The settlement is pending approval by the U.S. District Court for the Southern District of New York and resolves department litigation, actions brought by New York’s attorney general (see “N.Y. AG Wins Settlement of Madoff Claims”) and several private lawsuits and class actions brought on behalf of plans and other investors that invested with Ponzi schemer Bernard L. Madoff. The settlement was reached with Ivy Asset Management LLC, J.P. Jeanneret Associates Inc., Beacon Associates Management Corp., Andover Associates Management Corp. and their current and former owners and officers.
The department sued Ivy, Jeanneret, Beacon, Andover and their owners and officers in 2010 (see “DOL Sues Money Managers over Plans’ Madoff Losses”) for alleged violations of the Employee Retirement Income Security Act (ERISA). The suit alleged that they breached their fiduciary duties to a number of benefit plans by recommending, making and maintaining investments with Madoff, thus losing hundreds of millions of dollars in assets needed for the pension and health benefits of thousands of workers.
Ivy served as the investment adviser for Jeanneret, Beacon and Andover, and introduced those parties to Madoff. The suit also alleges that the defendants failed to take prudent actions to investigate or monitor Madoff and his purported trading and to disclose the extent of the known risks, irregularities and suspected “red flags” surrounding Madoff’s operation. Additionally, the suit alleges that the defendants failed to protect the plans’ interests while collecting tens of millions of dollars in fees for themselves as a result of the Madoff investments.
According to the suit, plan investments were made with Madoff through direct investment and indirectly through the Jeanneret, Beacon and Andover funds that invested with Madoff. The suit further alleges that the Jeanneret defendants improperly received higher fees on the Madoff investments than other investments.
Under the settlement agreement, Ivy and its principals have agreed to pay a total of $210 million. Jeanneret and its owners, John P. Jeanneret and Paul Perry, have agreed to pay $3 million. Beacon and Andover and their owners, Joel Danziger and Harris Markhoff, have agreed to pay $3.5 million and relinquish a claim of more than $3.3 million for management fees.