UPDATE Westport National Bank allegedly received $2.5 million in fees for managing pooled investments for Bernard Madoff, Governor M. Jodi Rell said today as she referred results of a preliminary investigation to the state’s Attorney General.
Gov. M. Jodi Rell referred preliminary findings involving Westport National to Attorney General Richard Blumenthal. (CLICK TO ENLARGE) Dave Matlow for WestportNow.com/file
In addition, she said a Westport-based pension consultant firm and its founder and owner allegedly received clients’ fees in excess of $14 million and failed to properly disclose to clients how those fees were calculated.
The investigation into the securities activities of the bank and PSCC Services Inc., and its founder-owner Robert L. Silverman of Wilton is an outgrowth of the Madoff fraud scheme that resulted in losses of almost $65 billion to investors.
“Bernie Madoff perpetrated a fraud that has created a landslide of misery for thousands upon thousands of innocent people,” Rell said in a statement.
“They are left picking up the pieces of shattered dreams and lost hopes. If these allegations are true, I am deeply troubled by the failure of the pension consultant and the bank to conduct minimal due diligence and to make important disclosures to investors.”
Blumenthal said in a statement that his office and the Connecticut Department of Banking have been conducting “a wide-ranging investigation” into Westport National, PSCC Services Inc, and Silverman.
“Our investigation is focused on allegations that Westport National Bank, PSCC and Mr. Silverman operated investment funds that fed cash into Madoff’s massive fraud, skimming millions of dollars in fees for themselves,” Blumenthal said in the statement.
“I expect to make a decision soon regarding possible legal action.” Legal action could be aimed at recovering money for investors as well as fees.
Madoff pleaded guilty last year to 11 counts and admitted operating what investigators believe may have been the largest investor fraud ever committed by an individual. He is serving a 150-year prison sentence.
“Our state Banking Department has been looking into allegations that Westport National Bank created one or more investment funds for clients of PSCC Services and utilized Madoff’s company, Bernard L. Madoff Investment Securities, as the funds’ investment manager,” Pitkin said.
“The probe found information indicating that Silverman and PSCC Services allegedly steered clients toward pooled investments for which Westport National Bank served as the nominal custodian and which were to be managed exclusively by Madoff’s company.
“The state probe suggests clients allegedly received statements from the bank showing their investment in one of two funds and characterizing the investment as involving ‘shares’ or ‘units’ with a designated market value,” Rell said.
“When Madoff’s scheme collapsed, the investments were purportedly valued at over $59 million.
“In return for their services, Silverman and PSCC Services allegedly received clients’ fees in excess of $14 million and failed to properly disclose to clients how those fees were calculated,” Rell said.
“Westport National Bank allegedly received over $2.5 million in fees for managing the pooled investments.”
The governor has directed Pitkin to work with Blumenthal to review the findings of the investigation to date and to purse all remedies available under Connecticut law, her office said.
Pitkin urged Connecticut consumers who may have been affected by the alleged violations to contact the Banking Department at (800) 831-7225.
Westport National Bank did not return calls seeking comment. A phone number listed for PSCC and Silverman was not accepting messages.
Westport National said earlier it acted “in a ministerial capacity only” and had not invested any of its money with Madoff. (See WestportNow Jan. 2, 2009)
