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Joseph Cotchett Madoff Complaint

Joseph Cotchett Madoff Complaint

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Published by ldelevingne
October 2009
October 2009

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Published by: ldelevingne on Oct 21, 2009
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50.Sandra L. Manzke (“Manzke”) was a major Madoff supporter and

founded the second-largest Madoff feeder fund in the world, helping channel

nearly $3.3 billion of investor monies to Madoff and BMIS. In 1984, she founded

feeder fund Tremont Capital Management, the predecessor to the Tremont Group.

Manzke was also a sponsor and director of Madoff feeder fund Kingate Global

Fund since its founding in 1990. Kingate Global Fund is one of the targets of

BMIS’ Trustee Irving Picard, who is seeking to recover nearly $255 million that

BMIS transferred to Kingate a month before Madoff’s confession. At Tremont,

Manzke was initially Chief Executive Officer (“CEO”) and later co-CEO

beginning in 2000 with Robert Schulman. Manzke met Madoff in the mid-1980's

through other investors. Shortly thereafter, Manzke founded Tremont, and during

this time period, Manzke began investing with Madoff. Over the years, Manzke

developed a close relationship with Madoff and she reaped tremendous financial

benefits from that relationship. In 1994, when Madoff asked Manzke to pool

investors together, she founded one of the first Madoff feeder funds, American

Masters Broad Market Fund L.P. This later became the Rye Select Broad Market

Fund. In 2005, Manzke left Tremont but maintained her relationship with Madoff.

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After leaving Tremont, Manzke founded Maxam Capital Management, another

Madoff feeder fund that placed nearly $280 million with Madoff and BMIS.

51.Manzke was a financial industry veteran who purportedly had

extensive experience in alternative investments and hedge fund investing. From

her years of experience, Manzke claimed that she had extensive experience

analyzing and conducting due diligence of investment managers such as Madoff

and BMIS. Before she founded Tremont, Manzke worked at Rogers, Casey &

Barksdale, Inc., a well-known, highly regarded pension fund consulting firm,

where she helped pension plans perform due diligence reviews of investment

managers. From this experience, Manzke knew that she and Tremont were

making false and material misrepresentations by claiming that they did a thorough

due diligence review of Madoff and BMIS. Manzke had built a long and

profitable relationship with Madoff and BMIS. That long relationship gave her a

unique opportunity to notice the many red flags surrounding Madoff’s and BMIS’

operations. However, by serving as a spokesperson for the Ponzi scheme, Manzke

made hundreds of millions of dollars doing nothing more then sending to Madoff

billions of dollars she had convinced innocent investors into giving her. Madoff

transformed Manzke from a relatively obscure financial industry figure into the

head of one of the nation’s largest hedge funds. Therefore, in order to continue

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collecting millions of dollars in fees and benefits, Manzke continued to tout

Madoff and BMIS and trick innocent investors into funneling billions of dollars

into the Ponzi scheme.

52.Robert I. Schulman (“Schulman”) joined Tremont Group Holdings

as president and Chief Operating Officer in 1994. He was also a member of

Tremont’s audit committee. In 2000 he became co-CEO with Tremont founder

Sandra Menzke, and then sole CEO in 2005. During his 14 years as CEO of the

Tremont Group, Schulman often spoke of his close relationship to Madoff and

stated that they were in contact on a weekly basis. Madoff had Schulman’s

number is his “black book” in which he kept the most important numbers that

Madoff called on a regular basis. Madoff’s “black book” was seized by the FBI

after his arrest in December of 2008.

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53.Over the years, Schulman, along with Manzke, fed hundreds of

millions of dollars of investor monies to Madoff and BMIS and gave Madoff and

BMIS a veneer of respectability and cover for the fraud. Schulman profited

greatly from his relationship with Madoff and BMIS, raking in millions of dollars

while all he did was hand over hundreds of millions of dollars of investor monies

to BMIS without ever conducting any real audit of BMIS’ operations.

54.In June 2007, Schulman left his position as CEO of Tremont to

become president of the Rye Investment Management division, a unit of the

Tremont Defendants. The Rye Investment Management division was responsible

for managing several Rye funds that invested mainly with Madoff. Schulman

retired in July 2008, remaining as chairman emeritus of Tremont until the end of

2008. Afterwards, Schulman started Foredestine LLC, another Madoff feeder

fund.

55.Before Schulman joined Tremont, he was a Senior Executive Vice

President for Smith Barney. A financial industry veteran, he served at various

times on the NYSE Derivative Product Committee, the Chicago Board Options

Exchange Retail Advisory Council, the National Association of Securities Dealers

Options and Derivative Product Committee, the Board of the New York Futures

Exchange and the NYSE Option Specialist Association Committee. Schulman

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met with Madoff regularly and knew that Madoff would never provide any details

verifying his trading, even to someone as close as Schulman. At best, Madoff

would provide vague descriptions of the trading strategy. Schulman knew that he

and Tremont had never done a careful or thorough review of BMIS and did not

exercise any oversight over BMIS’ operations. Schulman was uniquely placed to

detect the many red flags surrounding Madoff’s operation and investigate those

red flags. Schulman decided not to. Even though he knew that Tremont’s

representations to investors about its purported due diligence of Madoff was false,

Schulman continued to tout Madoff to investors in exchange for millions of

dollars in personal profit.

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