Madoff clients' lawsuits look to others for recompense

Fiduciary duty also plays a central role in the proposed class-action lawsuit filed last month by a pension fund that represents more than 10,000 Philadelphia-area hospital and health care workers. The lawsuit targets Austin Capital Management, an investment firm that placed part of the fund's investments with Madoff.

But in a legal twist, the fund charges that Austin Capital violated the Employment Retirement Income Security Act, the federal law that sets minimum standards for retirement and health benefit plans. KeyCorp key, parent company of Austin Capital, says it does not comment on pending litigation.

Theodore Lieverman, a Spector Roseman Kodroff & Willis law partner representing the pension fund, says ERISA regulations designate investment managers as fiduciaries and require them to act "prudently" when they make decisions for retirement and benefit funds. As a result, he says, the pension fund merely needs to prove "that Madoff was not a prudent investment."

"We're arguing that there were any number of red flags out there that Austin Capital Management or anyone else investing should have seen," says Lieverman. "It's hard to argue it was a prudent investment."

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