Not a day goes by that we don’t discover another class of Madoff investors. Today’s new entrants: clients of Morgan Stanley and Citigroup.
Morgan Stanley and Citigroup Inc., which are forming a venture to be the largest investment adviser to individuals, had $1.8 billion of clients’ cash in a fund that invested with Bernard Madoff, said two people familiar with the matter.
The money was in an $8 billion fund run by Switzerland’s Union Bancaire Privee, which gave $700 million to Madoff, one person said. Morgan Stanley has advised clients, who it said lost $95 million of their $1.1 billion investment, to redeem their money and has taken the UBP fund off its recommended investments list. Citigroup advised its clients, who had about $720 million at UBP, to redeem their cash, a person said.
To read between the lines: Morgan Stanley had recomended the UBP fund to clients. Citigroup presumably did too. Was no one doing any diligence on where all this money was going? Surely Morgan Stanley and Citi’s brokers had heard the rumours that something wasn’t right with Madoff.