Fairfield Greenwich: We Didn't Commit Fraud

Fairfield Greenwich Group denies Massachusetts’ allegation that its claim of having done extraordinary due diligence on Bernie Madoff was hogwash. 

The firm also cites a few examples of Massachusetts allegedly playing fast and loose with the facts:

The allegations in the complaint brought against FGG by the Massachusetts Securities Division are false and misleading. Contrary to the allegations, FGG conducted vigorous and robust monitoring on an ongoing basis of the Madoff investments. This monitoring was consistent with the representations made to investors in the Sentry funds. FGG has fully and completely cooperated with the Massachusetts Securities Division investigation. Unfortunately, Massachusetts has leapt to erroneous conclusions without completing its investigation and without even granting a meeting with FGG in an attempt to arrive at an accurate understanding of the facts.

There are many examples of erroneous allegations in the complaint. For example, the complaint recites that there was no disclosure that Madoff was serving as sub-custodian of the assets under management. In fact, the Private Placement Memoranda for the Sentry funds specifically place investors on notice of the fact that “substantially all of the Fund’s assets will be held in segregated accounts at BLM . . .” Moreover, the complaint also includes sensational allegations that an FGG employee based his communications with the SEC in 2005 on a discussion with Madoff. This is simply false. The employee referenced in the complaint provided entirely accurate information to the SEC. And the complaint conveniently leaves out the fact that the employee specifically reported his telephone conversation with Madoff to the SEC at that time.

There are many other misleading aspects of the complaint, which is based on nothing more than 20-20 hindsight that supposes that anyone familiar with Madoff’s operations should have determined that it was a Ponzi scheme. The SEC, other regulatory agencies and every other investor in Madoff failed to detect his sophisticated fraud. FGG is appalled by the Madoff losses suffered by its investors, including its employees and the three investors who reside in Massachusetts.

FGG intends to vigorously contest the allegations in the complaint.

We’re sympathetic.  Everything’s obvious in hindsight.  But the fraud complaint raised many more serious questions than the ones that are detailed here. 

And the total amount of “Madoff losses” suffered by all FGG employees ($60 million, if memory serves) were barely more than a single FGG partner, Andres Piedrahita, paid himself in 2007 ($45 million).

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