PwC in $55 million settlement with Madoff feeder fund investors

NEW YORK (Reuters) - PricewaterhouseCoopers agreed to pay $55 million to settle claims it failed to audit properly the books of Fairfield Greenwich Group, the biggest operator of “feeder funds” for now-imprisoned swindler Bernard Madoff, court papers showed.

Disgraced financier Bernard Madoff is escorted by police and photographed by the media as he departs U.S. Federal Court after a hearing in New York, January 5, 2009. REUTERS/Lucas Jackson

The all-cash settlement with Fairfield Greenwich investors was disclosed on Wednesday night in filings with the Manhattan federal court. PwC denied wrongdoing in agreeing to settle.

According to court papers, Fairfield Greenwich investors suffered big losses on the more than $7 billion of their money that was sent to Bernard L. Madoff Investment Securities LLC, the epicenter of Madoff’s Ponzi scheme.

Investors accused PwC of failing to exercise reasonable care and acting negligently in auditing the financial statements of the Fairfield Sentry, Fairfield Sigma, Fairfield Lambda and Greenwich Sentry funds from 2002 to 2007.

The accord resolved claims against PricewaterhouseCoopers LLP in Canada, PricewaterhouseCoopers Accountants NV in the Netherlands and PricewaterhouseCoopers International Ltd.

“We believe strongly that our audit work complied with professional standards, but we pursued a settlement to avoid the uncertainties and unrecoverable legal costs of a lengthy jury trial,” PwC Canada said in a statement on Thursday. “At no time was Madoff a firm client.”

The accord requires approval by U.S. District Judge Victor Marrero in Manhattan, and would end seven years of litigation.

Prior settlements on the investors’ behalf included a $125 million accord with hedge fund administrator Citco Group, and an $80.3 million accord with Fairfield Greenwich.

David Barrett and Stuart Singer, who are partners at Boies, Schiller & Flexner representing the investors, in a statement on Thursday called the resolution “an exceptional result.”

Fairfield Greenwich investors are also represented by the law firms Wolf Popper and Lovell Stewart Halebian Jacobson.

The law firms plan to seek legal fees of up to $16.5 million, or 30 percent of the settlement fund, plus up to $2.5 million for expenses, court papers showed.

Madoff, 77, is serving a 150-year prison term. He pleaded guilty to fraud in March 2009, three months after his scheme was uncovered and he was arrested. The Fairfield Greenwich litigation began one week after his arrest.

The case is Anwar et al v. Fairfield Greenwich Ltd et al, U.S. District Court, Southern District of New York, No. 09-00118.

Reporting by Jonathan Stempel in New York; Editing by Cynthia Osterman and Meredith Mazzilli