Connecticut Attorney General to sue bank and money manager for custodian neglect over Madoff – Attorney General Richard Blumenthal is suing Westport National Bank and a money manager for $16.2 million dollars on behalf of investors in Bernard Madoff funds. The lawsuit has been filed in co-operation with Department of Banking Commissioner Howard F Pitkin. Among several complaints, the action alleges Westport claimed $2.4 million in fees between 2000 and 2007 for its custodian duties while performing hardly any of the subsequent responsibilities.

These duties were turned over to money manager Robert L Silverman and his company PSCC, also a target of the lawsuit. It is alleged neither the custodian nor PSCC performed any verification on the fund and ignored inconsistencies that indicated fraud, such as contradictory sales and purchase notices of stocks.

Westport National Bank was mandated as custodian in 1999 and given responsibility for billing, administrative work and taking legal possession of securities and other investments, as well as verifying their purchase on behalf of investors, said Blumenthal.

However, these duties were delegated to PSCC, with Westport handing over blank bank stationery for the company to communicate with clients, the case alleges. PSCC in turn then charged $13.8 million in fees. The fees were so high even Madoff complained, alleges Blumenthal.

Blumenthal is suing for the total amount of fees to be paid to investors to rescind their losses as well as a $100,000 fine for each violation of state banking laws and costs. Ninety seven investors in Connecticut put money into Westport’s Madoff funds out of a total of 240 investors who invested $10 million.

Other allegations in the case accuse Westport, Silverman and PSCC of providing no written information on the fund’s risks and strategies and acting as investment advisers with the required licence.

Bernard Madoff was arrested in December 2008 after his Ponzi scheme masquerading as a fund business was uncovered. Madoff was sentenced to 150 years in prison in New York in June 2009.

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