Bernard Madoff's 'Stealth Sales Force' Charged with Fraud

SEC alleges employees of feeder fund funneled "billions of dollars" to Madoff.

ByABC News
May 6, 2009, 5:13 PM

June 22, 2009— -- A Bernard Madoff feeder fund and three of its employees were charged with securities fraud by the Securities and Exchange Commission on Monday. The SEC alleges they acted as a "stealth sales force" and "knowingly or recklessly" participated in the Ponzi scheme by funneling billions of dollars to Bernard L. Madoff Investment Securities Corporation LLC.

Cohmad and three of its employees, Maurice Cohn, Marcia Cohn and Robert Jaffe, were "instrumental to the success of Madoff's scheme" for more than 20 years, according to documents filed in the United States District Court in the Southern District of New York.

The SEC alleges the defendants specifically recruited "affluent but financially unsophisticated investors."

"Madoff communicated to the Defendants that he would not accept investments from anyone who worked in the finance or banking industry. Madoff communicated his concern to Cohmad and the Cohns that sophisticated investors would ask 'too many questions,'" according to the civil complaint.

The three defendants were paid an excess of $100 million in fees for recruiting investors who accounted for more than 800 accounts at Madoff's investment advisory business.

The complaint alleges that Robert Jaffe was paid directly through his personal account at Bernard L. Madoff Investment Securities and received "outsized" returns of up to 46% despite the fact that the clients he referred received returns of 12% to 18%.

Jaffe withdrew at least $150 million from his accounts between 1996 and 2008 and "made specific request to BMIS seeking a specific dollar amount of gains for a given period," according to the SEC.

"The complaint filed today by the Securities and Exchange Commission, which we learned about only from the press, smacks of impulsiveness and efforts at self-justification. It is unfair, baseless in the law, and is inaccurate in its understanding of the facts and of Mr. Jaffe," Jaffe's lawyer said in a statement.

Lawyers for the Maurice and Marcia Cohn did not return calls for comment.

Jaffe withdrew at least $150 million from his accounts between 1996 and 2008 and \"made specific request to BMIS seeking a specific dollar amount of gains for a given period,\" according to the SEC.

\"The complaint filed today by the Securities and Exchange Commission, which we learned about only from the press, smacks of impulsiveness and efforts at self-justification. It is unfair, baseless in the law, and is inaccurate in its understanding of the facts and of Mr. Jaffe,\" Jaffe's lawyer said in a statement.

Lawyers for the Maurice and Marcia Cohn did not return calls for comment.

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