Connecticut Attorney General Richard Blumenthal sued Westport National Bank and a Wilton, Conn., money manager on Monday for "effectively aiding and abetting" a fraud by the convicted Ponzi schemer Bernard Madoff.
In a statement, Blumenthal said his office, in cooperation with the Connecticut Department of Banking, is seeking to recover for investors $16.2 million in fees paid to Westport National and Robert L. Silverman, a Connecticut actuary and investment adviser.
Blumenthal also is recommending a $100,000 fine for each violation of state banking law, plus legal costs.
"These investors were betrayed twice, first by Madoff and then by their advisers, who charged them millions and then hurled them into the abyss," Blumenthal said. "Not only did they mislead investors but [also] miscalculated fees to enrich themselves."
The lawsuit alleges that Silverman and his company ignored repeated and obvious signs of fraud, failed to perform their duty to verify Madoff's claimed investments, miscalculated fees and operated as investment advisers without the proper state license. Silverman's firm earned $13.8 million in fees, Blumenthal said.
The bank, as custodian, collected $2.4 million in fees from 2000 to 2007 but failed to perform its duties, including verifying the purchase of securities on the investors' behalf, Blumenthal said.
About 240 people, including 97 Connecticut residents, invested an estimated $10 million in two Westport National funds with Madoff, Blumenthal said.
The bank did not immediately return a phone call seeking comment Monday. Silverman was not immediately available to comment.