After getting a look at documents obtained by regulators in Massachusetts, lawyers for investors in the Fairfield Greenwich Group decided to drop the F-bomb in their suit against the Madoff feeder fund and its founders. In an amended complaint filed late Friday night in Manhattan federal district court, investors added claims that Fairfield and its co-founders, Walter Noel, Jeffrey Tucker and Andrew Piedrahita, committed fraud when they funneled $7 billion to Bernard Madoff's investment firm. (Which F-bomb did you think we were talking about?)
The fraud claims likely would not have been made without the help of Massachusetts' secretary of the commonwealth, William Galvin, who filed a highly detailed April 1 administrative action against Fairfield Greenwich. Stuart Singer of Boies, Schiller & Flexner, which is co-lead counsel for the plaintiffs with Wolf Popper and Lovell Stewart Halebian, told The Am Law Litigation Daily on Monday that the documents obtained in the Massachusetts case convinced him and his colleagues that this was not merely a case of gross negligence. He said that while the newly filed investors' complaint does not allege that the Fairfield defendants knew about Madoff's Ponzi scheme or engaged in a conspiracy to perpetrate it, their suit argues "that the Fairfield Group had promoted investments in Sentry so recklessly that it crosses the line from gross negligence into fraud."
"You can prove that fraud by showing that you made statements recklessly without any regard for whether they're true or false," Singer added. "That's what we think has happened here."
A spokesperson for Fairfield Greenwich, which is represented by Simpson Thacher & Bartlett, did not immediately return a call for comment. Marc Kasowitz of Kasowitz Benson Torres & Friedman, who represents Tucker, told Bloomberg that the allegations against Fairfield and his client are "absolutely meritless" and said that the Fairfield defendants "were as much the victims of Madoff's fraud as the literally thousands of other victims."
Noel is represented by Glenn Kurtz of White & Case, and Piedrahita has Andrew Levander of Dechert. Neither immediately returned calls for comment.
This article first appeared on The Am Law Litigation Daily blog on AmericanLawyer.com.
