More than six years after former stockbroker Bernard Madoff was convicted of fraud, the cost of the Ponzi scheme is still being tallied. This week, a jury in Seattle, Wash. found the auditing firm Ernst & Young guilty of negligence in its auditing of a feeder fund that ultimately directed funds to Madoff's firm. The feeder fund was managed by FutureSelect Portfolio Management, Inc. for its clients. Ernst & Young was found liable for an estimated $200 million that FutureSelect said it invested ion behalf of its investors.
The finding comes on the heels of an announcement by Securities Investors Protection Corp. CEO, Stephen Harbeck that most of Madoff's investors would be getting a complete reimbursement of their investments. Those who had invested up to $1,161,000 in Madoff's Ponzi scheme would be fully reimbursed. Those who had invested more would get less -- about 61 cents on every dollar invested.
“Coming out of a Ponzi scheme with 61 percent of what you started out with is a major victory,” Harbeck told reporters in a statement.
In October a motion was filed in U.S. Bankruptcy Court asking for an increase in the amount paid out to victims. Approximately $7 billion of the $11 billion that officials have been able to find were recovered from the accounts of Madoff's deceased partner, Jeffrey Picower. Only $4 billion of the estimated $17 believed to have been swindled out of investors were recovered from Madoff.
And while this is not the first time that Ernst & Young has been accused of fraud, it is far from the only company that has appeared recently on court dockets related to the Madoff's fraud. In August, Citco Group reached a settlement of $125 million for its part in the fraud. Like Ernst & Young, Citco has been accused of failing to monitor and properly assess funds that were invested in a feeder fund through a secondary company, Fairfield Greenwich Group, which then funneled monies to Bernard L. Madoff Investment Securities LLC. Until this month, the Citco settlement was believed to be the largest of its kind related to losses sustained by the Madoff investment fraud.
Jan Lee is a former news editor and award-winning editorial writer whose non-fiction and fiction have been published in the U.S., Canada, Mexico, the U.K. and Australia. Her articles and posts can be found on TriplePundit, JustMeans, and her blog, The Multicultural Jew, as well as other publications. She currently splits her residence between the city of Vancouver, British Columbia and the rural farmlands of Idaho.