SEC charges firm, 4 people with fraud in Madoff case

— -- The Securities and Exchange Commission on Monday charged a New York brokerage, a financial representative and an investment adviser with secretly funneling billions of dollars to Bernard Madoff's Ponzi scheme.

In a complaint filed in U.S. District Court in Manhattan, the SEC alleged Cohmad Securities furtively functioned as Madoff's "in-house marketing arm," letting him falsely manufacture "an air of prestige" around his firm.

Also charged with fraud were Maurice Cohn, 78, the firm's CEO, and his daughter, Marcia Cohn, 49, president. The civil complaint separately charged Robert Jaffe, a Cohmad vice president, with participating in the fraud and luring more than $1 billion to Madoff.

The defendants ignored numerous red flags in dealing with Madoff, the SEC said.

"Madoff cultivated an air of exclusivity by pretending he was too successful to trouble himself with marketing to new investors," said Robert Khuzami, director of the SEC's enforcement division. "In fact, he needed a constant in-flow of funds to sustain his fraud."

Madoff pleaded guilty in March to running a scam that used money from new investors to pay earlier ones. He is scheduled to be sentenced Monday and faces up to 150 years in prison.

According to the SEC's complaint, Cohmad officials floated among the country club set in New Jersey and Palm Beach, Fla., coaxing investors.

Madoff, in fact, owned 15% of Cohmad, and Cohmad's offices were embedded within Madoff's in Manhattan, the SEC charged.

The SEC alleged Madoff hid Cohmad's dealings from regulators, barring Cohmad from using e-mail and concealing the fees Madoff paid Cohmad.

Cohmad received more than $100 million in fees, the SEC alleged.

Cohmad's lawyer, Clifford Thau, could not be reached for comment.

Jaffe separately brought in more than 150 accounts and withdrew at least $150 million from Madoff funds, the SEC charged. His lawyers at Arkin Kaplan Rice called the complaint "unfair" and "baseless."