LONDON—Britain’s Serious Fraud Office said Tuesday it won’t take action against the directors of Madoff Securities International Ltd., the U.K. arm of Bernard Madoff’s investment and trading business.
“Following a thorough review of all the available evidence it has decided to take no action against either the company or its directors there being insufficient evidence to provide a realistic prospect of conviction,” the SFO said.
However, investigators have found it difficult to prove that workers at Mr. Madoff’s London office, which employed about 25, were knowingly involved. U.K. employees have said they were unaware of the fraud, people familiar with the matter told Dow Jones Newswires.
Investigators have had similar challenges building a case against fund firms that funneled client money to Mr. Madoff’s Ponzi scheme because they need to establish whether there were funds moved by these firms after the fraud came to light in mid-December 2008, meaning people at the funds would have been in full knowledge of allegations regarding criminal acts, these people added.
Tag Archives: Madoff
Because they’ll win – the claimants are trying to blame the bank for investment decisions their own financial advisors made. I made the same point last year when this suit was first filed, but here’s a good update, with comments from a better lawyer.
Jeffrey Blomberg, a partner in the Greenwich office of international law firm Withers Bergman LLP, commented that while he didn’t have an opinion as to the merit of the plaintiffs’ entire case, “They are trying to fit a square peg in a round hole. The plaintiffs are trying to impose fiduciary duties on a custodial relationship where they don’t generally apply.”
Even if the newly implemented SEC rules regarding investment advisers who have custody of client assets, which the NY Times’ Floyd Norris penned a column on today, had been in effect at the time the Westport National arrangements were entered into, they wouldn’t apply to the bank because it was acting as a custodian for the IRA and not as investment adviser to an IRA.
“In this case, I don’t see where the bank had a duty to monitor how the assets of their customers were invested,” says Blomberg. “This suit appears to be applying duties of an investment advisor to the bank, who appears to have been acting merely as a custodian with specific contractual obligations.”
With Westport Bank’s largest shareholder having very deep pockets it’s easy to see why plaintiffs would try to go after the bank, but it appears they are really trying to hold a third party accountable for someone else’s mistakes — a notion the bank reminds customers of when they question the ethics in this sad saga
It won’t provide much financial relief for the scam victims but these guys kept the game going for at least fifteen years and should have tales to tell. Will this bring down the boys? Want a house on Tomac? Cherry Valley?
The SEC analysis of its bungling of the Madoff matter is producing lots of interesting tidbits, including the fact that Renaissance Technologies grew suspicious of Madoff back in 2003 and eventually pulled its investments from him.
[….] Henry Laufer, Renaissance’s chief scientist, expressed amazement at Mr. Madoff’s ability to exit the market, selling its investments and holding primarily cash in a way that consistently staved off losses other investment firms suffered.
The timing of the moves, Mr. Laufer said, was almost statistically impossible. Mr. Laufer told the SEC in testimony earlier this year that “we would have loved to figure out how he did it so we could do it ourselves.”
He added: “And so that was very suspicious.”
Renaissance didn’t pull its Madoff investments immediately, according to the report. Nathaniel Simons told regulators that one reason was that the firm believed the SEC had closely examined Mr. Madoff’s investments, and that regulators could readily perform the same analysis Renaissance did of Mr. Madoff’s trading strategy.
“[Y]ou just assume that someone was paying attention to make sure that there was something on the other side of the trade,” the younger Mr. Simons told the SEC.
“We did feel that despite the fact that we’re kind of smart people, we were just looking at matters of public record,” he said, according to testimony in the report.
However, Renaissance’s discomfort with Mr. Madoff became greater, prompting the firm to withdraw money from the investments, people familiar with the matter said. Earlier this decade James Simons urged investors he knew also to withdraw, they said.
Renaissance employees expressed dismay to the SEC’s watchdog unit this year that regulators hadn’t unearthed Mr. Madoff’s fraudulent trades. “This is not rocket science,” Mr. Laufer told the inspector general’s office, according to Friday’s report. He added that an SEC examiner could “wander down, you know, to Goldman Sachs and wander over to their options department and ask them, how does somebody execute $10 billion of options, and find out it’s very difficult.”
So where was Walter Noel during this period? He and Andres were selling up a storm, pulling friends into the Madoff vortex not warning them away as Mr. Simons did. Why? I suggest that Simons wasn’t running a fund feeder, so he couldn’t pocket 20% of the illusory profits Madoff was claiming. And that affected his judgment.
Greenwich Bank & Trust’s parent has been sued in a class action brought by disgruntled Madoff investors. The first suits were filed last year within days of Madoff’s confession but now David Golub has stepped in with a new bunch of litigants. He’s an excellent lawyer, although I don’t remember him being involved in this field back when I was hunting wicked stockbrokers. Will he succeed? Who knows – his theory seems to be (and I’m basing this on a few scant newspaper paragraphs, not from a reading of the actual complaint) is that some “Investment Adviser”, a Ron Silverman, pooled clients’ assets, invested them with Madoff, and used GN&T’s parent as a custodian. Silverman went belly up as quickly as Walter Noel did so Golub is after the bank, claiming that if they had taken physical possession of the securities Madoff claimed to be purchasing, they’d have discovered the fraud.
Well, maybe, but Madoff was supposed to be going in and out of the market numerous times a day so what’s a custodian supposed to do to take possession? At first blush, I’d say this was a loser, but Golub’s a far better lawyer that I ever was, so I’ll make no prediction.
He passed out investors’ money to all his family and spent most of it on himself. No sign yet of the Madoff boys’ houses on Tomac or Cherry Valley being put up for sale, but my guess is that they’ll be just behind Walt’s Round Hill cottage. Maybe a “Madoff real estate tour” should be organized for this fall?
Mr. Madoff listed family members, boat captains, housekeepers and others as employees of Bernard L. Madoff Investment Securities, even though they never actually worked for the firm, newly released documents show. Mr. Madoff also used his firm’s money to pay for real estate, yachts, private planes and country club memberships, according to court filings by the trustee charged with liquidating the Madoff firm and recovering money for victims of Mr. Madoff’s multibillion-dollar Ponzi scheme.
The documents back up a previous assertion by lawyers for the trustee, Irving H. Picard, that Mr. Madoff used his business as a personal “piggy bank.”
In January, Mr. Madoff, his wife, Ruth, and other family members spent more than $100,000 on his firm’s American Express Corporate Card. Among the charges were $1,564 at Bistro Chez Jean-Pierre in Palm Beach, Fla.; $2,000 at Georgio Armani in Paris; and $2,813 at the Apple computer store in New York.
Mr. Madoff, the mastermind of the world’s biggest Ponzi scheme, doled out more than $7 million to various companies owned by his wife, Ruth, his two sons and his niece Shana. Peter Madoff’s wife, Marion, was paid a salary of $163,500 by the Madoff firm last year, even though investigators found no evidence that she actually worked there.
Mr. Madoff also paid out $471,000 to a marina in Long Island and nearly $1 million to a number of exclusive country clubs including the Breakers, the Atlantic Country Club on Long Island, the Palm Beach Country Club and the Trump International Golf Club.
If the IRS never audited this guy, who were they auditing? Just asking.
Andrew Cuomo, who sat back in the weeds while Massachusetts assembled a civil fraud case against Madoff feeder funds, has now charged Ezra Merkin and his feeder fund, Ascot, with the same claim. Connecticut’s courageous Attorney General, Dick Blumenthal, now has a pretty good feel for which way the wind’s blowing and we can expect him to join in the fray any month now – probably after his betters get past the initial court hurdles. But he’ll be there at the end to claim credit, in front of the cameras, I promise you.
The Ascot fund was formed by Mr. Merkin in 1992 exclusively as “feeder” fund for Mr. Madoff, says the Attorney General. It grew to hold $1.7 billion from 300 investors by the end of December, 2008. Mr. Madoff then used the money in a massive Ponzi scheme.
About 85% of the investors in the Ascot fund did not know their money was siphoned to Mr. Madoff, the complaint says. For those that knew, the truth about the size and scope of the investment was obfuscated, says Mr. Cuomo. Mr. Merkin collected an annual fee from Ascot’s investors amounting to 1% to 1.5% of the total assets in the fund – a fee that included the fictitious Madoff returns, says the complaint. By 2008, Mr. Merkin was collecting about $25.5 million a year from managing Ascot.
And if you think that set up was similar to Walter’s, try this:
Mr. Merkin was not personally heavily invested in his own Ascot fund. He did not reinvest his $169 million in management fees for the years 1995 to 2007 back into his own fund, says the complaint. All told, Mr. Merkin invested personally and through family trusts and foundations $7 million in Ascot in its first six years, and less than $2 million over the following 10 years.
I’m waiting for criminal fraud charges to compliment the civil ones but I expect those will come from out-of-state, rather than Hartford. Tough to put your golfing buddy in jail, I guess.