Madoff Little Helpers Charged

Bernard Madoff
Bernard Madoff

Federal regulators on Monday charged a New York brokerage firm and a California investment adviser with securities fraud, accusing them of funneling billions of dollars from investors into Bernard Madoff’s Ponzi scheme.The Securities and Exchange Commission announced civil fraud charges against Cohmad Securities, its chairman, Maurice Cohn, chief operating officer Marcia Cohn and broker Robert Jaffe.

Named in a second SEC lawsuit was Los Angeles-based investment adviser Stanley Chais, who allegedly oversaw three funds that invested all of their assets — nearly $1 billion — with Madoff.

Madoff secretly controlled New York-based Cohmad and used it to procure a steady stream of funds for his multibillion-dollar fraud, the SEC said.

While channeling billions in investor funds to Madoff, the associates together collected several hundred million dollars in fees from the now-disgraced money manager, the SEC alleged.

The agency’s lawsuits were filed in federal court in Manhattan. One accuses Cohmad, the Cohns and Jaffe of actively marketing Madoff’s funds to prospective investors “while knowingly or recklessly disregarding” facts that indicated he was running a fraud. A second suit alleges that Chais committed fraud by misrepresenting his role in managing the three funds’ assets and providing account statements to investors that he should have known were false.

Chais has portrayed himself for the past 40 years as an investment “wizard” who managed hundreds of millions of dollars of investor funds in the three partnerships, according to the SEC.

In truth, he was little more than a middleman who merely turned over all of the funds’ assets to Madoff while charging the funds more than $250 million in fees, the agency said.

Jaffe and the Cohns, the SEC said, “collectively raised billions of dollars from investors for Bernard Madoff’s Ponzi scheme”.

“They ignored and even participated in many suspicious practices that clearly indicated Madoff was engaged in fraud,” it further said.

In a statement Robert Khuzami, director of the SEC’s enforcement division, said the defendants helped Madoff “cultivate an air of exclusivity by pretending that he was too successful to trouble himself with marketing to new investors”, while providing “a constant in-flow of funds to sustain his fraud”.

Madoff, 71, has been jailed since March, when he pleaded guilty to securities fraud, perjury and other charges. He admitted stealing billions of dollars from some investors to pay fraudulent profits to others. He faces up to 150 years in prison and is scheduled to be sentenced next week in Manhattan federal court.

The thousands of investors who lost money included ordinary people, Hollywood celebrities and scores of famous names in business and sports — as well as big hedge funds, international banks and charities in the U.S., Europe and Asia.

Sources: www.npr.org, www.themoneytimes.com

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