Relatives of New Jersey Sen. Frank Lautenberg are pursuing a novel approach to recover more than $7 million they say they lost as a result of Bernard Madoff’s alleged $50 billion Ponzi scheme.
They’re suing his younger brother.
Two of Lautenberg’s children and his charitable foundation filed suit against Peter B. Madoff, 63, the firm’s senior managing partner and chief compliance officer, saying that he either failed to spot “obvious, material red flags” of fraud, or covered them up.
The 17 “flags” they cite include the fact that no one was allowed in the 17th floor of the firm’s offices, known as “the cage,” and that the firm’s trading statements showed a history of buying securities at or near their daily lows, and selling them at or near their daily highs, timing that the complaint says was “virtually impossible to achieve in the absence of deceit or manipulation.”
Peter Madoff, like his brother, was also a stakeholder in Cohmad Securities, a major feeder firm to Bernard Madoff Investment Securities with offices in Boston and Palm Beach, FL.
“There were many obvious material red flags evidencing the giant Ponzi scheme at BMIS and other alerts of fraudulent activity at BMIS that were recklessly ignored and/or concealed and/or not disclosed and/or consciously disregarded by Peter Madoff,” according to the complaint.
The family foundation invested $7.32 million with Bernard L. Madoff Investment Securities in 2001 and 2002, according to a complaint filed Tuesday in New Jersey federal court. That sum grew to $15.4 million at the time of Madoff’s Dec. 11 arrest, the plaintiffs allege.
In addition to the foundation’s losses, the papers say that the senator’s son, Joshua, invested $1 million with the Madoff firm in 2003, which purportedly grew to $1.78 million by Nov. 30, according to the complaint. His daughter, Ellen, invested $600,000 in 2003, which purportedly grew to $1.06 million.
The Lautenbergs are being represented by McElroy, Deutsch, Mulvaney & Carpenter and Gibbons PC.
Although Peter Madoff was the No. 2 at the New York-based securities firm, he has not been charged to date. The only person facing criminal or civil charges thus far is Bernard Madoff, prompting questions about how a single individual could have managed such a far-ranging fraud for so long.
Peter Madoff’s attorney, John R. Wing, has previously said his client did not know about any fraud and was cooperating fully with federal investigators.
While the investigation continues, the 70-year-old former Nasdaq chairman remains confined to his Manhattan apartment under house arrest.
The Lautenbergs are not alone in seeking to recover lost funds. The list of investors runs into the thousands and includes such luminaries as Holocaust survivor and Nobel Peace Prize winner Elie Wiesel, baseball Hall of Famer Sandy Koufax, filmmaker Steven Spielberg and socialite Zsa Zsa Gabor.
Besides suing Madoff and the firm, some defrauded investors have sued the firm’s accountant; some have sued investment advisers and some have sued the managers of the feeder funds that sent billions Madoff’s way.
Now, a rush to file suit against Peter Madoff will no doubt begin.
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