Firm rejects Madoff charges by Massachusetts regulator

A Connecticut firm that acted as a feeder fund for Bernard Madoff’s fraudulent investment scheme rejected allegations by Massachusetts’ top securities regulator that it misrepresented its lack of knowledge about Madoff’s operations.

Secretary of State William Galvin accused Fairfield Greenwich Group on Wednesday of civil fraud charges, saying officials were coached by Madoff on how to answer federal investigators’ questions and misrepresented how much they really knew.

The firm, in papers filed Wednesday, said any allegations that Fairfield Greenwich officials took instructions from Madoff and tailored answers to the SEC are “demonstrably false.”

The company said it regularly improved its diligence and risk monitoring abilities to keep pace with evolving industry standards.

It also said records show that Fairfield Greenwich Group personnel responded truthfully to the best of their knowledge to all SEC questions.

“It is clear that the complaint proceeds on theories of ‘guilt by association’ and ‘fraud by hindsight,’” the filing said.

Galvin said the firm invested over 95 percent of its Sentry Funds’ $7.2 billion in assets in Bernard L. Madoff Investment Securities.

The firm said it made clear to investors that Madoff held substantially all of the Sentry funds’ assets.

The firm said that PricewaterhouseCoopers, retained by FGG to audit the Sentry funds, consistently issued clean audit opinions.

The response to Galvin’s complaint also outlines what the firm called its oversight of the fund, including daily trade confirmations and monthly brokerage statements, price checking, asset verification and access.

“The assertion that FGG failed to conduct diligence in a manner amounting to fraud is entirely inconsistent with the objective facts,” the company said.

Galvin’s complaint seeks restitution for Massachusetts investors for losses from Fairfield Greenwich.

Galvin said he had not seen the company’s response but that his office stands by its case.

Madoff is in jail awaiting sentencing after pleading guilty to swindling thousands of investors of billions of dollars in what could be the biggest scam in Wall Street history. He faces a maximum sentence of 150 years behind bars.