NEW YORK — 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 convicted Ponzi scheme operator 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 seeking a $100,000 fine for each violation of state banking laws and legal costs.
"These investors were betrayed twice, first by Madoff and then by their advisors who charged them millions and then hurled them into the abyss," Blumenthal said. "Not only did they mislead investors, but miscalculated fees to enrich themselves. Silverman's fees were so high even Madoff complained. These defendants deceived their clients and shirked their duties, anything to keep the gravy train running--until it ran down their clients."
The lawsuit alleges 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 between 2000 and 2007, but failed to perform any of those duties, including verifying the purchase of securities on the investors' behalf, Blumenthal said.
Silverman started doing business with Madoff in the late 1980s and hired Westport National in 1999 to serve as custodian for his Madoff accounts, Blumenthal said.
About 240 consumers, including 97 who live in Connecticut, invested an estimated $10 million in two Westport National funds with Madoff, Blumenthal said.
Any restitution may be pro-rated because some investors withdrew funds before Madoff's fraud was revealed, Blumenthal said.
Madoff, 71, admitted in March 2009 to running a decades-long Ponzi scheme that bilked thousands of investors out of billions of dollars. The scheme fell apart after his arrest in December 2008. He is serving a 150-year prison term.
The bank did not immediately return a phone call seeking comment Monday. Silverman was not immediately available for comment.
