Madoff Trustee Targets Self-Styled Investor Rights Advocate Manzke

Dec 9 2010 | 7:05am ET

The latest suit filed by the trustee for the liquidation of Bernard Madoff’s investment firm seeks $100 million from a self-styled investor rights “watchdog” who allegedly got rich off Madoff’s Ponzi scheme.

Irving Picard has filed a complaint against Sandra Manzke, members of her family and Maxam Capital Management, the investment company she formed solely, according to the complaint, to continue “her collaboration with and enrichment through” Bernard L. Madoff Investment Securities (BLMIS).

Manzke was the founder and former CEO of Tremont Capital Management. Tremont’s Rye Group lost $3.1 billion in the Madoff scam and Tremont Group Holdings has been named in another complaint. Mass Mutual bought Tremont (through Oppenheim Funds) in 2001, and in 2005 Manzke left to form Maxam Capital.

Picard says the Maxam organization, during the three years it existed, funneled $300 million into BLMIS.

The complaint charges that while she was publicly advocating for investor rights, Manzke’s own  firm was ignoring accepted due diligence procedures. According to Marc D. Powers at Baker & Hostetler, the court-appointed counsel for the trustee, Manzke “used a veneer of industry respectability to lure investors and enrich herself, her family and select colleagues.”

Powers says the Maxam defendants’ personal and business relationships with Madoff “put them in a unique position to obtain information concerning BLMIS’s operations” but they choose to remain “willfully ignorant” and “collect lucrative fees.

In November of 2008, Manzke sent an email to 500 wealthy individuals, money managers and fund of funds calling on them to protest what she termed the “outrageous” behavior in the hedge fund industry: “While we all recognize the difficulties of the current market environment, I am appalled and disgusted by the activities of a number of hedge-fund managers,” she wrote. “We have managers who have received millions of dollars in incentive fees, walking away and leaving investors with nothing.”

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