In its request for the asset freeze, Pacific West Health Medical Center Inc. Employees Retirement System alleged that approximately $1 billion in fees was improperly paid to Fairfield affiliates and executives based on assets they invested with Madoff. “It is now known that those assets on which the fees were based were fictitious and that the fees paid to defendants were not earned,” Pacific West’s lawyers at Wolf Popper wrote in a brief in support of the injunction motion.
That didn’t sound unreasonable to us, but the Fairfield defendants, represented by Simpson Thacher & Bartlett, called Pacific West’s request “outrageous.” Simpson’s brief laid out a variety of reasons why the retirement fund had not met the standards for a preliminary injunction. “Plaintiff’s attempt to seek redress for the Madoff fraud from defendants, who are themselves victims of the fraud, fails to even state a claim, much less demonstrate a likelihood of success on the merits as is required for the extraordinary relief plaintiff seeks,” wrote Fairfield’s Simpson lawyers. “There is no fact cited as to when the Madoff Ponzi scheme started and what fees, if any, may have been paid with respect to assets that were misrepresented by Madoff. And even if there were, plaintiff’s conclusory and non-specific allegations of insufficient diligence by the defendants–and apparently by all who did diligence on Madoff or investigated him, including the United States Securities and Exchange Commission–do not state causes of action.”
Robert Finkel of Wolf Popper said he was “disappointed” with Judge Marrero’s ruling, but said he had no plans to appeal.
Simpson Thacher partners Mark Cunha and Michael Chepiga represent most of the Fairfield defendants. Marc Kasowitz of Kasowitz, Benson, Torres & Friedman; Glen Kurtz of White & Case; and Helen Cantwell of Debevoise & Plimpton are each representing one individual Fairfield defendant.