Medici’s Kohn Says Madoff Wasn’t Friend; Pain Is ‘Unbearable’

/Home/Madoff Fraud Victims- Swindler's List/Banks -Madoff Fraud Victims/Madoff : Bank Medici , Austria : Sonja Kohn

By Matthias Wabl

Jan. 15 (Bloomberg) -- Sonja Kohn, chairman of the Austrian private bank that invested $3.2 billion with Bernard Madoff, said the man accused of running what may be the world’s biggest Ponzi scheme, wasn’t a personal friend and didn’t confide in her.

“Having fallen victim to a company supervised by a U.S. regulator, as did many of the world’s most illustrious financial institutions, does not ease the pain,” Bank Medici AG Chairman Kohn, 60, said in an e-mailed statement, her first public comment since Madoff was arrested last month. “Reading that some voices believe that I should have known better makes the pain even more unbearable.”

Bank Medici, founded 15 years ago in Vienna by Kohn and 25 percent owned by Milan-based UniCredit SpA, was investment manager for three funds that entrusted almost all their assets to Madoff, who told prosecutors he swindled investors out of as much as $50 billion. Potential losses for Medici clients exceed those disclosed by any financial firm in Europe, including Spain’s Banco Santander SA, which said it has as much as $3.1 billion at risk with Madoff.

Kohn’s e-mail came from an address that was verified by a spokeswoman for Bank Medici. Kohn said Madoff was “trusted by the best and smartest” and likened his scheme to a tsunami or earthquake that strikes “unpredictably and devastatingly.” In the e-mail, Kohn doesn’t specify when and where she met Madoff, 70.

“The Madoff fraud destroyed lives, life savings and companies that were the result of decades of hard work,” she wrote.

Andreas Theiss, a lawyer for Bank Medici, said he wasn’t aware of the statement.

Bank Medici had net income of 541,000 euros ($713,000) in 2007 and employed about 15 people. It took in 9.7 million euros in fees and commissions for finding investors for funds, and paid out 7.1 million euros to other companies that referred investors for its funds, according to public filings.

Started to Blossom

The bank said in a Dec. 16 e-mailed statement that its Herald USA Segregated Portfolio One and Herald (Lux) US Absolute Return funds invested all of their $2.1 billion with Madoff. The bank also took over managing a third fund, the $1.1 billion Thema International Fund Plc based in Dublin, at the end of 2006, according to Medici.

“Bank Medici started to blossom with the Herald Funds as important contributor to profits,” Kohn said in the letter.

Kohn returned to her native Vienna from New York to found Bank Medici’s predecessor in 1994, according to her Web site.

Before Kohn’s bank managed the Thema and the Herald funds, which was started in 2004, she marketed another investment now linked to Madoff, according to Leopold Seiler, an associate at Vienna-based PEH Wertpapier. He said he represented the firm, previously known as VPM Vermoegensverwaltung AG, at an investor meeting in the mid 1990s when Kohn presented a fund known as Primeo Select and distributed by a Bank Austria unit.

‘Expedition to the Artic’

“Sonja Kohn was marketing the Primeo funds more like a conservative family holiday on a farm and not like a dangerous expedition to the Arctic,” as it turns out now to be, Seiler said. “They didn’t promise spectacular returns, but good and consistent ones.”

UniCredit inherited the Primeo funds as part of its acquisition of Bank Austria in 2005. Primeo Select was started in 1996 and invested all its money in the Medici-run Herald USA Fund, which was invested with Madoff, UniCredit said in a Jan. 13 statement. Primeo’s Executive Fund invested half its assets with Herald.

Kohn, who has five children and 24 grandchildren, helped the Vienna Stock Exchange establish ventures with the Shanghai and Dubai Stock Exchanges and created a private equity fund with a bank from the United Arab Emirates, she said in the e-mail. She also promoted Vienna as an investment capital and advised the Dorotheum auction house on art investments in Italy, according to Austrian newspapers including Der Standard.

“This agenda did not allow for socializing or private friendships - neither with Mr. Madoff nor others,” Kohn said in the e-mail.

To contact the reporter on this story: Matthias Wabl at mwabl@bloomberg.net.

Last Updated: January 14, 2009 20:01 EST