Washington investors seek to pin Madoff losses on auditors

13 Oct 2015 | Author: | No comments yet »

Madoff-related investment case heads for trial in Seattle.

Nearly seven years after Bernie Madoff’s investment empire was revealed to be a $17.5 billion fraud, the battle by investors to recover their losses ramps up in a case that goes to trial this week in Seattle. A group of Washington state investors in a fund tied to Bernard Madoff’s huge Ponzi scheme are going after the fund’s accountants in a Seattle courtroom, in what may be the only Madoff-related case in the U.S. to make it all the way to a jury trial. FutureSelect Portfolio Management of Redmond and some related firms, headed by hedge fund manager Ronald Ward, lost a total of about $129 million in the pyramid scheme. In court papers, the company alleges that Ernst & Young would have uncovered the scheme if it had taken even the most basic steps to verify Madoff’s assets — something the auditing firm denies it had any obligation to do. “This case is about the Madoff fraud and how it got to Washington state and how it’s impacting real people in Washington state,” said FutureSelect lawyer Steven Thomas. “Because Ernst & Young said the numbers were good, FutureSelect invested.

Jury selection started Monday and the initial hearings are expected Tuesday or Wednesday, said Steven Thomas, a lawyer for plaintiffs FutureSelect, a Kirkland-based investment fund that saw more than $100 million of its investors’ money disappear in Madoff’s $20 billion fraud. More than 300 investors, ranging from local individuals to a church in New York, lost their money after FutureSelect invested in a so-called “feeder fund” that channeled money to Madoff. The roughly $17.5 billion in principal invested by retirees, charities and other clients over decades was mostly gone — paid out as fake profits or raided by Madoff’s family and cronies. The plaintiffs argue that they wouldn’t have been bamboozled by Tremont, the fund that fed into Madoff’s investment firm, if the accountants hadn’t signed off on its statements.

Most Madoff disputes were settled after class-action litigation in New York; a liquidator overseeing the restitutions had as of late September distributed $7.2 billion to Madoff customers. But FutureSelect refused to be part of the class action suit because it felt “responsibility toward their investors,” and in a large proceeding their voices wouldn’t be heard, said Thomas. Washington’s Supreme Court denied a bid by the defendants to have the case transferred to New York or to apply New York law, which would not have allowed the lawsuit. Its audits, for which it was paid $40,000 apiece, were simply to provide “reasonable assurance” that Tremont’s financial statements were free of misstatements. Ward’s decision to continue investing with Madoff-advised funds (and continue reaping the resulting fees) caused FutureSelect to suffer losses when Madoff revealed his fraud.”

Twitter-news
Our partners
Follow us
Contact us
Our contacts

About this site