Two doctors, their families and other colleagues have sued Westport National Bank, and a Westport-based pension consulting firm for losses they say occurred because they invested with Bernard Madoff, the Hartford Courant reported today.
Dr. Stephen R. Levinson of Easton and Dr. Richard E. Layton of Baltimore filed their lawsuit in U.S. District Court in Hartford on Feb. 13, the newspaper said. The bank acted as a custodian for Madoff, they said, and “deprived [them] of the security that an independent custodian is retained to provide.”
They also accused the bank and Westport’s PSCC Services of violating the federal Racketeer Influenced and Corrupt Organizations Act and the state Unfair Trade Practices Act, breach of fiduciary duty, fraud, negligent misrepresentation, aiding and abetting conversion and statutory theft, and other offenses.
Levinson began investing with Madoff years ago and later brought in his brother, and two daughters “whom he’d lectured about building nest eggs, even while they were in college,” the Courant said. They are suing for an estimated $60 million, the newspaper said.
The suit, filed on behalf of the two doctors, their families and other colleagues who invested in the account, basically says the bank and pension firm failed to recognize “numerous red flags” that should have tipped them off that Madoff’s fund was bogus, the report said.
Levinson said that, despite the lawsuit, he will probably never restore his depleted retirement fund or erase the guilt he feels for roping in his brother and daughters, the Courant said.
“It was devastating,” Levinson said. “My family trusts me. And I trusted these people. There’s no way to avoid this feeling of guilt and of not living up to my responsibility to my children, who are wonderful.”
In a letter to the bank’s clients last month, Rich Cummings, president of Westport National Bank, said the bank had taken on the Madoff account from another financial institution in 1999 and that “nearly all of these individuals and entities had been investing with Madoff long before the bank was founded in 1998.” (See WesportNow Jan. 2, 2009)
“Each of these Madoff investors entered into a custodian agreement with the bank, and became a custodial client of the bank. This agreement reflected the fact that each custodial client directed the bank to give Madoff ‘full discretionary authority’ to invest the custodial client’s funds.”
TD Banknorth, which through a series of mergers acquired a bank that once served as custodian of the Madoff account, is also listed as a defendant in the lawsuit. TD Banknorth officials said that they wanted to review the lawsuit before commenting. PSCC Services did not return calls for comment, the Courant said.
I can’t seem to understand why people cannot take responsibility for their own investments and personal business. If it sounds to good to be true…it usually is. I know someone who lost everything to Bernie’s scam and admits she was captivated by the “impressive” people who invested with Bernie and the annual “guaranteed” returns. That statement would have been a red flag for me! People need to accept responsibility for their own actions and stop blaming others…custodial…or not.
Unfortunately in today
I could not agree with you more Mr. Raho. It burns me that we, as taxpayers, will now need to bailout those who got caught up in all the irrational exuberance. Again, choices and consequences..I’ve made a few errors in the investment arena over the course of time, but blame no one other than myself for any of “my” losses. People need to look at themselves a little closer in the mirror and take some personal inventory.
Laying “lack of responsibility” at socialism’s door is a bit disingenuous. The same free-market system that brings us wonderfully inventive products and lifestyles also gives us financial instruments so complex that the people who buy, sell, and oversee them cannot understand them; a P.R. and marketing industry that do a marvelous job making us want things we do not need; banks and other lenders who are more than happy to collude in our delusion that we can afford everything we want; politicians (not just Democrats, I might add), sports figures, and celebrities of all strips who have demonstrated a lack of personal responsibility on many fronts; an educational system that works to prepare kids for college (Physics, anyone?) but graduates students who don’t know how to balance a checkbook, not to mention a budget; politicians who have lied outright and paid no financial or political price for it; and corporations who have made it clear that shareholders and executives are all that matter—which is why you have to wait on the phone for 15 minutes just to get through to a customer service person, why you have to get a new cell phone every few years whether you need one or not, why our environment is being fouled at an unprecedented rate, and why the only way to effect real change is to have a really good lawyer. Is it any wonder that so many Americans think the rules don’t apply to them?
Ms. Prince,
Once again I fully agree with you and admire how well you say it!
Just wondering, does your husband ever win an argument?
One thing that I believed since I was a young adult was that the bank would never write a mortgage that was likely to default – banks don’t want to own houses. When I bought my first house, I wondered if I’d ever be able to write that “huge” check every month, and everyone told me not to worry, the numbers don’t lie (payment was about 30% of gross income). You’ll be a bit thin for a while (true!), but you’ll be OK (also true).
So to say that people were fools to sign off on loans that appeared to be legitimate is a bit harsh. The mortgage brokers who created these loans were very sneaky, as they polished the chrome and passed along these weak mortgages to the banks who paid little attention. The brokers took their commissions and ran. The banks were the fools, and we’re all paying for it.
The fact that a bank is part of the FDIC and other gov’t regulators is supposed to encourage us to deposit our savings and take out loans. The banks breached our trust, and that should be considered criminal. Unfortunately, the only solution is to restore that trust, which requires gov’t intervention via bailouts and guarantees. The only thing worse than trying to rescue the system to let it fail.
And yes, it’s fun to argue with Stacy. She usually wins, either with intellect, tenacity, or both.
It appears from the New York Times article below that the bank pooled peoples accounts. If this is correct….well then the Directors of Westport National have more than a little explaining to do.
http://www.nytimes.com/2009/02/06/business/06westport.html