Bernard Madoff-burned hedge fund Austin Capital Management may be closing shop, but that isn’t stopping its investors from suing.

The latest complaint comes from the National Education Association of New Mexico, which is suing the Texas-based fund of hedge funds on behalf of the state’s Educational Retirement Board and State Investment Council. Under New Mexico law, third parties, such as the teachers’ union, are permitted to seek recovery of losses of public money.

According to the NEA-NM, Austin Capital ignored several red flags because of its longstanding relationship with Madoff, who pleaded guilty in March to running a $65 billion Ponzi scheme. The New Mexico funds lost about $25 million, according to the complaint.

“This case is about Austin Capital’s not doing their homework on Bernie Madoff,” John Wertheim, a lawyer for NEA-NM, said. “Our investigation appears to be unique in having uncovered Austin Capital’s longstanding relationship with Madoff, one reason they missed the red flags.”

The lawsuit alleges that Austin Capital, which parent KeyCorp pulled the plug on last month, invested some 7.5% of its assets in Madoff feeder funds without notifying clients and without proper due diligence. NEA-NM’s suit alleges that this resulted from Austin’s allegedly close relationship with Madoff, although the hedge fund had no money directly invested with his firm, Bernard L. Madoff Investment Securities.

The teachers’ union suit is only the latest in a string of actions against Austin Capital. The soon-to-be-former firm already faces at least two class-action suits, and yesterday was added to the list of 75 Madoff-linked defendants being sued by Frank Foy, a former investment officer at the NMERB.