town of Palm Beach is an incorporated town in Palm Beach County, Florida, United States. The Intracoastal Waterway separates it from the neighboring cities of West Palm Beach and Lake Worth...
circuit, and attracted many Palm Beach Country Club members as investors." Jaffe brought in 150 accounts and more than $1 billion to Madoff. Madoff paid Jaffe directly through accounts he kept with Madoff at much higher returns than earned by other investors. Between 1996 and 2008, Jaffe withdrew at least $150 million, and the SEC claims he was aware Madoff was engaged in fictitious trading. Jaffe has said he received a commission of 1% to 2% from an investor's first profit, and he paid commissions to financial advisers who steered cash to Madoff's fund.
Richard Spring, of Boca Raton, Florida
Boca Raton, Florida
Boca Raton is a city in Palm Beach County, Florida, USA, incorporated in May 1925. In the 2000 census, the city had a total population of 74,764; the 2006 population recorded by the U.S. Census Bureau was 86,396. However, the majority of the people under the postal address of Boca Raton, about...
, received payments from Cohmad for many years in exchange for bringing investors and investment ideas to Madoff.
Alvin J. "Sonny" Delaire, Jr. of Far Hills, New Jersey
Far Hills, New Jersey
Far Hills is a borough in Somerset County, New Jersey, United States. As of the United States 2010 Census, the population was 919.Far Hills was incorporated as a borough based on an Act of the New Jersey Legislature passed on April 7, 1921, from portions of Bernards Township, subject to the results...
also recruited clients for Madoff's advisory business. Delaire has been sued by Dr. Martin and Suzanne Schulman of Nassau County
Nassau County, New York
Nassau County is a suburban county on Long Island, east of New York City in the U.S. state of New York, within the New York Metropolitan Area. As of the 2010 census, the population was 1,339,532...
, New York, claiming they were induced by Delaire to make investments with Madoff "based on fraudulent misrepresentations by Delaire and his omissions to disclose material facts." The lawsuit seeks a minimum of $9.6 million in damages since 2002 from Delaire.
The case is Martin Schulman, M.D. and Suzanne Schulman v Alvin J. Delaire, Jr. 09-3871U.S. District Court for the Southern District of New York (Manhattan).
Cohmad had fewer than 650 client accounts, and made 99.7% of its sales from brokerage services to Madoff's larger broker-dealer. In its audited financial statements for the 12 months ending June 30, 2008, Cohmad said revenue from Madoff Securities totaled $3,736,829. Its total sales for the same period were $3,748,397.
On January 14, 2009, William Galvin, Secretary of the Commonwealth of Massachusetts, who is in charge of the state's securities issues, filed suit against Jaffe, who promoted Madoff's funds to wealthy investors in Massachusetts
Massachusetts
The Commonwealth of Massachusetts is a state in the New England region of the northeastern United States of America. It is bordered by Rhode Island and Connecticut to the south, New York to the west, and Vermont and New Hampshire to the north; at its east lies the Atlantic Ocean. As of the 2010...
and Florida
Florida
Florida is a state in the southeastern United States, located on the nation's Atlantic and Gulf coasts. It is bordered to the west by the Gulf of Mexico, to the north by Alabama and Georgia and to the east by the Atlantic Ocean. With a population of 18,801,310 as measured by the 2010 census, it...
. On February 4, compelled to testify, Jaffe invoked his Fifth Amendment
Fifth Amendment to the United States Constitution
The Fifth Amendment to the United States Constitution, which is part of the Bill of Rights, protects against abuse of government authority in a legal procedure. Its guarantees stem from English common law which traces back to the Magna Carta in 1215...
right. Marcia Cohn, Maurice Cohn, and Alvin Delaire, Jr. failed to appear. On February 11, 2009, Galvin filed a complaint seeking to revoke the Massachusetts license of Cohmad Securities Corp., an accounting of all Massachusetts investors Cohmad referred to Madoff’s company, all the fees it earned doing so (more than $67 million), and a fine. It cited $526,000 in referral fees paid from Madoff Investments, to Cohmad, to Vienna Bank Medici
Bank Medici
Bank Medici AG was a bank based in Vienna, Austria. It was founded in 1994 by banker Sonja Kohn and incorporated as a bank in 2003.Bank Medici's president and majority stakeholder is Sonja Kohn. Its main institutional shareholder is Bank Austria Creditanstalt, Austria's largest banking group...
majority owner, Sonja Kohn
Sonja Kohn
Sonja Kohn is an Austrian banker.-Biography:Sonja Kohn was born to Jewish refugees from Eastern Europe. She grew up in Vienna in a small Jewish community....
, which she subsequently denied. On May 28, 2009, Bank Medici lost its Austrian banking license. Kohn and the Bank are under investigation.
On May 8, 2009, the Commonwealth of Massachusetts found the firm to be in “default” for not assisting regulators. Cohmad’s securities registration has been revoked, and they must provide an accounting of all fees the company or its agents earned for referring Massachusetts investors to Mr. Madoff's firm as well as, pay a $100,000 fine for failing to cooperate with the state securities investigation.
On March 15, 2009, Federal prosecutors filed a notice in federal court declaring its intent to seek the forfeiture of the Madoffs' interests in Cohmad Securities.
On June 22, 2009, Madoff Trustee, Irving Picard
Irving Picard
Irving H. Picard is a partner in the law firm Baker Hostetler. He graduated from the Wharton School, University of Pennsylvania, with a B.S. degree , from Boston University School of Law with a J.D. degree , and from the New York University School of Law with an LL.M. degree in 1967, and was...
filed a claim against Cohmad, founder Maurice “Sonny” Cohn, daughter Marcia Cohn, and Robert Jaffe, among more than two dozen individuals and trusts in U.S. Bankruptcy Court in New York. The lawsuit claims that up to 90 percent of Cohmad’s income came from referring clients and that the firm had a “symbiotic” relationship with Madoff, having earned hundreds of millions of dollars from the fraud. The lawsuit seeks more than $100 million paid to Cohmad six years prior to Madoff’s firm declaring bankruptcy, and more than $105 million in profits Cohmad employees and their families withdrew from the investment accounts they held with Madoff.
On June 22, 2009, the U.S. Securities and Exchange Commission (SEC) also filed civil fraud charges
against co-founder Maurice "Sonny" Cohn, president Marcia Cohn, and Robert Jaffe. The lawsuit alleges the company was Madoff's "in-house marketing arm" and critical to Madoff's scam. Cohmad representatives were paid for funds they brought into the firm but not for any increase in the investments' value. Withdrawals were treated as a loss, which "suggested that profits generated by Madoff were fictitious", although Madoff changed the arrangement for Maurice Cohn in 2002, to pay him a flat $2 million a year.
Jaffe has filed requests with the Courts to dismiss the SEC and the Picard cases. The cases are Picard v. Cohmad Securities Corp., 09-AP- 1305, U.S. Bankruptcy Court, Southern District of New York (Manhattan), and SEC v. Cohmad, 09-cv-5680, U.S. District Court, (Southern District of New York.).
Stanley Chais, the Brighton Company
Stanley ChaisStanley Chais
Stanley Chais , was a Beverly Hills, California investment advisor who operated "feeder funds" which collected money for funds related to the Madoff investment scandal. He was born in Bronx, New York....
was a wealthy investment advisor from Beverly Hills, California
Beverly Hills, California
Beverly Hills is an affluent city located in Los Angeles County, California, United States. With a population of 34,109 at the 2010 census, up from 33,784 as of the 2000 census, it is home to numerous Hollywood celebrities. Beverly Hills and the neighboring city of West Hollywood are together...
who was accused of steering money to private interests, including Madoff, through Chais's Brighton Co., a limited partnership
Limited partnership
A limited partnership is a form of partnership similar to a general partnership, except that in addition to one or more general partners , there are one or more limited partners . It is a partnership in which only one partner is required to be a general partner.The GPs are, in all major respects,...
formed to manage money. He took about 3.8% of the profits as management fees. His Chais Family Foundation, which in 2007 reported assets of $178 million and charitable contributions of nearly $8.2 million, was wiped out and has shut down. He had a home in Beverly Hills, and an apartment in New York.
On May 1, 2009, Irving Picard
Irving Picard
Irving H. Picard is a partner in the law firm Baker Hostetler. He graduated from the Wharton School, University of Pennsylvania, with a B.S. degree , from Boston University School of Law with a J.D. degree , and from the New York University School of Law with an LL.M. degree in 1967, and was...
, bankruptcy trustee, filed a lawsuit against Stanley Chais, 82. The complaint alleges he "knew or should have known" he was deep in a Ponzi scheme when his family investments with Madoff averaged 40% and sometimes soared as high as 300%. It also claims Chais was a primary beneficiary of the scheme for at least 30 years, allowing his family to withdraw more than $1 billion from their accounts since 1995 - money that belonged to Madoff victims. The case number is Picard v. Chais, 09-01172.
On June 22, 2009, the SEC filed civil fraud charges against Chais. According to the complaint, Chais told Madoff he didn't want to see any losses on the funds' trades.
Michael Chaleff, a former Justice Department
United States Department of Justice
The United States Department of Justice , is the United States federal executive department responsible for the enforcement of the law and administration of justice, equivalent to the justice or interior ministries of other countries.The Department is led by the Attorney General, who is nominated...
lawyer, was part of a 50-member investment group named CMG that lost $75 million to $80 million it gave to Chais' Brighton Co. Chaleff has filed a $250-million class action
Class action
In law, a class action, a class suit, or a representative action is a form of lawsuit in which a large group of people collectively bring a claim to court and/or in which a class of defendants is being sued...
federal lawsuit against Chais in Los Angeles, as has screenwriter
Screenwriter
Screenwriters or scriptwriters or scenario writers are people who write/create the short or feature-length screenplays from which mass media such as films, television programs, Comics or video games are based.-Profession:...
Eric Roth
Eric Roth
Eric Roth is an American screenwriter. He won the Oscar for Best Adapted Screenplay for Forrest Gump . He also co-wrote the screenplay for Michael Mann's The Insider , the Steven Spielberg film Munich , and David Fincher's film The Curious Case of Benjamin Button , all of which were nominated for...
. New Jersey
New Jersey
New Jersey is a state in the Northeastern and Middle Atlantic regions of the United States. , its population was 8,791,894. It is bordered on the north and east by the state of New York, on the southeast and south by the Atlantic Ocean, on the west by Pennsylvania and on the southwest by Delaware...
State Senator Loretta Weinberg
Loretta Weinberg
Loretta Weinberg is an American Democratic Party politician, who has served as a member of the New Jersey Senate since 2005, where she represents the 37th Legislative District...
lost her entire life savings in Chais' "Arbitrage Partnerships" fund.
Chais died on September 26, 2010 at age 84 in Manhattan
Manhattan
Manhattan is the oldest and the most densely populated of the five boroughs of New York City. Located primarily on the island of Manhattan at the mouth of the Hudson River, the boundaries of the borough are identical to those of New York County, an original county of the state of New York...
, where he and his wife had moved to further the treatment of a blood disorder that eventually took his life.
Tremont Group Holdings
Tremont Group Holdings started its first Madoff-only fund in 1997. That group managed several funds marketed under the Rye Select Broad Market Fund, which charged a 1% management fee and a 0.5% administration fee. The fund held $2.3 billion on Sept. 30, 2008, collecting $34 million in fees a year. Tremont also offered the Rye Select Broad Market Portfolio Ltd., which charged total fees of 1.95% of assets and held $1.2 billion on Sept. 30, 2008, with annual fees of $23.5 million. For investing $3.3 billion, Tremont was scheduled to receive over $30 million in fees in 2008. The town of FairfieldFairfield, Connecticut
Fairfield is a town located in Fairfield County, Connecticut, United States. It is bordered by the towns of Bridgeport, Trumbull, Easton, Redding and Westport along the Gold Coast of Connecticut. As of the 2010 census, the town had a population of 59,404...
, Conn., is seeking the recovery of fees, and the assets of Robert Schulman, who once ran Tremont Group Holdings have been temporarily frozen.
Lawsuits filed have been consolidated into three categories: federal security laws, insurance actions, and state law actions. They are: Lange, et al. v. Mass. Mutual Life Ins. Co., et al. (08 CV 11117, S.D. N.Y.); Finkelstein v. Tremont Group Holdings, Inc. (08 CV 11141, S.D. N.Y.); Peshkin v. Tremont Group Holdings, et al. (08 CV 11183, S.D.N.Y.).; Arthur M. Brainson IRA R/O v. Rye Select Broad Market Fund, L.P., et al. (No. 08 CV 11212, S.D.N.Y.); and Group Defined Pension Plan & Trust v. Tremont Market Neutral Fund, L.P., et al. (No. 08 CV 11359, S.D.N.Y.). The plaintiffs are all investors in hedge funds with assets that they entrusted to Madoff for investment.
Four state law cases have been consolidated with Hagens Berman Sobol Shapiro as co-lead counsel. They initially filed a class-action lawsuit on behalf of investors and groups that invested capital with Tremont Group Holdings, alleging the company and others grossly neglected fiduciary duties and lost a total of $3.3 billion in assets, $3.1 billion from the Rye Funds invested with Bernard Madoff Investment Securities, relinquishing management to Madoff while continuing to receive client management fees. The complaint names Tremont Group Holdings, its Rye Investment Funds, Oppenheimer Acquisition Corporation, OppenheimerFunds, which owns Tremont, Massachusetts Mutual Life Insurance Company
Massachusetts Mutual Life Insurance Company
Founded in 1851, Massachusetts Mutual Life Insurance Company is a leading mutual life insurance company with 1800 offices and 13 million clients worldwide. Mass Mutual is one of the largest Life Insurance companies globally and is currently ranked 93rd in the Fortune 500 list...
, a majority owner of OppenheimerFunds and KPMG LLP, Tremont's auditor, as defendants.
On April 13, 2009, Judge Arthur Hiller in Bridgeport
Bridgeport
Bridgeport is the most populous city in the U.S. state of Connecticut.Bridgeport may also refer to:-Places:In Canada:* Bridgeport, Nova ScotiaIn the United States:* Bridgeport, Alabama* Bridgeport, California, in Mono County...
, Connecticut, dissolved the temporary order he imposed March 30 freezing assets, in exchange for a pledge of $2.5 million in total from Tremont Entities and Robert Shulman and $500,000 from Oppenheimer Acquisition Corporation. The pension fund case is Retirement Program for Employees of the Town of Fairfield v. Madoff, FBT-CV-09-5023735-S, Superior Court of Connecticut (Bridgeport)
The Tremont Group is represented by Michael Gruenglas of Skadden, Arps, Slate, Meagher & Flom
Skadden, Arps, Slate, Meagher & Flom
Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates , founded in 1948, is a prominent law firm based in New York City. With over 2,000 attorneys, it is one of the largest and highest-grossing law firms in the world. Forbes magazine calls Skadden "Wall Street's most powerful law firm"...
in New York.
Maxam Capital
Madoff was the investment adviser over all the $300 million Maxam Absolute Return Fund’s assets. Maxam was scheduled to receive $2.8 million for investing $280 million in 2008. The Town of Fairfield, ConnecticutFairfield, Connecticut
Fairfield is a town located in Fairfield County, Connecticut, United States. It is bordered by the towns of Bridgeport, Trumbull, Easton, Redding and Westport along the Gold Coast of Connecticut. As of the 2010 census, the town had a population of 59,404...
invested in Madoff through the Return Fund created by Maxam Capital Management LLC, based in Darien, Connecticut
Darien, Connecticut
Darien is a town in Fairfield County, Connecticut, United States. A relatively small community on Connecticut's "Gold Coast", the population was 20,732 at the 2010 census. Darien was listed at #9 at CNN Money's list of "top-earning towns" in the United States as of 2011...
. The Maxam fund in turn invested in Madoff through Tremont. Sandra L. Manzke, the founder of Maxam Capital, has had her assets temporarily frozen by the same Connecticut court.
Maxam Absolute Return Fund LP has filed a lawsuit in Connecticut Superior Court
Connecticut Superior Court
The Connecticut Superior Court is the Connecticut state trial court of general jurisdiction. It hears all matters other than those heard by the Connecticut Probate Courts...
in Fairfield County
Fairfield County, Connecticut
Fairfield County is a county located in the southwestern corner of the U.S. state of Connecticut. The county population is 916,829 according to the 2010 Census. There are currently 1,465 people per square mile in the county. It is the most populous county in the State of Connecticut and contains...
against auditors Goldstein Golub Kessler LLP and McGladrey & Pullen LLP to recover losses, claiming they relied on the auditors for their expertise in examining Madoff's firm.
On April 13, 2009, Judge Arthur Hiller in Bridgeport
Bridgeport
Bridgeport is the most populous city in the U.S. state of Connecticut.Bridgeport may also refer to:-Places:In Canada:* Bridgeport, Nova ScotiaIn the United States:* Bridgeport, Alabama* Bridgeport, California, in Mono County...
, Connecticut, dissolved the temporary order he imposed March 30 freezing assets, and ordered Sandra Manzke, to provide a $2.5 million mortgage on a piece of property she owns in Vermont. Maxam's attorney, Jonathan D. Cogan said,“The Town of Fairfield’s suit is an outrageous publicity stunt to divert attention from the town’s own decision to invest in Madoff, which was made long before it did business with Maxam." The pension fund case is Retirement Program for Employees of the Town of Fairfield v. Madoff, FBT-CV-09-5023735-S, Superior Court of Connecticut (Bridgeport)
Fiserv Inc.
A $1 billion class-action federal lawsuit was filed in Colorado against FiservFiserv
Fiserv, Inc. provides information management systems and services to the financial and insurance industries. Leading services include transaction processing, outsourcing, business process outsourcing , software and systems solutions. The company serves more than 16,000 clients worldwide...
, Inc. of Brookfield, Wisconsin whose subsidiaries were custodians for pension
Pension
In general, a pension is an arrangement to provide people with an income when they are no longer earning a regular income from employment. Pensions should not be confused with severance pay; the former is paid in regular installments, while the latter is paid in one lump sum.The terms retirement...
or IRA
Individual Retirement Account
An individual retirement arrangement is the blanket term for a form of retirement plan that provides tax advantages for retirement savings in the United States...
accounts and invested with Madoff. The complaint alleges Fiserv failed "to hold and safeguard assets entrusted to it" by about 800 Madoff customers who had been told to hire Fiserv to handle their accounts with him. Fiserv is accused of breach of fiduciary duty, fraud
Fraud
In criminal law, a fraud is an intentional deception made for personal gain or to damage another individual; the related adjective is fraudulent. The specific legal definition varies by legal jurisdiction. Fraud is a crime, and also a civil law violation...
, negligence
Negligence
Negligence is a failure to exercise the care that a reasonably prudent person would exercise in like circumstances. The area of tort law known as negligence involves harm caused by carelessness, not intentional harm.According to Jay M...
and aiding and abetting breach of fiduciary. Fiserv sold its investment account administration business in 2007 to TD Ameritrade
TD Ameritrade
TD Ameritrade is an American online broker with over 6 million U.S. customers, and many more internationally, that has grown rapidly through acquisition to become the 746th-largest US firm in 2008. TD Ameritrade Holding Corporation is the owner of TD Ameritrade Inc...
, also a defendant. The lawsuit estimates Fiserv generated at least $25 million annually from Madoff investors and claims it wasn't diligent because "Fiserv had too much revenue at stake to risk upsetting Madoff."
External links
- Ruth Madoff Biography Ruth Madoff biography and photos.
- Frank DiPascali DOJ Information/Plea Agreement (August, 2009)
- Serious Fraud Office broadens investigation to Madoff feeders The GuardianThe GuardianThe Guardian, formerly known as The Manchester Guardian , is a British national daily newspaper in the Berliner format...
, March 27, 2009, British government's investigation into the London activities of certain feeder funds that channeled investments to Madoff - Something LARGER than the Madoff-Style Scam on the horizon,
- Merkin Civil Fraud Complaint, State of New York (April 6, 2009)
- Exhibits 1-20 to Civil Fraud Complaint
- Exhibits 21-26 to Civil Fraud Complaint
- Exhibits 27-48 from Civil Fraud Complaint
- Bankruptcy Complaint against J. Ezra Merkin (May 7, 2009)
- Complaint against Harley International (Cayman) Limited (May 12, 2009)
- Commonwealth of Massachusett Secretary of State Complaint (January 14, 2009)
- Picard v. Cohmad Securities Corp. 09-AP-1305 (June 22, 2009)
- SEC v. Cohmad Securities Corp., 09 Civ. 5680 (June 22, 2009)
- Picard v. Chais et al. 08-01789 (May 1, 2009)
- SEC v. Stanley Chais, 09 CIV 5681 (June 22, 2009)