Jaffe: Broker tests state's power of subpoena - Robert Jaffe VP- Cohmad Securities Corp

Broker tests state's power of subpoena
By Beth Healy
Globe Staff / January 22, 2009
A lawyer for Robert Jaffe yesterday argued in Suffolk Superior Court that the broker could not legally be forced to travel from Palm Beach, Fla., to Boston to testify in the Massachusetts Securities Division's investigation of disgraced money manager Bernard L. Madoff.

Lawyers for Secretary of State William F. Galvin, who oversees the Securities Division, said he does have that authority, under a state law that deals specifically with the brokerage business and which gives Galvin broad power to subpoena brokers who are licensed to do business here. Jaffe is licensed as a broker in Massachusetts and had raised funds for Madoff, the alleged mastermind behind a $50 billion Ponzi scheme.

Judge Stephen E. Neel's decision on whether to enforce Galvin's subpoena is likely to come down to one point of law: whether Galvin's power to subpoena brokers trumps other state law and legal precedent regarding subpoenas.

In an interview, Galvin said that when brokers fill out state licensing applications, they agree to comply with investigations by the Securities Division. That includes accepting the service of a subpoena no matter where they live, he said, under the Uniform Securities Act.

Typically, people cannot be forced to travel more than 50 miles to provide testimony. Dan Rabinovitz, a Boston securities lawyer, said, "Ordinarily, a Massachusetts court cannot compel a Florida resident to travel to Massachusetts to give testimony."

Galvin has said that his office offered to take testimony from Jaffe in Palm Beach, but Jaffe's lawyers refused. Jaffe is a resident of Florida, his spokesman said, although he maintains a home in the Boston suburb of Weston.

Jaffe's spokesman, Elliot Sloane, said Jaffe's subpoena was faxed to him in Palm Beach.

Yesterday, Judge Neel said he needed more information on the law to make a decision. He gave both parties until the close of business tomorrow to provide more documentation.

One of Jaffe's attorneys, Barry S. Pollack, of the Boston law firm Sullivan & Worcester, had asked the judge for four weeks to prepare for any meeting with Galvin. Pollack said he and others representing Jaffe want the various regulators and officials looking into the Madoff case to coordinate their efforts, rather than require Jaffe to testify repeatedly.

Neel said four weeks was too long. "How could anyone imagine there wouldn't be multiple inquiries?" he asked rhetorically.

Jaffe's lawyers were in court because their client did not appear at a hearing at the Securities Division yesterday morning, for which he had been subpoenaed. It was the second time in two weeks that Jaffe's lawyers at the last minute informed the regulators that he would not appear.

"There was a sense that Mr. Jaffe was avoiding testimony," Lawrence J. Kenney Jr., a special assistant attorney general, said.

Jaffe is an employee of Cohmad Securities Corp., a New York firm that used to have a Boston office and whose business was to raise money for Madoff's investment funds. Jaffe has said he knew nothing of the scandal, which used one set of investors' money to pay off another. He and his family say they lost hundreds of millions of dollars.

Another officer of Cohmad, Marcia B. Cohn, also failed to appear under subpoena this week, said Kenney. Cohn could not be reached for comment yesterday.

Beth Healy can be reached at bhealy@globe.com.