Madoff yacht seized; feeder fund firm is charged with fraud

— -- Jailed financier Bernard Madoff's 55-foot luxury yacht and a smaller boat were seized by U.S Marshals in Florida Wednesday, while in Massachusetts, one of Madoff's top investment feeder funds was charged with fraud for allegedly misrepresenting how much it knew about the disgraced financier's operations.

The boats were taken from two marinas. Marshals' spokesman Barry Golden says the yacht named Bull is a 1969 Rybovich. A 24-foot motor boat belonging to Madoff also was seized.

The investment fraud case, the first government charges against one of the many funds that funneled investors' money to Madoff, was filed by Massachusetts' top securities regulator against the Fairfield Greenwich Group.

The firm's Sentry Funds placed roughly $7.2 billion of investors' assets, representing 95% of the total, with Madoff.

The complaint filed by Massachusetts Secretary of State William Galvin cited an alleged "profound disparity" between the due diligence Fairfield told its investors it would conduct on Madoff's operations and minimal checking the firm actually performed.

The alleged disregard of duties owed to investment clients and alleged misrepresentations "rises to the level of fraud," the complaint says.

Investment advisers have a fiduciary responsibility to their clients under law, said Galvin. "The allegations against Fairfield in this complaint outline a total disregard for such responsibility, which helped the Madoff scheme to stay afloat for so long."

The complaint alleged that Madoff coached Fairfield officials in 2005 about potential responses to Securities and Exchange Commission attorneys who were investigating the firm's relationship with Madoff. That investigation was prompted by Harry Markopolos, a Boston-based fraud investigator.

A transcript of one of the sessions between Madoff and Fairfield, filed as an exhibit with the complaint, shows Madoff began the discussion by warning, "first of all, this conversation never took place … okay?"

Fairfield spokesman Thomas Mulligan said the company is examining the complaint and had no immediate comment.