The implications of the Madoff fraud continue to widen. Just a day after a Connecticut town filed suit in the case, officials in Massachusetts have also taken action against one of the Connecticut based feeder funds associated with the disgraced financier.
Massachusetts Secretary of State William Galvin has accused the Fairfield Greenwich Group of fraud in its dealings with investors. Fairfield Greenwich funneled cash into Bernard Madoff’s operations – now revealed to be a multi-billion dollar Ponzi scheme. Galvin says the Connecticut fund mislead its own investors, and failed to carry out due diligence.
"They turned a blind eye to it. When they became suspicious, or at least had reason to ask questions, they not only failed to ask the questions, but they actually assisted Mr Madoff. We have a transcript of a conversation between Mr Madoff and principals of Fairfield Greenwich where he’s instructing them how to answer the SEC’s questions."
Other feeder funds, Maxam Capital and Tremont Group Holdings were named a lawsuit filed this week by the town of Fairfield, on behalf of its pension fund, which lost more than 40 million dollars in the scheme. Town attorney David Golub says he also believes the funds failed to heed red flags that were obvious to other financial professionals.
"We believe that the feeder funds knew that Bernard Madoff was engaged in criminal activity and supported that criminal activity, abetted that criminal activity. What investigation has shown is that many of the major financial institutions refused to do business with Bernard Madoff."
Fairfield’s suit seeks $75m dollars in compensatory and punitive damages. A judge has already ordered a temporary freeze on the assets of Madoff, his family members and the fund principals named in the suit.