Fairfield Greenwich should return at least $1 billion in fees it wrongfully accepted from investors, according to a proposed class-action, or group, lawsuit filed yesterday in Manhattan federal court by a Los Angeles-based retirement trust.
Pacific West Health Medical Center Inc. Employees Retirement Trust claims that Fairfield Greenwich failed to act on warnings found in news reports and in meetings with Madoff, who was arrested on Dec. 11 after allegedly admitting he ran a $50 billion Ponzi scheme.
Fairfield “claimed to be caught unaware of this massive Ponzi scheme,” the trust alleged. “Had the defendants properly performed the necessary due diligence, red flag warnings would have alerted them to this scheme much earlier.”
Fairfield founding partners Noel, Andres Piedrahita and Jeffrey Tucker are accused of breach of fiduciary duty, negligence, unjust enrichment and breach of contract, as are other executives including Brian Francouer and Amit Vijayvergiya of FG Bermuda, a Noel affiliate.
“The fees were inappropriately paid because they were based on assets and performance that didn’t exist,” the trust’s lawyer, Robert Finkel of the firm Wolf Popper in New York, said yesterday in a phone interview. “They didn’t actually earn that money and they’re obligated to return it to investors.”
‘Due Diligence’
“The company did indeed perform extensive due diligence,” Fairfield Greenwich spokesman Thomas Mulligan said yesterday in a phone interview.
Fairfield was first sued Dec. 19 in Manhattan state court by investors seeking class-action status. Investors in that case also claim Noel and his fund jeopardized their assets by ignoring red flags about Madoff.
Madoff, 70, was charged with one count of securities fraud for allegedly using billions of dollars from new investors to pay off older ones. Madoff told authorities that investors may have lost $50 billion, prosecutors said.
Madoff has been restricted to his Upper East Side home on $10 million bond that the government agreed to after Madoff’s arrest. He faces as long as 20 years in prison as well as a $5 million fine if convicted.
Madoff’s assets were frozen in a related civil lawsuit brought by the Securities and Exchange Commission. A judge will decide soon whether to revoke Madoff’s bail and send him to jail based on a government claim that he mailed jewelry and other items in violation of a court order in a parallel case.
The case is Pacific West Health Medical Center Inc. Employees Retirement Trust v. Fairfield Greenwich Group, 09-cv- 00134, U.S. District Court, Southern District of New York (Manhattan).
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