Massachusetts Secretary of State William Galvin’s office has rejected a proposed settlement by an investment firm to repay nearly US$6 million to state investors who lost money in Bernard Madoff’s fraudulent investment scheme.
Galvin spokesman Brian McNiff said on Sunday that his agency is not accepting New York-based Fairfield Greenwich Group’s offer to fully refund nearly a dozen investors in the state because officials are still trying to identify all the affected investors.
Galvin filed a civil fraud complaint against Fairfield Greenwich in April, saying officials were coached by Madoff on how to answer federal investigators’ questions and misrepresented how much they knew. The secretary of state’s securities division has set a hearing for Sept. 9.
The firm disputes Galvin’s allegations.
Fairfield Greenwich spokesman Thomas Mulligan said on Sunday that the firm believed its proposed settlement was fair.
Mulligan said Fairfield Greenwich was not admitting wrongdoing but wanted to settle the Massachusetts case so it could focus on more significant legal action it was facing.
He said the proposed deal includes provisions to repay other Massachusetts investors who are identified later, but not at the full restitution the firm is offering the nearly dozen investors identified so far.
“It would be irresponsible for Fairfield to devote any more time or resources to a case involving at most a dozen people with losses of US$6 million, when Fairfield is facing litigation involving thousands of investors and hundreds of millions of dollars elsewhere,” Mulligan said.
Madoff, 71, is serving 150 years in prison for defrauding investors in a multibillion-dollar pyramid scheme. Fairfield Greenwich was one of the so-called “feeder funds” for Madoff.
Galvin has said the firm invested more than 95 percent of its Sentry Funds’ US$7.2 billion in assets in Bernard L. Madoff Investment Securities.
The company has said it made clear to investors that Madoff held substantially all of the Sentry funds’ assets.
In May, the New York trustee overseeing the liquidation of Madoff’s assets sued Fairfield Greenwich, claiming the firm ignored clear warning signs Madoff was orchestrating a giant fraud and seeking to return US$3.5 billion to pay off claims from burned investors.
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