LOS ANGELES (Reuters) - Like Bernie Madoff in New York, Stanley Chais was known among certain wealthy Los Angeles investors as a man who could defy the stock market, if only you were lucky enough to invest your funds with him.
A money manager for 40 years, Chais built a clientele that included many among the wealthy Jewish communities in the suburban San Fernando Valley north of Los Angeles, where he was known as a stock market wizard whose clientele was exclusive.
With Madoff awaiting sentencing after pleading guilty to a $65 billion pyramid scheme, Chais, 83, was charged in an SEC lawsuit on Monday with ignoring red flags as he funneled money to his New York counterpart.
“What a lot of people were saying about Madoff in New York were things that people were saying in L.A. about Stanley,” Daphne Brogdon, who said she lost her entire $80,000 IRA after investing it with Chais, told Reuters in an interview.
Brogdon, the host of TV Guide Channel’s weekly series “The Fashion Team” and a contributor to CNN Headline’s “Showbiz Tonight,” decided to invest with Chais after being told that he was consistently beating the market.
She said she saw the statements her husband, restaurateur Mark Peel, was getting from his investments with Chais, which reflected returns of 8 percent to 10 percent when most investors were only breaking even or losing money.
“(Chais) was by no means a charming guy, from what I understand, but he was supposed to be a good business person,” said Brogdon, 40, the name plaintiff in a class-action lawsuit against Chais. “It was supposed to be very exclusive. They wouldn’t even take my money until I married my husband.”
Brogdon’s lawsuit warns that Chais has deep ties to Israel, and may have hidden assets there.
Chais sat on the boards of the Technion - Israel Institute of Technology in Haifa, the Weizmann Institute of Science and the Hebrew University of Jerusalem, and his son Mark lives in Israel, where he heads a venture capital company, according to the Jerusalem Post.
Chais’ family charity, which he says was wiped out by the Madoff fraud, was honored in February in Israel for donating millions each year to Jewish nonprofits in Israel, the United States and the former Soviet Union, the Post reported.
Brogdon’s lawsuit, one of five by investors, accuses Chais of failing to inform investors that he was passing their funds to Madoff, and of not independently monitoring the funds.
The lawsuit says investors did not learn that their money was invested with Madoff until last December, after he admitted to securities regulators that his investment business was, in fact, “a giant Ponzi scheme.”
Brodgon said she and her husband began to question the returns that Chais was getting and had decided to pull out their money when Madoff was arrested.
“I was driving home and my husband (called) and said “It’s gone. It’s all gone. And we knew right then we would have to sell our house. We had diversified to some extent but my husband lost millions,” she said.
The SEC action is the latest salvo against Chais, who says he was ruined by Madoff’s scheme, had to put his Los Angeles apartment on the market and has only “relatively modest funds” on which to live since his Goldman Sachs accounts were frozen.
His attorney, Eugene Licker, called the SEC suit “baseless” and says the government has unfairly denied Chais access to his money to defend himself and to pay for cancer treatment.
On May 19, the California attorney general’s office said it was investigating Chais’ role in Madoff’s Ponzi scheme.
Earlier in May, the U.S. bankruptcy court trustee handling the liquidation of Madoff’s investment firm sued Chais and members of his family for the return of $1 billion of investor funds, charging that he benefited from Madoff’s scheme for more than 30 years and should have known about the fraud.
Editing by Steve Orlofsky