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Participants in the Madoff investment scandal

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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.[1] 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.[1] 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’?” [2]

“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 prices 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.[2]

Criminal investigation

Jeffrey Picower and Stanley Chais, two philanthropists who invested heavily with Mr. Madoff, and Carl J. Shapiro, 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. [3]

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. [4][5]

On March 24, 2009 Judge Louis L. Stanton granted power of attorney to Irving Picard, trustee, over Madoff's controlling stake in London.[6]

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.[4][5]

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.[4]

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. [7] 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.[7]

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. [7] 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.[8]

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.[8][9]

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.[10]

On April 20, 2009, Steven Leber filed a $4 million lawsuit against Konigsberg and his accounting firm for negligence, and breach of fiduciary duty.[11] Konigsberg answered the charges with affirmative defenses.[12]

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.[8]

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.[8][9]

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."[8][13]

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 DB2/4 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).[14]

On June 8, 2009 the Chapter 15 case was transfered 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 bankrupcies against Madoff, and his companies, also filed in New York. The associated aversary 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. Friehling, 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. [15] He faces up to 105 years in prison on all of the charges.[16][17][18] Federal prosecutors had until about June 17, 2009 to produce a grand jury indictment against him, or a plea bargain to end the case.[19]

Madoff's firm paid Friehling between $12,000 and $14,500 a month for his services between 2004 and 2007.[17]

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.[20] [21]

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 Law, 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.[22][23] Peter owns a home in Old Westbury, valued between $3–5 million,[24] 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.[25] [26][27]

Peter also owns between 5% and 10% of, and is a director of, Cohmad Securities Corp.[28] He has been subpoenaed by Massachusetts's Secretary of State William Galvin[29][30]

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. [31]

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.[32] The case is Ross v. Madoff, 09-5534, New York State Supreme Court for Nassau County (Mineola).[33][34]

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)[35]

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. [36]

Senator Frank Lautenberg's family foundation, which invested more than $7 million, also filed a lawsuit against Peter Madoff.[37]

Ruth Madoff

Ruth Madoff has been seen riding the N.Y. subway and did not attend her husband's sentencing. [38][39] 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. [40]

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. [41] The case is Picard v. Madoff, 1:09-ap-1391, U.S. Bankruptcy Court, Southern District of New York (Manhattan). [42][43][44]

She has been named in several civil actions.[45] She is represented by attorney Peter Chavkin.[46] and David Barres.

Ruth has not been charged with any crime, and has not been questioned by prosecutors.[47] 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.[48][49]

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:[50] 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.[46] 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.[50][51]

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.[30][52] In November, she also received $2 million from her husband's London office, Madoff Securities International Ltd. [4][53]

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)[35]

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 creditors. 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.[54]

On September 18, 2008, she reapplied for Homestead Exemption, and it was granted on January 12, 2009, after Madoff's arrest. [26][27]

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 bonds 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.[55]

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.[56] Their assets were frozen on March 31, 2009.[57] Madoff has contended that his sons were not involved in the fraud, but that has been viewed with skepticism. [58] The two have been estranged from their father, since December 10, 2008, and haven't spoken with their mother[39]

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.[59] 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. [7]

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[13]

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. [54][60]

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)[35]

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. [61]

Frank DiPascali

Frank DiPascali, 52, who referred to himself as "director of options trading" and as "chief financial officer" at Madoff Securities pleaded guilty on August 11, 2009, to 10 counts[62]: 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 was over $2 million annually. He has agreed to connect the dots and to name names, with sentencing anticpated in May, 2010.[63] 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 funds deposited by investors and later disbursed to other investors. The same day, a Securities and Exchange Commission civil complaint[64] was filed against DiPascali.[65]

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.[66] 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.[67] 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.[68] According to an SEC memo, DiPascali "responded evasively" to questioning following Madoff's arrest.[69]

Enrica Cotellessa-Pitz

Enrica Cotellessa-Pitz, controller 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 statements off its website.[70]

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.[67] [71] 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.[72][73]

Sosnik Bell and Co.

Even before Sosnik and Bell took over a small New Jersey 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.[20]

Fairfield Greenwich Group

Fairfield Greenwich Group, 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.[74]

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.[75] Another Noel son-in-law's territory included Asia. Madoff began advertising openly, contrary to his initial strategy of handpicking investors.[74] The company is listed as a defendant in an investor lawsuit filed in Miami.[20]

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. [76]

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. [77][78]

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 Twardy, 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)[35]

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.[79] 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.[80]

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).[81]

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 are under the control of their local directors. [82]

J. Ezra Merkin

J. Ezra Merkin, a prominent investment advisor and philanthropist, has been sued for his role in running a "feeder fund" for Madoff.[83] 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.[84] The Connecticut Attorney General Richard Blumenthal is examining the role boards of nonprofits played, in possibly not conducting due diligence on donors' contributions.[85]

On April 6, 2009, New York Attorney General Andrew Cuomo filed civil fraud charges [86] 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."[87][88][89][90]

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.[91]

On May 7, 2009, Madoff Bankruptcy Trustee, Irving Picard filed a lawsuit [92] 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.[93]

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.[94]

Cohmad Securities Corp.

Cohmad Securities, whose name combines “Cohn” and “Madoff,” founded in 1985 by Madoff and Cohn, Madoff’s friend and former neighbor.[95] 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%. [96]

The brokerage firm lists its address as Madoff's firm's address in New York City. Cohmad employs Robert Jaffe, as vice president.[28] 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.[97]

Jaffe, a philanthropist, "worked the Palm Beach, Florida circuit, and attracted many Palm Beach Country Club members as investors."[98] 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.[96] 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.[99][100]

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).[101]

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.[28][102]

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.[103] 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[104] 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.[30][52] On May, 28, 2009, Bank Medici lost its Austrian banking license. Kohn and the Bank are under investigation.[105]

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.[106]

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.[107]

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. [96] The case is Picard v. Cohmad Securities Corp., 09-AP-1305, U.S. Bankruptcy Court, Southern District of New York (Manhattan).[95]

On June 22, 2009, the U.S. Securities and Exchange Commission (SEC) also filed civil fraud charges [108] 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. [96]

Stanley Chais, the Brighton Company

On May 1, 2009 Irving Picard, bankruptcy trustee, filed a lawsuit[109] 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. [110]

On June 22, 2009, the SEC filed civil fraud charges against Chais. According to the complaint,[111] Chais told Madoff he didn't want to see any losses on the funds' trades.[96]

Stanley Chais is a wealthy investment advisor from Beverly Hills, California who is 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. 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.[112][113] New Jersey State Senator Loretta Weinberg lost her entire life savings in Chais' "Arbitrage Partnerships" fund.[114][115]

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,[116] 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.[117] The town of Fairfield, Conn., is seeking the recovery of fees, and the assets of Robert Schulman, who once ran Tremont Group Holdings have been temporarily frozen. [118][119]

Lawsuits filed have been 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.[120]

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.[121]

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)[35]

The Tremont Group is represented by Michael Gruenglas of Skadden, Arps, Slate, Meagher & Flom 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.[117] The Town of Fairfield, Connecticut 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.[122]

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.[123]

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.[124] 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)[35]

Fiserv Inc.

A $1 billion class-action federal lawsuit was filed in Colorado against Fiserv, 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."[125]

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