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The civil suit, filed in federal court in Manhattan, wants three Fairfield Greenwich funds to give back the money they took out of their Madoff accounts from 2002 until the scheme's collapse in December. The suit alleges the funds, which placed client money with Madoff, "should have known" he was engaged in fraud. According to the suit, since 1995, the Fairfield funds, which are run by Walter Noel, invested about $4.5 billion with Bernard L. Madoff Investment Securities LLC, or BLMIS, through 242 wire transfers, Picard said in the complaint. The funds are Fairfield Sentry Ltd., Greenwich Sentry LP and Greenwich Sentry Partners LP. Beginning in 1996, "the defendant funds received from BLMIS unrealistically high and consistent annual returns," Picard said in the complaint. "Defendants knew or should have known that BLMIS was engaged in fraud based on these facts." The hedge funds withdrew $3.2 billion from Madoff accounts in the six-year period before Madoff's Dec. 11 arrest, including $1.2 billion withdrawn in the final three months of the fraud, according to the complaint. Picard said that amount is recoverable under U.S. bankruptcy law. According to the lawsuit, the funds received "unrealistically high and consistent annual returns" of 10% to 21% from the Madoff investments. The suit doesn't claim that Fairfield or its officers had knowledge of the Madoff fraud but says the firm didn't perform the adequate due diligence it promised its clients. The suit also alleges Fairfield missed numerous warning signs, including trades listed in its accounts that could never have occurred. Moreover, the complaint said, the funds' account records showed prices for 280 stock trades that did not match the actual price range for those stocks when the trades supposedly occurred. Some trades were shown as occurring on days that were actually holidays or weekends, according to the complaint. "These trades were clearly fictional," the complaint said. Picard also wants the court to allow him to deny the three funds any compensation from the Madoff estate "unless and until" they return the money they withdrew from their Madoff accounts in that six-year period. - Donna Block See earlier story from Dealscape Madoff Trustee's Lawsuit Against Fairfield Greenwich
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The lawsuits in the Bernard Madoff con are now flying. On the heels of news that at least eight of Madoff's biggest investors were being investigated by the feds for what they knew about the scheme, a suit was filed late Monday by Madoff trustee Irving Picard seeking $3.2 billion from Fairfield Greenwich, the Connecticut hedge fund that sent more money Madoff's way than anyone else.
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