Tremont sued by investors in Madoff fraud case - Tremont hedge 'loses $3.3 bln in Madoff scandal'

Tremont sued by investors in Madoff fraud case
BY ERIK LARSON • BLOOMBERG NEWS • JANUARY 3, 2009
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Rye-based Tremont Group Holdings Inc., a hedge-fund firm owned by Massachusetts Mutual Life Insurance Co., was sued again for investing with financier Bernard Madoff, who allegedly admitted to operating a $50 billion Ponzi scheme.

Group Defined Pension Plan & Trust, a Jersey City, N.J.-based investor, sued Tremont and its auditor, Ernst & Young LLP, over claims they missed warnings about the alleged scheme. The complaint, filed yesterday in Manhattan federal court, seeks class-action, or group, status.

Tremont already faces a lawsuit filed Dec. 22 on behalf of investors who may have lost $3.1 billion, according to the complaint. Funds including Walter Noel's Fairfield Greenwich Group, which invested $7.5 billion, and Ezra Merkin's Gabriel Capital LP and Ascot Partners LP, were also sued for investing in Madoff's firm following his arrest Dec. 11.

"You are looking at the tip of an iceberg here," the pension plan's lawyer, Fred Longer, said yesterday. "Entities like Tremont really show the kings here have no clothes. They blindly go into these investments and they're not disclosing the fact that the investments aren't well-investigated."

Charles Perkins, an Ernst & Young spokesman, declined to comment. Jim Lacey, a Massachusetts Mutual spokesman, didn't immediately return a call for comment.

Tremont "recklessly" permitted about 27 percent of its investment capital to be placed with Madoff, while Ernst & Young failed to notice "red flags indicating high risk" to the hedge-fund firm, according to the complaint, which seeks unspecified monetary damages.

Group Defined Pension, a pension-plan operator for Jersey City-based Tops Personnel Inc., lost at least $100,000 of its $400,000 investment, according to Longer, a lawyer with the firm Levin, Fishbein, Sedran & Berman in Philadelphia. Hundreds of other investors are capable of joining the lawsuit, he said.

Tremont had $3.3 billion, or more than half its total assets, invested with Madoff, a person familiar with the matter said. Of that, the firm's Rye Investment Management unit had $3.1 billion, virtually all the money it managed, allocated to Madoff, said the person, who declined to be identified because the information is private.

Tremont had another $200 million invested through its Tremont Capital Management group.