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Two More Funds, Managers Sued Over Investments With Madoff
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(April 21, 2009 - Tuesday) - http://online.wsj.com/article/BT-CO-20090421-715047.html
By Chad Bray
Of DOW JONES NEWSWIRES
APRIL 21, 2009, 2:49 P.M. ET
NEW YORK (Dow Jones)--Two more funds and their fund managers have been sued in separate lawsuits for allegedly breaching their fiduciary duties in entrusting client money with convicted Ponzi-scheme operator Bernard Madoff.
Hedge fund of funds Meridian Capital Partners and its investment manager, Meridian Diversified Fund Management LLC, were sued Monday in a lawsuit in U.S. District Court in Manhattan, while fund managers J.P. Jeanneret Associates Inc. and Ivy Asset Management Corp. and Ivy's parent Bank of New York Mellon Corp. (BK) were sued Friday in U.S. District Court in White Plains, N.Y.
The Meridian lawsuit alleges that 6% to 8% of Meridian client funds were invested in Madoff-managed investments.
"This was contrary to the duties Meridian Diversified had made regarding its processes for selecting fund managers," the lawsuit said. "As a result of defendants' breaches of fiduciary duty and false statements, investors made additional investments in the funds and/or held shares they would have redeemed."
The Meridian complaint is seeking class-action status for a group of clients who invested in the fund between Jan. 2, 2008, and Dec. 11, 2008, and a sub-class of employee benefit plans who invested during that period.
The suit was filed on behalf of the Pension Trust Fund for Operating Engineers by law firm Coughlin Stoia Geller Rudman & Robbins LLP.
Meridian didn't immediately return a phone call seeking comment Tuesday.
Separately, the J.P. Jeanneret lawsuit claims J.P. Jeanneret and Ivy Asset Management failed to conduct minimal due diligence regarding Madoff's investment strategy, failed to follow a sustainable investment strategy and failed to conduct ongoing due diligence in order to identify and avoid massive fraud.
The case relates to investments allegedly made with Madoff by the Income-Plus Investment Fund, which is managed by Jeanneret Associates.
"During the class period, defendant Jeanneret Associates Inc. neglected its professional and fiduciary duties to manage the capital that plaintiff and other members of the proposed class invested in the fund," the lawsuit said. "Instead, Jeanneret Associates blindly entrusted a substantial part of plaintiff's capital to Madoff and BMIS, who used that capital in a massive Ponzi scheme."
Jeanneret retained Ivy Asset Management to provide investment advice regarding the selection of fund managers and "the thoroughly researched allocation of the fund's assets," according to the lawsuit.
The lawsuit is seeking class-action status for investors in the Income-Plus Investment Fund between Jan. 1, 1999, and the present. It was filed on behalf of two pension funds for
Plumbers and Steamfitters Local 73 by law firm Lowey Dannenberg Cohen & Hart PC.
"Ivy was not the investment manager for the Income-Plus Fund nor is the Income- Plus Fund or its investment manager affiliated with Bank of New York Mellon," a spokesmen for Ivy Asset Management said. "We think it's baseless and intend to defend ourselves vigorously."
Jeanneret didn't immediately return a phone call seeking comment Tuesday.
On March 12, Madoff was ordered directly to jail after he pleaded guilty to 11 criminal counts in connection with a decades-long Ponzi scheme that bilked thousands of investors out of billions of dollars. The fraud came to light in December.
-By Chad Bray, Dow Jones Newswires; 212-227-2017; chad.bray@dowjones.com
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