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Firm did not act strongly enough on Madoff suspicions, N.Y. attorney general says - S-S / AP, 2010 May 11, David B. Caruso
Those warnings weren't loud enough, New York's attorney general now says. The state sued Ivy and two of its former executives Tuesday, alleging they had "disturbing" evidence years ago that Madoff was lying about his investment methods but played down those suspicions because they feared losing millions of dollars in management fees. Ivy's customers, which included several union pension funds, lost $227 million when the scheme collapsed, according to the suit. "Ivy and its former co-principals saw the trouble with Madoff coming around the bend, but instead of guiding their clients through the financial waters, they sold them down the river," Attorney General Andrew Cuomo said in a statement. The company and its two former executives, CEO Lawrence Simon and CIO Howard Wohl, vigorously disputed the charges. Simon's lawyer released several e-mails sent to some of Ivy's customers between 1997 and 2001 in which he urged them to reduce their Madoff investments. "Despite Madoff's stellar record, we continue to be concerned by his unwillingness to be fully forthcoming about capital under management and other aspects of his business, and we reiterate our strong recommendation that the outsized allocations to this strategy be reduced," Simon said in a memo to one client in 2000. In another memo a year earlier, Simon told another investor that "we cannot 'close the loop' [on Madoff] in a manner that gives us total comfort." Ivy's chief restructuring officer, Douglas Squasoni, said the company would defend itself against the suit. "Ivy informed its clients that it had questions about Madoff that it could not answer and recommended to its clients that they reduce their exposure to Madoff," he said in a written statement. The clients who lost money were primarily other investment advisers who chose to ignore the firm's warnings, he said. Ivy is now owned by Bank of New York Mellon Corp. Mellon had previously acknowledged in public filings that it was a subject of an investigation by Cuomo's office and said it was in discussions about a possible settlement. ..... In the late 1990s, executives at the financial advisory firm Ivy Asset Management decided something about Bernard Madoff didn't add up and began urging clients to back away from the man later revealed to be Wall Street's greatest fraudster.