Tuesday, November 13, 2012
A Bank of New York Mellon unit, Ivy Asset Management, will pay $210 million to settle claims that it concealed its doubts about Bernard Madoff's business operations. This resolves litigation brought by the New York AG, the U.S. Dept of Labor and investors. Ivy was a "feeder fund" that directed clients' funds to Madoff. According to the New York AG's press release:
Internal Ivy documents reveal the firm’s deep but undisclosed reservations about Madoff. One email from an Ivy principal to his subordinate stated: "Ah, Madoff, you omitted one possibility - he’s a fraud!"
Despite its reservations, Ivy did not disclose its suspicions to clients for fear of losing the fees Ivy received through the Madoff investments. Instead, it falsely told them that "we have no reason to believe there is anything improper in the Madoff operation," and that Ivy's only concern about Madoff was the difficulty of managing the enormous pool of assets he had under management.