Jailed financier Bernard Madoff's Palm Beach mansion, 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.
Barry Golden, a spokesman for the U.S. Marshals Service, said five U.S. marshals arrived at the 8,753-square-foot, five-bedroom mansion late Wednesday afternoon, hours after marshals seized the boats. Authorities planned to enter and secure the mansion, change the locks and conduct an inventory of the property, which Palm Beach County records show had a taxable value of $9.3 million last year.
The process "might take a while," Golden said.
Palm Beach County property records show that the mansion was purchased in 1994 under his wife Ruth's name for $3.8 million. The 2008 property tax bill was $157,298.
Earlier in the day, Golden said Madoff's 55-foot yacht named "Bull" and a 24-foot motor boat were taken from marinas on Florida's east coast. The yacht, a 1969 Rybovich, is worth $2.2 million.
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.
Galvin's office is seeking restitution on behalf of Fairfield investors in Massachusetts, along with disgorgement of hundreds of millions of dollars in performance fees paid to the company for the Madoff-related investments.
Madoff pleaded guilty last month to securities fraud, perjury and other charges for operating a multi-billion-dollar fraud that victimized celebrities, charitable and financial organizations, banks and investors worldwide. He faces a maximum 150-year prison term at a scheduled June 16 sentencing.
Madoff has insisted he acted alone. However, federal investigators are continuing to seek evidence that could theoretically implicate his relatives, business associates or others.
Prosecutors are seizing as much as they can of Madoff's personal fortune, and have begun demanding millions of dollars in payments from his relatives. Roughly 6,700 people have filed claims for a share of whatever is recovered. Thousands more — some who lost in excess of $1 million — are expected to come forward.
Court documents filed by Madoff's attorneys have indicated Madoff and his wife had up to $826 million in assets at the end of last year.
If prosecutors get their way, Madoff and his wife, who has not been charged, will have to give up all their assets, including a $7 million Manhattan penthouse bought in 1984, the Florida home, a $1 million home in Cap d' Antibes, France and a $3 million luxury home on New York's Long Island. The government also wants Madoff and his wife to forfeit $10 million in furnishings for all the homes and luxury cars, among other items.
Defense attorneys have indicated they may try to keep the Manhattan apartment, as well as about $62 million in securities, for his wife.
On Wednesday, Madoff's lawyer Ira Sorkin spoke briefly about the government seizing his client's assets.
"We have no objection to the seizure or to the assets being sold," said Sorkin. "The proceeds of the sale will be put aside for discussion at a later date."