Chais Defends SEC Suit Citing Agency’s Failure to Stop Madoff

Chais Defends SEC Suit Citing Agency’s Failure to Stop Madoff - 10/22/2009

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Chais Defends SEC Suit Citing Agency’s Failure to Stop Madoff
David Glovin

Bloomberg. October 22, 2009
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EXCERPT: Money manager Stanley Chais, denying allegations in a U.S. Securities and Exchange Commission lawsuit against him stemming from Bernard Madoff’s Ponzi scheme, said the agency itself is to blame for failing to stop the fraud. The SEC sued Chais in June, saying Chais since the early 1970s steered assets from three investment funds to Madoff, “despite having clear indications” the money manager was engaged in fraud, the SEC said its lawsuit. Chais, in his response filed yesterday in federal court in Manhattan, denied many of the allegations and faulted the SEC for failing to catch Madoff’s fraud. A report by the SEC’s internal watchdog in September criticized the agency for missing repeated signs of fraud at Madoff’s firm. The SEC’s “claims are barred by virtue” of its “own conduct, which provided credibility to Madoff,” Chais, a resident of New York and Beverly Hills, California, said in his answer to the lawsuit. John Heine, a spokesman for the SEC, declined to comment. The SEC accused Chais of ignoring signs of Madoff’s fraud to collect fees from his investors, who had about $900 million placed with Bernard L. Madoff Investment Securities LLC, and to pocket sizeable returns for himself and his family. […] Chais and funds he controlled earned more than $250 million in fees from his investors, the SEC said in its complaint. From 1995 to 2008, withdrawals from Madoff’s firm by Chais and his family exceeded their investments by about $500 million, according to the SEC. Chais didn’t elaborate in his answer on the SEC’s alleged culpability. His lawyer, Eugene Licker, didn’t immediately return a call seeking comment. Licker previously said that Chais was “blindsided and victimized” by Madoff. Separately, Chais said the SEC’s allegations in the complaint about his receipt of funds from Madoff are “irrelevant” to the case.

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