The Securities and Exchange Commission has charged four more people and a New York-based broker-dealer firm today in connection with the Bernard Madoff debacle.
The SEC brought civil fraud charges against Cohmad Securities Corp., its chairman Maurice Cohn, its vice president Robert Jaffe and its chief operating officer Marcia Cohn.
The commission alleges that the Cohns—who are father and daughter—filed false reports to conceal Cohmad’s relationship with Bernard L. Madoff Investment Securities. The SEC contends they brought investors to Madoff while ignoring activity that clearly indicated Madoff was conducting a fraud. According to the complaint, Jaffe also solicited investors for Madoff, bringing in more than $1 billion.
The SEC filed a separate complaint against California investment adviser Stanley Chais, accusing him of misleading investors that he was managing their money, while, in reality, Madoff had full control of their accounts. According to the SEC, many of the investors didn’t know who Madoff was until the collapse of his Ponzi scheme. By that time, the SEC says he was managing nearly $1 billion of their money.
Both complaints were filed in the U.S. District Court for the Southern District of New York. The full documents are available here and here.
Cohmad Securities and Maurice and Marcia Cohn are being represented by Clifford Thau, managing partner of Vinson & Elkins’ New York office, and New York partner Steven Paradise. Peter Pope, of counsel at New York-based Arkin Kaplan Rice, is defending Jaffe. Eugene Licker, a partner in Loeb & Loeb’s New York office, is representing Chais. None of the lawyers were immediately available for comment.
The SEC—which charged Madoff in December with a $50 billion Ponzi scheme—reached a partial settlement in its civil case against the one-time Wall Street titan in February. Details of the settlement released last week reveal that Madoff did not have to admit wrongdoing under the agreement, but he is barred from ever again working in the securities industry. That’s likely the least of his worries, since Madoff may well spend the rest of his life in prison for the criminal charges against him. He is scheduled to be sentenced next Monday, June 29.
In an e-mailed statement, Jaffe’s lawyers said the SEC’s complaint “smacks of impulsiveness and self-justification. It is unfair, baseless in the law, and is inaccurate in its understanding of the facts and of Mr. Jaffe.”
Licker also released a statement on behalf of his client, Chais:
The Complaint filed today by the SEC paints a distorted and false picture of Stanley Chais, borrowing liberally from baseless allegations by private plaintiffs trying to benefit themselves. Like so many others, Mr. Chais was blindsided and victimized by Bernard Madoff’s unprecedented and pervasive fraud. Mr. Chais and his family have lost virtually everything – an impossible result were he involved in the underlying fraud. Moreover, the government has unfairly and without any judicial approval denied Mr. Chais access to his own funds to defend himself or address these charges. Nonetheless, Mr. Chais is solely a victim and has faith that the judicial system will allow him to fight these reckless charges and restore his hard-earned good name.