Lawyers for Broker in Madoff Case Call U.S. Suits Unfair

Published: August 21, 2009
Lawyers for Robert M. Jaffe, a stockbroker whose father-in-law was one of Bernard L. Madoff’s earliest investors, accused federal regulators on Friday of suing Mr. Jaffe without any evidence that he was involved in Mr. Madoff’s enormous fraud.

Dana-Faber Cancer Institute
Robert Jaffe is a stockbroker.
A defense team led by Stanley S. Arkin made the claim in federal court in motions seeking the dismissal of two similar lawsuits that name Mr. Jaffe, one filed by the Securities and Exchange Commission and another filed by the Madoff bankruptcy trustee.

The primary defendant in both cases is Cohmad Securities, a small brokerage firm co-founded by Mr. Madoff and closely affiliated with him. The defense motions on Friday are the first salvo in what may well be a protracted battle over whether Cohmad knowingly played any role in defrauding Madoff investors.

Mr. Jaffe has been accused by the S.E.C. of steering more than $1 billion into the long-running Ponzi scheme in exchange for outsize profits in his own Madoff accounts.

“What the commission has done here to Robert Jaffe is simply unfair,” the defense motion argued. “The agency has called him a cheat, a knowing participant in the largest Ponzi scheme in history. Yet, it has failed to back up these charges with factual allegations.”

It added: “As this court well knows, times of great passion can lead regulators to overreach, sometimes to defend their reputations and sometimes their very existence.”

Mr. Jaffe is the son-in-law of Carl J. Shapiro, a philanthropist and former apparel industry entrepreneur who was one of Mr. Madoff’s largest individual investors. Mr. Shapiro, his charitable foundation and his family members — including Mr. Jaffe — reported losing hundreds of millions of dollars when the fraud unraveled in December.

Mr. Jaffe’s lawyers also attacked the complaint filed by Irving H. Picard, the Madoff trustee, who sued to recover money Mr. Jaffe withdrew from his Madoff accounts. That complaint described numerous transactions between Mr. Madoff and various Cohmad executives and brokers.

“But in an astonishing pattern, the complaint repeatedly excludes Jaffe — by name — from factual allegation after factual allegation,” the defense motion noted. The result is a lawsuit that cites little but “a handful of conclusions” about Mr. Jaffe and should be dismissed, it concluded.
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