Fund that helped Madoff draws fraud charges
— -- A major feeder fund for convicted Ponzi scheme architect Bernard Madoff was charged with fraud Wednesday for allegedly misrepresenting its lack of knowledge about the disgraced financier's operations.
The case, the first government charges targeting one of the many funds that funneled investors' money to Madoff, was filed against the Fairfield Greenwich Group by Massachusetts Secretary of State William Galvin's office.
COURT PDFs:Complaint against Fairfield Greenwich Group, Part 1 | Part 2
The charges came as federal authorities in Florida seized Madoff's Palm Beach mansion, his 55-foot yacht "Bull" and a smaller boat as part of an effort to recover assets to repay swindled investors, the Associated Press reported.
Fairfield's Sentry funds invested and lost roughly $7.2 billion of investors' assets with the former Nasdaq chairman, who pleaded guilty last month to operating a massive scam that victimized celebrities, charities and average investors worldwide.
The complaint cited an alleged "profound disparity" between the due diligence Fairfield told investors it conducted on Madoff's operations and the minimal checking it actually performed.
"We allege that as time went on, they even worked with Madoff and helped conceal what he was really doing," said Galvin.
Seth Faison, a Fairfield spokesman, called the allegations "false and misleading" and said the company "conducted vigorous and robust monitoring on an ongoing basis of the Madoff investments."
"Unfortunately, Massachusetts has leapt to erroneous conclusions without completing its investigation and without even granting a meeting with Fairfield Greenwich Group in an attempt to arrive at an accurate understanding of the facts," said the firm, which stressed that it would contest the charges.
Despite its 18-year business tie with Madoff, Fairfield has insisted it had no way of knowing that he did none of the complex securities trades he promoted to thousands of clients, and that he used money from new investors to pay earlier ones, a typical Ponzi scheme.
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