*UPDATE: FGG was kind enough to respond to the criminal-conspiracy theory in detail. Please see below.
EARLIER: Check out this nugget in Irving Picard’s $3.2 billion lawsuit against Fairfield Greenwich Group. If Picard’s allegation is accurate, it looks as though FGG conspired with Madoff to deceive the SEC when the SEC was investigating Madoff in 2005:
In 2005, the SEC was conducting an investigation of [Madoff]. Pursuant to this investigation, Madoff had a telephone call with [FGG attorney Mark] McKeefrey and [FGG chief risk officer Amit] Vijayvergiya in December 2005. The call began as follows:
MADOFF: Obviously, first of all, this conversation never took place, Mark, OK?
VIJAYVERGIYA: Yes, of course.
MADOFF: All right.
Stop right there! That’s criminal conspiracy. Madoff is asking FGG to lie to the SEC for him, and FGG is agreeing to do it. [FGG says that FGG did not, in fact, do it and that FGG had told the SEC about this call in advance–see below].
During the course of the call, Madoff explained exactly how he wanted FGG to answer the SEC’s questions. The Madoff investigation ended soon thereafter (presumably largely as a result of the SEC’s incompetence, but perhaps the Madoff-FGG conspiracy had something to do with it).
Needless to say, legitimate asset managers don’t ask their clients to lie to the SEC for them. At best, that should have been yet another red flag in the long line of frantically waving red flags for FGG that Madoff was a scam. At worst, this exchange reveals that FGG conspired to deceive the SEC and obstruct justice–which, last time we checked, were crimes.
UPDATE: FGG’s response:
Fairfield Greenwich has not even been accused of criminal conspiracy, by any legal authority, including those who cite the Dec. 2005 telephone call in question. No lawyer, among the many lawsuits underway, is alleging criminal conspiracy. Under what standard of fairness can you declare, “That’s a criminal conspiracy”?
About that phone call, three critical pieces of context, which are disputed by no one: 1) Fairfield Greenwich asked the SEC for permission to talk to Madoff before the phone call. 2) Fairfield Greenwich discussed the call with the SEC afterward. 3) During the interview with the SEC, Fairfield Greenwich officers cooperated fully and answered all questions truthfully.
As to the lawsuit filed by Picard, please consider including our comment: Fairfield Greenwich funds lost far more from the Madoff fraud than they ever redeemed. There is no merit to this lawsuit, and it will be defended vigorously.