Town of Fairfield settles final claim for Madoff investment mess

March 23, 2013 (Press-News.org) Town of Fairfield settles final claim for Madoff investment mess

Article provided by Tinley, Nastri, Renehan & Dost, LLP
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The town of Fairfield, Connecticut, recently settled its final claim to recover funds lost in the $20 billion Ponzi scheme perpetrated by Bernie Madoff. The town's legal battle began back in 2007, when Madoff's record-breaking fraud was first coming to light. It would take another several years for the full scope of the fraud to be revealed, and by that point, many assumed that Fairfield's pension fund investments - most of which had been sold to Madoff by other investment brokers and managers - were gone forever.

The town's persistence and diligence have meant the world for former local employees whose entire retirement and pension funds had once disappeared. Through a series of court cases and out-of-court settlements against brokers who had transferred the funds to Madoff after promises of previously unheard of returns for investors, Fairfield has been able to recover about 80 percent of the original investments.

Too good to be true?

The nature of a Ponzi scheme is such that early investors are paid off not by actual, profitable investments, but instead with money provided by later investors. The "rave reviews" offered by those who actually were paid is enough to keep more funds coming in, and the originator of the scheme - in recent years, Madoff and Tom Petters have been named as perpetrators of two of the most profitable schemes in history - is able to keep the lion's share of the funds, usually spent on a lavish lifestyle.

Getting the money back

In hindsight, it is obvious that Madoff's investment strategy was fraudulent, and involved his theft of client funds for his own purposes. At the time, however, Fairfield's accounts seemed to be in good hands. After the scheme had been revealed, countless investors assumed that their funds would never be recovered, but the town of Fairfield brought a series of legal challenges based on the theory that investment brokers and fund managers dealing with Madoff either did know or should have known that something was awry and a bit "too good to be true."

The most recent legal claim brought by Fairfield was against investment company Maxam Capital Management, which agreed to recompense the city for a portion of the lost funds, but has denied any wrongdoing by their dealing with Madoff.

While the claims made by Fairfield are unique in that they involve a municipality, they are similar to those that could be brought by any commercial entity involved in a suit. Are you a business owner who needs to bring a legal claim against another company? Regardless of the size of the companies involved or the amount of money tied up in a claim, if the livelihood of your business is at stake, your chances are better with an experienced business litigation attorney at your side.