Cuomo sues Bank of NY Mellon unit over Madoff

By Jonathan Stempel

NEW YORK (BestGrowthStock) – New York Attorney General Andrew Cuomo sued a Bank of New York Mellon Corp unit and two former senior officers on Tuesday, claiming they kept clients in the dark about investing with Bernard Madoff.

Citing internal emails, the lawsuit claims that Ivy Asset Management LLC knew as early as 1997 that putting money with Madoff’s investment firm was too risky, and that Madoff was not investing client funds as advertised.

Nevertheless Ivy did not disclose this to clients for fear of losing millions of dollars of advisory fees. The lawsuit also names Ivy’s former chief executive, Lawrence Simon, and former chief investment officer, Howard Wohl, as defendants.

The lawsuit said hundreds of Ivy clients lost more than $227 million from Madoff’s Ponzi scheme, including more than $150 million of losses at 76 union pension and welfare funds.

Ivy collected more than $40 million of fees from 1998 to 2008 to advise and provide due diligence for clients with investments at Bernard L. Madoff Investment Securities LLC, the lawsuit said.

“Ivy and its former co-principals saw the trouble with Madoff coming around the bend,” Cuomo said in a statement. “Instead of guiding their clients through the financial waters, they sold them down the river.”

According to the complaint, Simon in a December 1998 email fretted about losing $1.6 million of fees by pulling back from Madoff, while Wohl in a January 2003 email wrote “Madoff (NOT!)” in urging that Madoff not be recommended as a manager to a prospective client.


Madoff, 72, is serving a 15-year prison term after pleading guilty to 11 counts of securities and mail fraud, perjury and other charges in March 2009. Prosecutors said he ran a $65 billion Ponzi scheme in which he cheated investors who believed he was generating safe, consistent returns with their money.

All three defendants said they plan to defend against Cuomo’s lawsuit.

Ivy said the case mainly concerns services it gave advisers whose own clients’ assets were invested with Madoff, and that it advised its own clients to lower exposures because “it had questions about Madoff that it could not answer.”

Simon advised Ivy clients to lower exposure to Madoff for more than a decade, but this advice was “consistently ignored,” a statement from his lawyer Paul Shechtman said.

Shechtman offered letters from Simon that he said reflected worry about Madoff, including an August 2001 letter questioning “the continued ability of this manager to produce consistent returns on what must be an enormous amount of capital.”

Wohl also urged clients to “drastically reduce” exposure to Madoff, his spokeswoman said.


Cuomo’s lawsuit seeks restitution, the disgorgement of all fees, punitive damages, and an order barring Simon and Wohl from acting as investment advisers.

The Ponzi scheme caused losses for customers who had accounts with Madoff’s firm and customers who invested indirectly through “feeder” funds.

Bank of New York Mellon has owned Ivy since 2000, but is liquidating the unit in a process expected to take a couple of years. Ivy oversaw $5 billion of client assets at year-end.

In a Friday regulatory filing, Bank of New York Mellon said Ivy had been in talks with Cuomo’s office to avert a lawsuit, and had no funds-of-funds investments with Madoff since 2000.

Bank of New York Mellon shares were down 53 cents at $31.04 in afternoon trading on the New York Stock Exchange.

The case is Cuomo v. Ivy Asset Management LLC et al, New York State Supreme Court, New York County.

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(Reporting by Jonathan Stempel; Additional reporting by Elinor Comlay, Joan Gralla and Grant McCool; Editing by Leslie Gevirtz, Derek Caney, Phil Berlowitz)

Cuomo sues Bank of NY Mellon unit over Madoff