New Madoff Lawsuit Targets KPMG, Tremont

Feb 9 2009 | 3:01am ET

For the first time, KPMG finds itself caught up in the legal crossfire surrounding Bernard Madoff’s alleged $50 billion Ponzi scheme.

The auditor has been sued by an investor in a Madoff feeder fund, alleging it missed a series of red flags while looking over the books of the Rye Select Broad Market XL Fund. The hedge fund in question was managed by Rye Investment Management, the Tremont Group hedge fund unit that announced last month that it would close after losing all of its assets in the Madoff scandal.

The 2005 Tomchin Family Charitable Trust’s complaint, filed last week, alleges that KPMG ignored its obligations to carefully audit the once-$213 million fund’s financial statements, according to a press release from the Pomerantz law firm, which is handling the case. In particular, the lawsuit focuses on KPMG’s signing off on financial statements that claimed the fund’s assets were entirely invested in Treasury bills every Dec. 31, despite the fact that Madoff claimed to employ a split-strike strategy.

The lawsuit also targets Tremont and several of its executives, accusing them, like KPMG, of breach of professional, fiduciary and contractual duties.

“Tremont collected millions of dollars in management fees from the fund while turning a blind eye to numerous red flags indicating that Madoff was a fraud and that the fund's assets were in grave danger,” Pomerantz partner Marc Gross said. “Tremont could not have done this, however, without the imprimatur received from the Fund's auditor, KPMG, which told the fund that there was nothing to worry about and that its assets were safely invested. We hope this case is a major step in recovering the fund's losses caused by these derelictions of duty.”


In Depth

Exotic Assets: Investing In Rare Violins

Jan 17 2017 | 4:43pm ET

By definition, alternative investments include exotic assets far beyond your typical...

Lifestyle

'Tis the Season: Wall Street Holiday Parties Back In Fashion

Dec 22 2016 | 9:23pm ET

Spending on Wall Street holiday parties has largely returned to pre-2008 levels...

Guest Contributor

The Trump Administration: What It Could Mean for Carried Interest

Jan 19 2017 | 5:25pm ET

The arrival of the Trump administration brings the potential for a repeal of the...

 

From the current issue of

Versum Materials (VSM), with a market capitalization of $2.7 billion, enables chipmakers to achieve higher performance at lower cost with enhanced reliability. Versum is a leading global provider of electronic materials for the integrated circuit and flat-panel display markets.