Westport National Bank And Investment Manager Sued For Defrauding Madoff Investors

Westport National Bank, a money manager, and the money manager’s company have been sued by Connecticut, which is seeking to recover $16.2 million for investors in Bernard Madoff’s Ponzi scheme. 

The lawsuit charges the bank, Robert L. Silverman and his company, PSCC, Inc., with multiple violations of state banking laws. The action alleges that they:
 
·         Ignored repeated and obvious indications of fraud;
·         Failed to fulfill their duty to verify Madoff’s claimed investments;
·         Miscalculated fees, resulting in millions of dollars in overcharges;
·         Provided no written information on fund risks and strategies;
·         Acted as investment advisors without the necessary state license. 
           
In addition, according to the lawsuit: Westport National Bank allegedly collected $2.4 million in fees between 2000 and 2007 for performing various duties as custodian of its clients’ funds, but actually did little, handing over most responsibilities to Silverman and his company. The bank even provided Silverman with its blank letterhead for communications with clients. Silverman’s firm earned a separate $13.8 million in fees, so much that Madoff himself complained, causing them to be lowered.
 
Connecticut alleges that: Neither Silverman nor Westport National Bank ever properly verified that Madoff made investments he claimed. They also ignored discrepancies that indicated fraud. For example:
 
·      Madoff would send the bank and Silverman notice of a stock purchase, but a statement issued about the same time would list the transaction as a sale, or vice versa;
·      Madoff’s funds would provide notice of a U.S. Treasury Bill purchase listing a maturity date, but the same bond would have a different maturity date on the statement issued about the same time.
 
In addition to restitution, Connecticut is seeking a $100,000 fine for each violation of state banking laws and the state’s legal costs.