The dragnet on Madoff associates appears to be under way! Yesterday, judges in Connecticut and New York froze the assets of Madoff’s sons and feeder funds that contributed billions to Bernie’s Ponzi scheme, and today, Massachusetts secretary of the Commonwealth William Galvin filed a complaint against Fairfield Greenwich Group, alleging that their “flagrant and recurring misrepresentations to its investors rises to the level of fraud.” It’s a non-criminal complaint, unfortunately, and according to the Journal, it doesn’t indicate that anyone at Fairfield, as Walter Noel son-in-law Andrés Piedrahita put it yesterday, “knew anything about anything.” Because, apparently, they felt it was much better if they didn’t try to know anything about anything!
For instance, Fairfield co-founder Jeff Tucker only once went to the seventeenth-floor office of the man they turned over $7 billion to. Madoff showed him what he said were some screens (“Have you ever seen a DTC screen before?” Tucker was asked later. “No.” “Have you seen one since?” “No”) and he went merrily on his way. Later, Fairfield Greenwich CFO Dan Lipton happily confirmed that Madoff’s auditor had “hundreds of clients” and was “well known in the local community,” even though, actually, there was only one employee working there, which they knew. Why did they feel so confident in this auditor’s ability? “I looked [him] up on the Internet,” Lipton told investigators, which we guess is an example of the kind of significantly “higher level of due diligence work” they used to brag about on their website.
And they definitely didn’t want to know what Harry Markopoulos was on about in all those letters to the SEC. When SEC attorneys contacted Fairfield Greenwich about Markopoulos’s concerns in 2005, Bernie coached them on how to respond, prefacing the conversation with Fairfield’s general counsel Mark McKeefrey and CRO Amit Vijayvergiya with the warning, “Obviously, first of all, this conversation never took place, Mark, okay?”
So, you know, the secrecy as to information is a key issue for everybody from our standpoint yours should basically [be] I don’t know about — I don’t know about the trades until after they’re executed and my job is then just to monitor and see what the performance of it is and to make sure that the securities that we — that was — that are supposed to be in the model are in the model.”
Vijayvergiya responded: “Understood, that makes sense.”
“The less you know about how we execute, and so on and so forth, the better you are, other than, yes, you could — you know, you could, if they asked do you know that Madoff, do you know if Madoff has Chinese walls, and you could say, yes, look — you know, your position is, say, listen, Madoff has been in business for 45 years, you know, he executes, you know, a huge percentage of the industry’s orders, he’s — you know, a well-known broker.
Also, apparently Andrés Piedrahita paid himself $45 million a year to not know anything. Oy.
Fairfield Greenwich Charged With Fraud in Madoff Case [WSJ]
Fairfield Complaint [SEC/MA]
