madoff lawsuit

8/9/2019 Madoff Lawsuit

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STATE OF CONNECTICUT

NEWS RELEASE

Attorney General Richard Blumenthal

Department of Banking Commissioner

Howard F. Pitkin________________________________________________________________________

MONDAY, APRIL 19, 2010

ATTORNEY GENERAL, BANKING SUE WESTPORT NATIONAL BANK,WILTON INVESTMENT MANAGER SEEKING $16.2 MILLION FOR

DEFRAUDED MADOFF INVESTORS

Attorney General Richard Blumenthal today sued Westport National Bank,

a Wilton money manager and his company seeking to recover $16.2 million forinvestors in Bernie Madoffs Ponzi scheme.

The lawsuit, filed in cooperation with Department of BankingCommissioner Howard F. Pitkin, charges the bank, Robert L. Silverman and hiscompany PSCC, Inc. with multiple violations of state banking laws. The actionalleges that they:

Ignored repeated and obvious indications of fraud; Failed to fulfill their duty to verify Madoffs claimed investments; Miscalculated fees, resulting in millions of dollars in overcharges; Provided no written information on fund risks and strategies; Acted as investment advisors without the necessary state license.

In addition, Westport National Bank allegedly collected $2.4 million in feesbetween 2000 and 2007 for performing various duties as custodian of its clientsfunds, but actually did little, handing over most responsibilities to Silverman andhis company. The bank even provided Silverman with its blank stationary forcommunications with clients. Silvermans firm earned a separate $13.8 million infees, so much that Madoff himself complained, causing them to be lowered.

Blumenthal is seeking all $16.2 million in fees paid to the defendants as

restitution for investors wiped out when Madoffs Ponzi scheme collapsed.

The bank and Mr. Silverman effectively aided and abetted Madoffsmassive fraud, ignoring clear and compelling signals that his investments werebogus, Blumenthal said. Screaming signs and sirens shouting fraud -- the same

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MEDIA CONTACTSAttorney Generals Office Department of BankingChristopher Hoffman 860-808-5324 Jim Heckman 860-2408105


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securities bought and sold on the same day, the same bonds with differentmaturity dates -- were repeatedly and reprehensibly disregarded.

These investors were betrayed twice, first by Madoff and then by theiradvisors who charged them millions and then hurled them into the abyss. Notonly did they mislead investors, but miscalculated fees to enrich themselves.

Silvermans fees were so high even Madoff complained. These defendantsdeceived their clients and shirked their duties, anything to keep the gravy trainrunning -- until it ran down their clients.

The misdeeds in this case are staggering, revealing monumental moral rotand malfeasance. Westport National Bank charged consumers $2.4 million forturning over its supervisory duties to Mr. Silverman and his company. They evenprovided him with bank stationary, streamlining the lie that the bank was lookingafter its clients interests.

I will fight to recover every penny -- $16.2 million -- for restitution to

investors. They must make their former clients whole to the greatest extentpossible, which is why we seek return of all $16.2 million in fees. In addition torestitution, my office will seek harsh penalties -- monetary fines, court orders andother actions -- to deter future fraud.

Silverman and his company started doing business with Bernard L. MadoffInvestment Securities in the late 1980s. In 1999, he hired a new custodian for hisMadoff accounts, Westport National Bank in Westport. Silverman and the bankset up two investment funds to funnel money into Madoffs scheme, one forgeneral investing and the other for IRAs.

Blumenthal said that as custodian, Westport National Bank was supposedto handle billing, do administrative work and take legal possession of securitiesand other investments, verifying their purchase on behalf of investors. The bank,however, conducted none of these activities, handing them over instead toSilverman and his company.

Neither Silverman nor Westport National Bank ever properly verified thatMadoff made investments he claimed. They also ignored discrepancies thatindicated fraud. For example:

Madoff would send the bank and Silverman notice of a stockpurchase, but a statement issued about the same time would list thetransaction as a sale, or vice versa;

Madoffs funds would provide notice of a U.S. Treasury Bill purchaselisting a maturity date, but the same bond would have a differentmaturity date on the statement issued about the same time.


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In addition to restitution, Blumenthal is seeking a $100,000 fine for eachviolation of state banking laws and the states legal costs.

Blumenthal said that 240 consumers -- of whom 97 live in Connecticut --invested in the two Westport National Bank Madoff funds. He estimated thatconsumers originally invested about $10 million.

Because some investors withdrew money before the funds collapsed,possibly earning a profit, any restitution may be pro-rated, he said.

Blumenthal thanked Assistant Attorney General Patrick Ring and AssistantAttorney General Matthew Budzik, chief of the Attorney General's FinanceDivision, and for their hard work on the case.

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