NEW YORK, Jan 22 (Reuters) - A U.S. judge has denied a request to freeze the fees paid to Fairfield Greenwich Group fund managers who entrusted money to accused swindler Bernard Madoff, according to court documents.
The Jan. 16 ruling by Judge Victor Marrero in U.S. District Court in Manhattan applies to three lawsuits filed by investors against Fairfield, among “feeder funds” that lost billions of dollars investing with Madoff, a court official said.
Investment manager Madoff is under house arrest and 24-hour surveillance following his Dec. 11 charge for what authorities said was the biggest Ponzi scheme in history, with potential losses of $50 billion. He has not yet appeared in court to formally answer the charge.
A Ponzi scheme is one in which early investors are paid with the money of new clients. Many wealthy people invested directly with Madoff, 70, while others put their money in hedge funds that in turn invested with Madoff.
Several lawsuits have been filed in federal and state courts against “feeder funds,” as investors seek to recover losses, accusing them of negligence and failing to do proper due diligence. The lawsuits accuse the funds of enriching themselves by taking fees predicated on phony profits reported by Madoff’s firm.
“The motion of plaintiff Pacific West Health Medical Center Inc Employees Retirement Trust for a preliminary injunction is denied,” Marrero’s written order said.
Attorneys for the trust, which filed the lawsuit on Jan. 8, had asked the judge to impose a temporary freeze on the fees. Lawyers for Fairfield said in a written brief that Fairfield was also a victim of the purported fraud.
“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,” Fairfield’s lawyers wrote.
“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 Exchange Commission — do not state causes of action.”
The judge also ordered that all of the parties in the cases submit a proposed joint “case management plan” by Jan. 29 or tell the court if they cannot agree on a plan.
Illinois Investors Pasha Anwar and Julia Anwar sued Fairfield Greenwich on Dec. 22. Another lawsuit was filed against the group on Jan. 12 by Inter-American Trust, a Cayman Islands trust.
The cases against Fairfield Greenwich Group et al are consolidated as 09-118 in U.S. District Court for the Southern District of New York (Manhattan)