Stanley Chais, a money manager who funneled millions of dollars toward Bernard L. Madoff, is now the subject of a criminal investigation.
Papers filed in federal court Friday revealed that the Justice Department is investigating Chais for several possible crimes, including conspiracy, money laundering, mail fraud and securities fraud.
Assistant U.S. Attorney William J. Stellmach has asked the court to delay a Securities and Exchange Commission lawsuit against Chais for six months for the sake of the criminal investigation.
Stellmach argues that depositions and interrogations related to the civil lawsuit could reveal information to Chais and other defendants that would allow them to tailor their testimony in the criminal case.
“The public interest in enforcement of the criminal laws outweighs the civil defendants’ desire to proceed with discovery,” Stellmach concludes in his request to Judge Louis L. Stanton of the U.S. District Court for Southern New York.
According to the request, the SEC has agreed to a delay, as have the defendants in the civil case, which was filed in June.
Madoff, 71, pleaded guilty in March to running a Ponzi scheme that lost billions of dollars for investors. In June, he was sentenced to 150 years in prison.
Chais, 83, was based on the West Coast but now lives in New York City, where he is being treated for leukemia.
He ran three funds that invested with Madoff, the paper value reaching $1 billion. One of them, the Lambeth Company, was the first of the feeder funds investing with Madoff.
The SEC complaint alleges that, unlike other Madoff investors, Chais and his family members profited significantly from their dealings with Madoff, withdrawing approximately $500 million.
In addition, the SEC contends that Chais took away $269.6 million in management fees from investors. He allegedly didn’t make it clear that Madoff was actually managing the money.
According to Stellach’s request, the criminal investigation is attempting to determine whether Chais knew that Madoff was operating a Ponzi scheme. It also seeks to find out if he misrepresented himself as managing the money and if he falsified account statements.
Chais is also being sued by Irving Picard, the trustee in charge of the liquidation of Madoff’s firm, on behalf of Madoff’s victims.
In addition, screenwriter Eric Roth has sued Chais for losses he suffered.
Before the collapse of Madoff’s house of cards, Chais was best known for giving millions of dollars to Jewish causes. The Chais Family Foundation closed in December 2008 because of Madoff losses.
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