New York Attorney General Andrew M. Cuomo has filed a civil suit against Ivy Asset Management and co-founders Lawrence Simon and Howard Wohl, alleging that advisory clients of the firm were deliberately misled regarding investments in Bernard L. Madoff Securities.
According to a complaint filed in New York State Supreme Court and a news release from Mr. Cuomo, hedge funds-of-funds manager Ivy Asset Management provided investment advice and due diligence in an advisory capacity between 1998 and 2008 to investment to wealth managers J.P. Jeanneret Associates and others.
Ivy's non-discretionary clients invested assets of 76 upstate New York union pension and welfare funds in Madoff feeder funds and which subsequently lost more than $150 million in the Madoff Ponzi scheme. Overall, Ivy client losses from the Madoff scheme totaled $227 million, according to Mr. Cuomo's release.
“While conducting due diligence, Ivy learned that (Bernard L.) Madoff was not investing funds as advertised,” but “Ivy did not disclose this information to clients for fear of losing revenue from fees,” according to Mr. Cuomo's release.
Ivy collected $40 million in fees from these advisory client relationships, according to the complaint. The complaint also alleges that Ivy and Messrs. Simon and Wohl warned other clients more forcefully not to invest in Madoff feeder funds. Mr. Simon was president and CEO and Mr. Wohl, chief investment officer.
Ivy and the two former executives are charged in the lawsuit with fraud and breach of fiduciary duty and seeks restitution, damages, penalties and disgorgement of fees.
Ivy Asset Management was acquired by BNY Mellon Asset Management in 2000. Messrs. Simon and Wohl left the firm in 2008. BNY Mellon Asset Management announced last month that Ivy will be closed and its remaining hedge funds of funds wound down.