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Cuomo sues money manager in Madoff scandal

Andrew Cuomo

Andrew Cuomo

NEW YORK CITY — New York’s attorney general sued a hedge fund management firm and two of its former executives Tuesday, claiming they discovered a decade ago that Bernard Madoff wasn’t being truthful about his investment methods, but kept their suspicions quiet.

Ivy Asset Management customers, which included several union pension funds, wound up losing $227 million when the scheme collapsed, according to the suit.

Attorney General Andrew Cuomo said the firm and its former principals, CEO Lawrence Simon and CIO Howard Wohl, had a duty to tell clients about their concerns.

The suit claims they stayed silent because pulling their clients money entirely would have cost them millions of dollars in management fees.

Ivy’s chief restructuring officer, Douglas Squasoni, said the company would defend itself against the lawsuit. He disputed Cuomo’s charge that the company didn’t tell customers that something about Madoff didn’t add up.

Squasoni said the clients who lost money were primarily other investment advisors who chose to maintain their Madoff exposure, despite being warned of the firm’s concerns.

Ivy is now owned by Bank of New York Mellon Corp, which had acknowledged previously in public filings that it was a subject of an investigation by Cuomo’s office.

Cuomo’s suit acknowledges that the firm did, indeed, begin warning some clients away from Madoff, but claims it didn’t tell others who had already invested heavily.

Spokespeople for Wohl denied that allegation, saying in a statement that he had repeatedly sounded the alarm with the fund managers his firm advised.

According to the suit, Wohl continued to express concerns internally about Madoff as the years ticked by. He responded to one subordinate who had attempted to analyze Madoff by writing, “Ah, Madoff. You omitted one other possibility — he’s a fraud!”

Madoff, 72, is serving a 150-year prison term after admitting that his investment advisory business never bought any securities. Instead, he used new investments to pay returns to existing clients.