New Wave of Suits Focuses on 'Intense' Investor Relationships With Madoff

New Wave of Suits Focuses on 'Intense' Investor Relationships With Madoff - 5-13-2009 , Class Action News, Class Action, Securities News, shareholder class action, claim, litigation, securities action, common stock'>

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New Wave of Suits Focuses on 'Intense' Investor Relationships With Madoff
Noeleen G. Walder

http://www.law.com. May 13, 2009
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EXCERPT: For the third time this month, the trustee overseeing the liquidation of Bernard L. Madoff Investment Securities has brought a high-profile suit against a sophisticated investor demanding the return of millions of dollars, and more suits are expected soon. The $1.1 billion action brought Tuesday by trustee Irving H. Picard against Harley International Ltd. claims the firm, which had long-standing ties to Madoff's firm, "knew or should have known" that its account statements "did not reflect legitimate trading activity and that Madoff was engaged in fraud." […] The suits represent the first wave of avoidance actions against investors who had "long-term and intense" relationships with Madoff and his investment advisory firm, according to David J. Sheehan, who represents Picard. On May 1, the trustee brought a $1 billion fraudulent transfer action against Stanley Chais alleging the philanthropist and investment advisor knew or should have know the "implausibly high returns" he reaped since 1995 were the result "of manipulated purported returns, false documents and fictitious profits." Days later, Picard demanded that J. Ezra Merkin, who "enjoyed unusually intimate access" to Madoff, return roughly $558 million in "non-existent principal" he withdrew from his friend's firm before its implosion. Both Chais and Merkin engaged in "frequent transactions" with Madoff over a "long period of time," and received statements that on a daily basis provided them with "intensive insights" into how his business operated. Coupled with other red flags, including a 2001 article in Barron's entitled "Don't Ask, Don't Tell: Bernie Madoff is so secretive, he even asks investors to keep mum," "one has to reach the conclusion" that they knew or should have known of the fraud, Sheehan said.

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