Fairfield Greenwich Group was charged with fraud in an administrative complaint filed Wednesday by Massachusetts Secretary of the Commonwealth William F. Galvin. The complaint alleges lack of due diligence in funneling Massachusetts investors money to Bernard L. Madoff Investment Securities.
In a news release, Mr. Galvin alleged that Fairfield exhibited a total disregard for its fiduciary responsibilities in placing 95% of the $7.2 billion in Fairfields Sentry Funds with Madoff, who pleaded guilty in federal court in March to running a giant Ponzi scheme.
Brian McNiff, a spokesman for Mr. Galvin, said Fairfield Greenwich will have 21 days to respond to the allegations before a hearings officer from the states Securities Division, with the option of appealing any eventual ruling to Superior Court.
The administrative complaint seeks restitution for losses and disgorgement of performance fees paid to Fairfield by those investors, as well as an administrative fine. Fairfield earned a fee of 1% of the Sentry funds assets under management, plus a 20% performance fee based on the funds returns, the news release said.
In a statement released Wednesday afternoon, Fairfield Greenwich said it intends to vigorously contest the allegations in the complaint, which it termed false and misleading. The statement said the Massachusetts complaint is based on 20-20 hindsight that supposes that anyone familiar with Madoff's operations should have determined that it was a Ponzi scheme.