NEW YORK (Legal Newsline) - New York Attorney General said Tuesday that Ivy Asset Management misled clients about investments tied to Bernie Madoff, while one of those sued says Cuomo is targeting the wrong individuals.
Cuomo filed suit against Ivy and former CEO Lawrence Simon and former Chief Investment Officer Howard Wohl. Ivy is owned by Bank of New York Mellon and was paid more than $40 million to conduct due diligence for clients with large Madoff investments.
Madoff pleaded guilty last year to turning his wealth management business into a Ponzi scheme and defrauding thousands of investors.
"Ivy and its former co-principals saw the trouble with Madoff coming around the bend, but instead of guiding their clients through the financial waters, they sold them down the river," Cuomo said.
A spokesperson for Wohl said the allegations will not hold up in court after correspondence and relevant facts are presented.
"Contrary to the Attorney General's allegations, the facts will show that Mr. Wohl repeatedly told Ivy's advisory clients -- the fund managers, who were responsible to the investors -- about concerns he had with the Madoff funds," a statement said.
The statement says Wohl shared his concerns with the fund managers.
"These fund managers rejected his counsel, and their investors suffered significantly as a result," it says.
"It should be made clear, that even as Mr. Wohl raised his concerns regarding Madoff to these fund managers, Mr. Wohl never knew or concluded that Madoff was running a Ponzi scheme.
"It is regrettable that the Attorney General would turn this situation on its head by suing Mr. Wohl who shared his Madoff concerns, while not pursuing the fund managers. Mr. Wohl intends to vigorously defend himself against these unwarranted charges."
Cuomo alleges Ivy knew there were not enough options to support Madoff's trading strategy and that the business knew Madoff was using client assets to fund his business instead of investing the money.
The suit charges the defendants with violating the Martin Act.
Documents obtained through an investigation, Cuomo says, reveal that:
-An internal Ivy memorandum from 1997 about Madoff states, "(t)his is a clear example of our inability to make sense of Madoff's strategy, and one where his trades for our accounts are inconsistent with the independent information that is available to us."
-When writing to a subordinate in 2002, Wohl wrote "Ah, Madoff, You omitted one possibility - he's a fraud!"; and
-When listing managers who should be recommended to a prospective client in 2003, Wohl wrote, "Madoff (NOT!)."
From Legal Newsline: Reach John O'Brien by e-mail at email@example.com.