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Duties Of Custodial Banks And Pension Consulting Firms

Monday, July 8, 2013 - 10:04 PM
from the New York Times

. . .

Though it was one of many institutions entangled with Mr. Madoff and his firm, Bernard L. Madoff Investment Securities, the trial serves as a cautionary tale for any investor on the role and duties of custodial banks. The central question at the heart of the civil case is what obligation, if any, such banks have in determining whether the assets of investors exist at all.

But to more than 200 individual investors, it was the bank that should have stood sentry over their money. A lawsuit brought by investors who lost a combined $60 million in the Madoff Ponzi scheme seeks to show that the bank failed at its job as the custodial bank in charge of their money.

 . . .

Some of the most ****ing evidence may come from the testimony given by Dennis Clark, the bank’s former vice president and manager of custody services. Mr. Clark said that he would at times receive three or four “very thick envelopes” from Madoff stuffed with trade confirmations in a single week.

Mr. Clark, who testified in a video deposition before he died last year, said that he sometimes looked at those confirmations out of “curiosity” as to what Madoff might be buying or selling. Other than that, though, he did not review the documents and would simply “put them in a file cabinet.”

. . .

The collection of plaintiffs from nine states had a common connection: they or their relatives were all introduced to Mr. Madoff through Robert L. Silverman, an actuary who ran a pension consulting firm from an office in Westport.

. . .

During the trial, Mr. Silverman was occasionally referred to by lawyers and witnesses as a “financial adviser,” typically a term of art that describes a broker or adviser who is overseen by securities regulators.

Mr. Silverman, however, was not supervised by any regulatory authority. 

. . .

Indeed, Mr. Clark himself said in his video deposition that he had received instructions from Mr. Silverman not to “ever, ever, ever contact Madoff.”

Madoff Case Puts Focus on Duties of Custodial Banks - NYTimes.com
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