First legal action against accountants in Madoff case

New York Law School was the first to take legal action against its
accountants, when it brought a suit yesterday against
BDO Seidman and the firm it
audited, Ascot Partners, where it had its $3m endowment fund invested.

Ascot, managed by GMAC chairman Ezra Melkin, invested all its money with
Madoff and reportedly lost $1.8bn. Lawyers predict lawsuits against other
accounting firms will soon follow, Time magazine reports.

BDO Seidman, KPMG, PricewaterhouseCoopers and McGladrey & Pullen signed
off on numerous statements, attesting the Madoff investment vehicles had
billions of dollars of assets as well as a track record showing years of
positive returns, billions of assets which have now vanished and returns which
seem to have been made up.

‘It’s surprising that the auditors for these various funds didn’t identify
that the underlying assets were not there,’ says Christopher Wells, a partner at
law firm Proskauer Rose, which specialises in hedge funds. ‘You would think that
is something they test.’

Further reading:

SEC starts immediate internal probe into Madoff fraud

Madoff’s $50bn fraud sends shockwaves worldwide

the Time magazine story

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