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21 Oct 2009
An investor in Bernard Madoff’s mega Ponzi scheme have now named KPMG UK in a lawsuit in which they claim the firm failed to spot the fraud while auditing Madoff’s London operations.
The action is being brought on behalf of investor Jay Wexler, an investor of “hundreds of thousands” dollars in Rye Select Broad Market Prime Fund, one of many feeder funds into the Madoff Ponzi scheme.
In a statement the law firm bringing the action, Cotchett, Pitre and McCarthy, said: “The London office of Bernie Madoff played a key role in his Ponzi scheme.
“Madoff used his London office as the vehicle to make it appear that securities were being traded — using smoke and mirrors which, the complaint alleges, should have been discovered by KPMG UK, the auditor for Madoff's London based operation, Madoff Securities International Ltd.
“Instead, KMPG UK never raised any red flags that investors' money was used by Madoff as his personal piggy bank.”
Reuters quotes KPMG this morning as having no comment.
The law suit also includes testimony from Madoff during March this year in which he said: “In more recent years, I used yet another method to conceal my fraud. I wired money between the United States and the United Kingdom to make it appear as though there were actual securities transactions executed on behalf of my investment advisory clients.
“Specifically, I had money transferred from the US bank account of my investment advisory business to the London bank account of Madoff Securities International Ltd., a United Kingdom corporation that was an affiliate of my business in New York.”
The law suit also attacks KPMG LLP as well as JP Morgan, The Bank of New York Mellon and a number of individuals.
More to follow.
Update. 16:00, 21 Oct.
KPMG issued a statement saying it would defend its role in the audit of Madoff's London operations "vigorously". The firm said the allegations made in the lawsuit were "wholly without merit" and that, "We are not aware of any suggestion that the financial statements of MSIL contain errors."
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