- The Washington Times - Tuesday, June 23, 2009

Federal regulators on Monday charged a New York brokerage firm, said to be secretly controlled by Bernard Madoff and a prominent California investment adviser, with securities fraud and accused the company of funneling billions of dollars from investors into Madoff’s Ponzi scheme.

The Securities and Exchange Commission (SEC) announced civil fraud charges against Cohmad Securities Corp., its chairman, Maurice “Sonny” Cohn; his daughter, Chief Operating Officer Marcia Cohn; and vice president and broker Robert Jaffe. Named in a second SEC lawsuit was investment adviser Stanley Chais, a longtime Beverly Hills philanthropist, who is accused of overseeing three funds that invested all of their assets — nearly $1 billion — with Madoff.

They were crucial to the success of Madoff’s $50 billion fraud scheme, targeting affluent yet financially unsophisticated investors by burnishing the impression that one could only be accepted as an investor with Madoff with special access and as a favor, the regulators said. Cohmad and Mr. Chais were said to have gained nearly all their revenue from introducing investors to Madoff in a well-oiled marketing operation.

Mr. Jaffe and Mr. Chais, through their attorneys, disputed the SEC’s allegations.

Madoff co-owned and secretly controlled New York-based Cohmad and used it to procure a steady stream of funds for his multibillion-dollar fraud, the SEC said. Cohmad’s main office was in the Lipstick Building on Third Avenue in Manhattan — the same address as Madoff’s investment and securities brokerage firms.

While channeling billions in investor funds to Madoff, the associates together collected several hundred million dollars in fees from the now-disgraced money manager, the SEC charged.

The agency’s lawsuits were filed in federal court in Manhattan. One accuses Cohmad, the Cohns and Mr. Jaffe of actively marketing Madoff’s funds to prospective investors “while knowingly or recklessly disregarding” facts that indicated that he was running a fraud. A second suit says that Mr. Chais committed fraud by misrepresenting his role in managing the three funds’ assets and providing account statements to investors that he should have known were false.

The SEC is seeking injunctions against the defendants as well as civil fines and restitution for any ill-gotten profits.

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