Madoff Investor Goes After Auditor

A Connecticut hedge fund is blaming the messenger and suing audit firms, claiming they did not stop the company from investing almost $300 million with good ol' Bernie Madoff.

Darien-based Maxam Absolute Return Fund LP placed all of its $280 million in holdings with Bernard Madoff, the accused mastermind of a rather large Ponzi scheme. Now the company is suing the people who audit them -- McGladrey & Pullen LLP and Goldstein Golub Kessler LLP -- for professional negligence, Bloomberg reports.

They filed the suit on Jan. 30 in state court in Bridgeport.

The auditors issued an opinion that Maxam’s financial statements conformed with general accounting principles, they “negligently relied solely on documents created by Madoff and sought no independent confirmation that trades had been executed or that assets existed,” according to the complaint, Bloomberg reports. “Assets were grossly overstated based on fraudulent trading tickets and fraudulent account statements provided by” Madoff.

Madoff, 70, was arrested Dec. 11.

The lawsuit said the auditors issued "unqualified" opinions for 2006 and 2007 audits that stated Maxam's financial statements presented its true financial position, Reuters reports.

"MAXAM intends to pursue its legal rights to ensure that proper restitution is made to its investors," Jonathan Cogan, a partner at Kobre & Kim LLP and counsel to MAXAM, said in a statement, Reuters reports.

Connecticut connections:  

  • Center for Children’s Advocacy, a Hartford-based legal advocacy group for children, lost $85,000.  
  • Fairfield Greenwich Advisors had part of its $7.5 billion fund invested with Madoff. How much it lost is unknown.  
  • Hadassah, a national volunteer organization of Jewish women founded in 1921, lost $90 million. There are 26 Hadassah chapters in Connecticut, according to its Web site.  
  • Maxam Capital Management, based in Darien, might be forced to close, the New York Post reported. It lost $280 million.  
  • Town of Fairfield - volunteer members of Fairfield's pension board had invested $22 million of funds for 800 town workers and 300 retirees in Madoff's company and thought its stake had grown to $42 million. 
Copyright Archive Sources
Contact Us