Bank settles Madoff lawsuits, wins verdict
By JOHN CHRISTOFFERSEN Associated Press July 18, 2013 3:46PM
Updated: July 18, 2013 3:46PM
NEW HAVEN, Conn. (AP) — A Connecticut bank has agreed to pay more than $7 million to investors who lost millions of dollars in Bernard Madoff’s massive Ponzi scheme but it also won a jury verdict involving two of the investors, attorneys said Thursday.
The investors contended Westport National Bank failed at its job as custodian of their retirement accounts. The bank argued it met its obligations and was not responsible for uncovering the fraud.
The bank, whose parent company is Connecticut Community Bank, reached a $7.7 million settlement last week with about 240 account holders, attorneys said. Investors put about $12 million into the accounts over the past 20 years, including about $5 million since the bank took over the account, said David S. Golub, attorney for about one-third of the investors.
The bank did not admit wrongdoing and made an economic judgment to settle, said Tracy Miner, the bank’s attorney. She said the total liability could have reached $70 million to $80 million.
A federal jury in Hartford concluded Wednesday that the bank was not liable in a case involving two of the investors who reported losses of about $2 million. The jury found the bank failed to perform its duties but the investors didn’t prove it resulted in losses to them.
“We’re thrilled,” Miner said of the verdict.
Steven Gard, attorney for the investors who lost their case, said his clients are disappointed with the verdict and they’re evaluating their legal options. He declined to comment further.
The Connecticut bank held the retirement accounts on behalf of the investors, whose financial adviser recommended Madoff. The bank transferred money from the investors’ account to Madoff and kept track of the investors’ account.
The case involved a small Connecticut bank in contrast to major financial institutions that have faced claims over Madoff losses. It was one of the first Madoff-related cases involving bank custodians to go to trial and raised the issue of what obligation custodians have in verifying investor assets.
Investors contended in the lawsuit that much of the information it received from Madoff was so far-fetched that even a casual review would have raised numerous red flags. Madoff claimed consistent profits every month, even during sharp downfalls in the market, Golub said.
The bank countered that it was not responsible for uncovering a fraud that even regulators failed to detect.
Madoff is serving a 150-year prison term.
A trustee seeking to recover investor losses has secured more than $9.3 billion of the estimated $17.5 billion that thousands of investors put into Madoff’s sham investment business.
After Madoff’s arrest, investigators quickly determined that client statements showing they held more than $60 billion in securities were fiction. The once-respected financier made no investments, but instead was paying out principal little by little to other investors.