New Madoff Probes In Connecticut, Spain

Jan 13 2009 | 5:04am ET

Bernard Madoff’s alleged $50 billion Ponzi scheme has attracted a pair of new investigations on either side of the Atlantic.

The Town of Fairfield, Conn., in the heart of hedge fund country, has launched its own investigation of the alleged fraudster, with plans to prosecute him in the Nutmeg State.

Fairfield’s pension is facing $42 million in losses tied to Bernard L. Madoff Investment Securities, and the town is planning both criminal and civil charges against the disgraced investor. The town has filed a formal fraud complaint with its police department, which plans a “swift” investigation of the allegations.

“It is no secret that Mr. Madoff has admitted to fraud,” Deputy Police Chief Gary MacNamara said at a Monday press conference. “The federal prosecution in no way affects or diminishes the crimes perpetrated in the state of Connecticut.”

Federal prosecutors have charged Madoff, who remains under house arrest in New York, with securities fraud. MacNamara said his department will seek an arrest warrant of its own when it finishes its probe.

“I think this will bring leverage in a lot of place,” Richard Saxl, Fairfield town attorney, said at the press conference. “I said we were going to be aggressive, and this is one of those ways of being aggressive.”

Another is the town’s planned lawsuit against Madoff and anyone else that may have wronged it. The pension’s board has hired a lawyer and authorized as much as $25,000 to cover litigation costs.

The attorney, David Golub, said the pension plans to pursue legal action against Madoff, its advisers, hedge fund managers, feeder funds and auditors.

"There's been a flurry of activity in New York federal court in Manhattan," Golub said. "We think that we will have an advantage as the sole plaintiff in state court. It may move faster and there are remedies available under state law not available under federal law."

Meanwhile, Spanish prosecutors have launched their own probe to determine how Banco Santander managed to lose more than $3 billion of client funds invested with Madoff. The Wall Street Journal reports that prosecutors want to know more about Europe’s second-largest bank’s relationship with Madoff and whether it knew of any problems with the accused Ponzi schemer. According to the Journal, Santander Chairman Emilio Botín sent one of his closest adviers to visit Madoff just weeks before the latter’s alleged scam unraveled.

Investigators are also looking into Santander’s hedge fund business, Optimal Investment Services, which is based in Switzerland and marketed Madoff feeder funds to investors.

Spanish authorities have also cast a wary eye upon Andres Piedrahita, a partner at Madoff feeder firm Fairfield Greenwich Group. In addition to raising money for Fairfield’s Madoff-linked funds, Piedrahita also managed a fund for Santander that was exposed to Madoff.

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