Galvin seeks to shut down firm with Madoff ties

/Home/Madoff Enablers and Madoff Naysayers/The Enablers who Helped Fund Bernie Madoff/Robert Jaffe VP- Cohmad Securities Corp

Galvin seeks to shut down firm with Madoff ties
February 11, 2009 11:45
Bernard L. Madoff's wife, Ruth Madoff, withdrew $10 million from a brokerage account on Dec. 10, the day before her husband was arrested for allegedly conducting a $50 billion Ponzi scheme, according to a complaint filed today by the Massachusetts Securities Division.

A few weeks earlier, on Nov. 25, Ruth Madoff allegedly withdrew $5.5 million from the same account, held at Cohmad Securities Corp., a brokerage part-owned by Bernard Madoff (right) that the Securities Division is looking to shut down in Massachusetts.

The complaint alleges that the relationship between Cohmad and Madoff Investment Securities is “deeply intertwined," and that Madoff sent payments to various brokers who raised money for him through Cohmad. The state, in its administrative complaint, said it was seeking to revoke the Massachusetts license of Cohmad Securities, a brokerage that helped raise funds for Madoff, for failing to cooperate with an investigation of the firm.

Over the past eight years, the complaint states, Madoff Investments made monthly payments to Cohmad that appear to add up to more than $67 million. The money appears to have come from investors who had invested with Madoff through Cohmad, according to the complaint. Those payments constituted more than 84 percent of Cohmad’s total income in that time.

Madoff's lawyer had no immediate comment.

According to the complaint, payments from Madoff Investments to Cohmad included about $526,000 for Sonja Kohn, a banker in Vienna who referred clients to Madoff.

The $67 million does not include commissions paid to broker Robert M. Jaffe, according to the complaint, because Cohmad did not respond to requests for that information from the Securities Division.

Jaffe - a member of the wealthy Shapiro clan, major philanthropic donors in Boston and Palm Beach, Fla. - appeared under subpoena before the Securities Division last week but invoked his rights under the Fifth Amendment, declining to answer any questions about his business, Cohmad, or his connection to Madoff Investments, according to the complaint.

Jaffe's spokesman could not be immediately reached for a comment.

The Massachusetts Securities Division, which is overseen by Secretary of State William F. Galvin, alleged that Cohmad demonstrated a "broad-based refusal" to respond to the Division's subpoenas for information and interviews. Marcia Cohn, president the company and a daughter of Cohmad co-founder Maurice Cohn, also was subpoenaed by Galvin's office and declined to appear. Maurice Cohn refused to appear as well.

“Specifically, the Division sought to determine whether the businesses and finances of Cohmad and Madoff Investments were so intertwined that they could be viewed as a common enterprise, and not as separate entities, for purposes of imputing liability and obtaining investor relief,” the complaint says.

In a regulatory filing, Madoff is listed as a director of Cohmad and an owner of 10 percent to 25 percent of the equity in the firm. Madoff's brother, Peter Madoff, who is chief compliance officer of Madoff Investments, also is a director and owner of between 5 percent and 10 percent of Cohmad.

Several Madoff-related people maintained Cohmad brokerage accounts, including Ruth Madoff and the Madoff Family Foundation, the complaint says. Ruth Madoff, in addition to the $10 million withdrawal on Dec. 10, withdrew $5.5 million on Nov. 25, according to the complaint.

Cohmad Securities is based in the same midtown Manhattan office building as Madoff's firm, and used to have an office on Commonwealth Avenue in Boston's Back Bay. In New York, Cohmad subleased its Third Avenue office from Madoff Investments and paid Madoff for electricity, telephone and technical services.

The complaint seeks an accounting of all Massachusetts investors Cohmad referred to Madoff’s company, and all the fees it earned doing so. The state is also seeking an undisclosed fine.

To learn more about Galvin's complaint, please click here.

To read some previous Globe stories about the Madoff scandal, please click here and here.
(By Beth Healy, Globe staff. Madoff file photo: Lucas Jackson/Reuters.)