Madoff and JP Morgan
February 4th, 2011Via: Guardian:
The UK’s Serious Organised Crime Agency (Soca) was warned about Bernard Madoff in October 2008, two months before the fraudster confessed that his investment empire was a sham, according to a lawsuit unsealed in New York.
The allegation was made in a suit filed against JP Morgan, one of Madoff’s banks, on behalf of the fraudster’s victims.
According to the suit, filed by the court-appointed trustee Irving Picard, executives at JP Morgan allegedly told Soca that they were concerned about “investment performance achieved by its [Madoff’s business] funds which is so consistently and significantly ahead of its peers, year-on-year, even in the prevailing market conditions, as to appear too good to be true – meaning that it probably is”.
The lawsuit, which cites internal emails, claims that employees in the bank’s “equity exotics & hybrids” desk found that the so-called feeder funds which brought in new investors knew little about Madoff’s operations and asked few questions. “It’s almost a cult [Madoff] seems to have fostered,” one employee observed.
The suit is damning of JP Morgan’s alleged role in the scandal. It claims that Soca was informed by JP Morgan “only in an effort to protect its own investments” and the bank did nothing further to stop the fraud even though it had informed the authorities.
“While numerous financial institutions enabled Madoff’s fraud, JP Morgan was at the very centre of the fraud and thoroughly complicit in it,” according to the suit. It details ways in which Picard alleges the bank sought to make money from investment funds that fed money to Madoff.
According to the court filing, a senior executive at the bank was told Madoff had “a well-known cloud” over his head and was suspected of running a Ponzi scheme 18 months before his empire collapsed leaving thousands of investors penniless. The 114-page suit claims the bank did not pay attention to billions of dollars passing through the fraudster’s main JP Morgan account.
