Investment News - The Leading News Source for Financial Advisors

Lawsuit claims Fiserv, TD Ameritrade tied to Madoff scam

• 
• 
• 
• 
• 

By Bruce Kelly

April 3, 2009 3:49 pm ET

Fiserv Inc., a technology company formerly in the clearing business, funneled money to Bernard Madoff, according to a lawsuit seeking class-action status on behalf of 800 investors, who are hoping to recover up to $1 billion.

TD Ameritrade Holding Corp. was also named in the suit for allegedly turning a blind eye to the matter when it acquired Fiserv’s retirement and custodial accounts in 2007, according to the lawsuit.

Filed Thursday in U.S. District Court in Denver, the suit alleges that Fiserv and Mr. Madoff had a quid-pro-quo relationship. A variety of Fiserv and TD subsidiaries are also being sued.

Fiserv allegedly reaped $25 million in annual revenue on the $1 billion in assets “steered to it by” Bernard L Madoff Investment Securities LLC of New York, according to the suit.

Fiserv of Brookfield, Wis., allegedly held the pension and individual retirement accounts in custody or trust for investing with Madoff Securities.

That relationship was fraudulent, the lawsuit said.

“In truth, while [Fiserv and its various affiliates] were the designated ‘custodians’ for their pension and IRA accounts, that designation was pure fiction. From beginning to end, Mr. Madoff’s firm held and controlled the actual custody of their pension and IRA accounts, and their underlying cash,” the complaint states.

Meanwhile, TD Ameritrade excluded any business involving customer accounts with Madoff Securities when it acquired 300,000 retirement and custodial accounts with $46 billion in assets from Fiserv in 2007, according to the suit. “This exclusion is highly suspicious because it appears that [TD] obtained actual knowledge of Mr. Madoff’s fraud through the due diligence process, which caused these assets to be excluded,” the complaint read

Mr. Madoff is in prison awaiting sentencing after pleading guilty to running a $65 billion Ponzi scheme.

Kim Hillyear, a spokesman for TD Ameritrade Holding Corp. of Omaha, Neb., said the firm had no comment about the allegations.

"Fiserv intends to vigorously defend against the assertions contained in the complaints, which have no merit whatsoever," wrote Judy DeRango Wicks, in an e-mail late Friday.

Some Fiserv clients in the past picked the adviser for the self-directed IRA accounts, she explained, although she did not say Mr. Madoff was among those chosen.

"Prior to 1996, Fiserv acquired several companies that act as custodians for individuals with self-directed IRAs. Account owners for self-directed IRAs are solely responsible for selecting his or her financial advisors and investments," she wrote.

"Each of those self-directed accounts was opened by an individual investor who knew up front that it was his or her sole responsibility to perform due diligence and to make his or her own investment choices within the account," Ms. DeRango wrote.

"Each account owner acknowledged, in writing, that we do not provide investment advice or investment management, rather we solely execute instructions as directed by the investor."

• Email
• Print
• Share
• RSS
• Reprint