Fairfield Greenwich Sued Again by Investors Over Madoff Losses

By Thom Weidlich

Jan. 13 (Bloomberg) -- Fairfield Greenwich Group, Walter Noel’s hedge-fund firm that had $7.5 billion with alleged fraudster Bernard Madoff, was sued for at least the third time by investors over claims it failed to protect their assets.

The latest complaint was filed yesterday in federal court in New York on behalf of investors by lawyer David Boies, who also represents Maurice “Hank” Greenberg, the former chief executive officer of American International Group Inc., and who argued before the U.S. Supreme Court for presidential candidate Al Gore in the 2000 election re-count battle.

“Most, if not all, of the assets of the plaintiff class had invested with defendants were stolen through the Madoff Ponzi scheme,” Boies wrote in the complaint. “These losses could have been avoided if defendants had fulfilled their duties” and “if they had adequately investigated and monitored Madoff.”

Two trusts and a holding company based in the Cayman Islands and Carlos Gauch of Mexico sued on behalf of investors in the Fairfield Sentry Fund. It’s the third suit filed against Fairfield Greenwich since Madoff was arrested on Dec. 11, after he allegedly said he’d been running a $50 billion Ponzi scheme. Another class-action, or group, suit was filed in Manhattan federal court by a Los Angeles-based retirement trust on Jan. 8.

“The legal counsel is going to review the suit,” Seth Faison, a spokesman for Fairfield Greenwich Group, said in a phone interview. “We won’t have any comment until then.”

‘95 Percent’

The plaintiffs “invested in Fairfield Sentry, which in turn handed substantially all of its assets -- at least 95 percent -- over to” Madoff, according to the complaint. They seek return of their investments and fees, in addition to damages. They claim Fairfield Greenwich didn’t conduct proper due diligence.

Fairfield founding partners Noel, Andres Piedrahita and Jeffrey Tucker are accused of breach of fiduciary duty, negligence and unjust enrichment, among other counts. Other defendants include the Dublin branch of Netherlands-based Citco Bank Nederland NV, which maintains Fairfield Sentry’s escrow account, according to the complaint. A phone message and an e- mail sent to the Irish branch after business hours weren’t immediately returned.

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. Separately, Bank Medici AG, an Austrian private bank that was taken over by regulators, was sued yesterday in New York federal court for investing in funds run by 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, U.S. prosecutors said.

The case is Inter-American Trust v. Fairfield Greenwich Group, 09-cv-301, U.S. District Court, Southern District of New York (Manhattan).

To contact the reporter on this story: Thom Weidlich in New York at tweidlich@bloomberg.net.

Last Updated: January 13, 2009 00:01 EST