Kingate Global, which channelled its money to Bernard L Madoff Investment Securities to manage, highlighted the risk of giving custody of its assets to its investment manager - Mr Madoff, although he was not named in the documents - and said they would not check the accuracy of statements he provided.
No doubt whoever wrote that disclosure is patting himself on the back for protecting his firm from the lawsuits that are undoubtedly about to ensue. But I imagine at least one trial lawyer is rubbing his hands and asking, "What did they know and when did they know it?"
Thierry de la Villehuchet who ran a feeder fund that fed money into Madoff's funds was found dead today.
He apparently slit his wrists with a box cutter and bled to death at his desk.
So did Kingate Global clients just lose one element of their defense against claw backs from defrauded Madoff clients? "You rats were warned the ship was sinking and you got out. Now we want our share of your payouts." Seems to me you might have a better case if Kingate hadn't warned you.
Technically, the disclosure does not protect them from their fiduciary responsiblity on behalf of their clients to do proper due diligence. What was their management fee for if not for that?
Technically, the disclosure does not protect them from their fiduciary responsiblity on behalf of their clients to do proper due diligence. What was their management fee for if not for that?
I went as far as doing the free registration to see the full FT article but part of the excerpt still doesn't make sense.
"and said they would not check the accuracy of statements he provided."
At first I thought that there's an inappropriate 'not' in that phrase. Now, I see the conjunction should be 'but'.
So, are they really saying that Kingate deserve some kudos for saying 'hey we may be doing business with a thief, but we're not going to check'? Or are they saying additionally, 'he may be a thief, we not going to check, we're going to give him money anyway, but it's entirely on your risk if you give us money that we're may give to a thief?' What the heck is Kingate doing for their piece of the action then?
What about the auditors? As a CFO who has to prepare for annual audits, I am curious as to what Madoff's auditors were doing. An audit for an investment company is easier than an audit for a manufacturing company. These auditors had to be in on this fraud along with many others. A fraud this size taking place over so many years could not have been pulled off by just one man.
Jim,
Are you asking about Madoff's auditors? That's out there now. Madoff's auditing firm was, what, three people in an office somewhere outside New York. They weren't very good auditors.
From CNN on Dec 17: "Already under investigation by local prosecutors for its potential role in the scandal, the firm, Friehling & Horowitz, is now also being investigated by the American Institute of Certified Public Accountants, the prestigious body that sets U.S. auditing standards for private companies."
I'm not sure what any of the feeder fund auditors where doing. There have been plenty of reports of other investment managers telling people to stay away from Madoff's fund because it was too opaque or too sketchy.
Just found out today that my state senator got wiped out by Madoff. Small world.