ZURICH (Reuters) - A manager at Swiss private bank Pictet sold funds to clients that lost money in Bernard Madoff’s fraud despite the investments not being recommended by Pictet, sources told Reuters.
A source close to Pictet, Switzerland’s largest privately held bank with assets close to $400 billion, said the bank never recommended Madoff-related funds and the client manager who sold those funds had left the bank by mutual agreement in 2009.
“Private client managers are only, and were only at the time, allowed to invest in funds on Pictet’s list of recommended funds. There have never been any Madoff-related funds on Pictet’s recommended list,” this person said.
“The fund advisory team specifically advised clients not to invest in known Madoff and Madoff-related funds,” he said.
Pictet declined to comment.
The bank has said its involvement with Madoff-related funds was limited to a custodian capacity, where it had no responsibility for investing assets.
Clients of the bank have confirmed no Madoff funds were on the bank’s recommended list.
Three other sources with knowledge of the matter said the manager who sold Madoff-related funds was fired after the Madoff scandal broke.
“They may not have recommended Madoff, but they had an adviser selling Madoff,” said one client who said he lost money to Madoff via a feeder fund held at Pictet.
Pictet has said it gained market share among private banking clients as a result of not being tainted by Madoff investments.
The source close to Pictet said a $156.4 million claim against the bank lodged by the trustee in charge of liquidating Madoff’s assets last week refers to money withdrawn by investors during the life of these investments, but was not related to the client adviser who sold Madoff funds.
Irving Picard, the trustee who has made a series of court filings as he seeks to recover money to pay Madoff’s victims, is seeking to claw back any gains paid out to Madoff investors before the fraud was revealed.
Pictet said last week the investments in question were made on the clients’ own initiative or on the advice of their external advisers.
“Pictet’s role was limited to that of custodian for the client assets,” the bank said.
A custodian is responsible for the safekeeping of assets and for dealing with clients and withdrawals, but not for the investment of the assets.
The trustee said the bank received transfers from Madoff feeder funds, including those run by U.S. investment managers Tremont and Fairfield, and by Britain’s Kingate, which lost some $12 billion in total.
Last week’s filing against Pictet introduces a new defendant to the broad mix of accused banks, which includes British bank HSBC (HSBA.L), JPMorgan Chase (JPM.N) and Citibank (C.N) of the United States, and Switzerland’s UBS UBSN.VX (UBS.N).
Editing by Chris Wickham and Erica Billingham