NEW YORK, April 2 A New York state judge has dismissed a lawsuit brought by an investor in a fund managed by Tremont Group Holdings, one of the largest feeders of funds into Bernard Madoff's Ponzi scheme.
The 2009 lawsuit accused Tremont of investing $3.3 billion with Madoff for more than a decade without investigating "red flags" that Madoff never bought or sold securities.
The lawsuit was brought by Jay Wexler, who claims to have lost more than $400,000 in a Tremont-managed hedge fund, the Rye Select Broad Market Prime Fund, which invested with Madoff.
Madoff is serving a 150-year prison term for running the massive Ponzi scheme, estimated to have cost investors more than $17 billion of principal.
Wexler's lawsuit included fraud claims on behalf of Rye Select.
New York Supreme Court Justice Richard Lowe dismissed these claims, noting that Tremont already had settled with other investors in a federal class-action lawsuit based on the same accusations.
"Wexler's derivative claims were represented in the federal action by other limited partners of the Rye Select fund," Lowe wrote in the April 1 opinion.
Lowe also dismissed Wexler's direct claims against Tremont for fraud and negligent misrepresentation.
Wexler's lawsuit, Lowe wrote, "fails to explain how one or more alleged red flags made it so obvious that Madoff was running a Ponzi Scheme that defendants must have known about the scheme and wanted to further it."
Lowe also dismissed the lawsuit against Tremont's parent, Oppenheimer Acquisition Corp; Oppenheimer's owner, Massachusetts Mutual Life Insurance, and former Tremont executives Sandra Manzke and Robert Schulman.
Lowe said he would issue a separate opinion on motions to dismiss the lawsuit against other named defendants, including JPMorgan Chase, accounting firm KPMG, Bank of New York Mellon and Paul Konigsberg, an accountant who worked with Madoff's clients.
Seth Schwartz, a lawyer representing Tremont and Schulman, said that "Tremont is pleased with the decision."
Lawyers for Wexler, Manzke and Oppenheimer did not respond to requests for comment on Wednesday.
A spokesman for Massachusetts Mutual did not immediately return a request for comment.
The case is Jay Wexler, individually and derivatively on behalf of Rye Select Broad Market Prime Fund LP v KPMG LLP et al, New York State Supreme Court, No. 101615/2009. (Reporting by Bernard Vaughan; Editing by Noeleen Walder and Jan Paschal)