Firms colluded with Madoff, Galvin charges

Massachusetts Secretary of the Commonwealth William Galvin today charged Fairfield Greenwich Advisors LLC and Fairfield Greenwich (Bermuda) Ltd. with fraud in connection with the Bernard Madoff investment scandal.
APR 01, 2009
By  Sue Asci
Massachusetts Secretary of the Commonwealth William Galvin today charged Fairfield Greenwich Advisors LLC and Fairfield Greenwich (Bermuda) Ltd. with fraud in connection with the Bernard Madoff investment scandal. Mr. Galvin’s administrative complaint alleges that the firms, which are part of New York-based Fairfield Greenwich Group, misrepresented to investors a lack of knowledge about the operations of Bernard L. Madoff Investment Securities LLC, also of New York. Fairfield had placed nearly $7 billion from its Fairfield Sentry fund with Bernard L. Madoff Investment Securities, the complaint alleges. Mr. Madoff, who pleaded guilty to running a $65 billion Ponzi scheme last month, is awaiting sentencing. The complaint, filed with the state’s securities division, seeks restitution to Massachusetts investors for losses and performance fees paid to Fairfield Greenwich, as well as an administrative fine. “Investment advisers have a fiduciary responsibility to their clients under the law,” Mr. Galvin said in a statement. The Massachusetts attorney general’s office alleges that Mr. Madoff coached Fairfield officials in 2005 on how to respond to questions from Securities and Exchange Commission attorneys who were looking into complaints. A December 2005 conversation between Mr. Madoff and Fairfield’s chief operating officer and general counsel, Mark McKeefrey, and chief risk officer, Amit Vijayvergiya, is among the exhibits in the case. The conversation is detailed in a transcript of an audiotaped telephone call, which was produced by Fairfield in response to a subpoena from the securities division. Mr. Vijayvergiya testified that the three parties on the call included him, Mr. McKeefrey and Mr. Madoff, the complaint said. “We are still examining the complaint,” said Thomas Mulligan, a Fairfield spokesman. “The lawyers are looking at it.” For its part, Fairfield vigorously denied the charge. "The allegations in the complaint brought against FGG by the Massachusetts Securities Division are false and misleading, the firm said in an e-mailed statement. "Contrary to the allegations, FGG conducted vigorous and robust monitoring on an ongoing basis of the Madoff investments … the complaint, which is based on nothing more than 20-20 hindsight … supposes that anyone familiar with Madoff's operations should have determined that it was a Ponzi scheme. The SEC, other regulatory agencies and every other investor in Madoff failed to detect his sophisticated fraud. FGG is appalled by the Madoff losses suffered by its investors, including its employees and the three investors who reside in Massachusetts. FGG intends to vigorously contest the allegations in the complaint." Fairfield earned a fee of 1% of assets under management for what was invested in the funds and a 20% performance fee based on the funds’ returns, according to the statement. Mr. Galvin’s office didn’t have an estimate available of how much money Massachusetts investors had invested in the fund

Latest News

Roughly three-fifths of Americans agree on higher taxes for large corporations, higher-income households
Roughly three-fifths of Americans agree on higher taxes for large corporations, higher-income households

Pew survey reveals slight majority consensus on tax rates, but views splinter based on political alignment and income levels.

The Fed's going to cut rates
The Fed's going to cut rates

While the Federal Reserve's decision to hold interest rates steady in March was widely expected, it's the reactions from financial professionals that provide a more nuanced picture of the central bank's approach.

Ontario Pension Fund revamps PE business in light of global risk
Ontario Pension Fund revamps PE business in light of global risk

The pioneering member of Canada's Maple Eight is stepping back from its go-it-alone private equity approach as a drought in deals and Trump's trade war prompt a rethink.

Raymond James, RBC reel in UBS advisors managing over $690M in assets
Raymond James, RBC reel in UBS advisors managing over $690M in assets

The firms' latest additions in Florida and Nevada come as a strategic change at UBS raises risk of advisor defections.

Assetmark debuts new advisor succession planning program
Assetmark debuts new advisor succession planning program

The new program offers opportunities and events structured for rookies, next-gen advisor leaders, and soon-to-exit veterans.

SPONSORED Beyond the all-in-one: Why specialization is key in wealth tech

In an industry of broad solutions, firms like intelliflo prove 'you just need tools that play well together'

SPONSORED Record growth: Interval funds emerge as key players in alternative investments

Blue Vault Alts Summit highlights the role of liquidity-focused funds in reshaping advisor strategies