Politics & Government

UPDATE: State Banking Department to Work with AG on Madoff-Related Probe

A Westport-based pension consultant and Westport National Bank are also involved in the probe.

Governor M. Jodi Rell today announced that she has directed the Connecticut Department of Banking to refer the results of a preliminary investigation into possible securities violations related to the Bernard L. Madoff case to the state's Attorney General.

The investigation into the securities activities of PSCC Services Inc., a Westport-based pension consultant, and its founder and owner Robert L. Silverman, as well as Westport National Bank, a federally chartered bank located in Westport, is an outgrowth of the Madoff fraud scheme that resulted in losses of nearly $65 billion to investors, according to a news release issued Tuesday.

"Bernie Madoff perpetrated a fraud that has created a landslide of misery for thousands upon thousands of innocent people," Rell said in the release. "They are left picking up the pieces of shattered dreams and lost hopes. If these allegations are true, I am deeply troubled by the failure of the pension consultant and the bank to conduct minimal due diligence and to make important disclosures to investors."

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Madoff pleaded guilty last year to 11 counts and admitted operating what investigators believe may have been the largest investor fraud ever committed by an individual.

"Our state Banking Department has been looking into allegations that Westport National Bank created one or more investment funds for clients of PSCC Services and utilized Madoff's company, Bernard L. Madoff Investment Securities, as the funds' investment manager," Department of Banking Commissioner Howard Pitkin said in the release. "The probe found information indicating that Silverman and PSCC Services allegedly steered clients toward pooled investments for which Westport National Bank served as the nominal custodian and which were to be managed exclusively by Madoff's company.

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According to Rell, the state probe suggests clients allegedly received statements from the bank showing their investment in one of two funds and characterizing the investment as involving 'shares' or 'units' with a designated market value. When Madoff's scheme collapsed, the investments were purportedly valued at more than $59 million.

 "In return for their services, Silverman and PSCC Services allegedly received clients' fees in excess of $14 million and failed to properly disclose to clients how those fees were calculated," Rell said. "Westport National Bank allegedly received over $2.5 million in fees for managing the pooled investments.

The Governor has directed Pitkin to work with Attorney General Richard Blumenthal to review the findings of the investigation to date and to purse all remedies available under Connecticut law.

Attorney General Richard Blumenthal has confirmed that his office and the Department of Banking are conducting a wide-ranging investigation into allegations that Westport National Bank and PSCC Services, Inc. and its owner Robert L. Silverman aided and abetted Bernard Madoff's Ponzi scheme.

"My office is working with the Department of Banking to conclude our months-long investigation, and I am preparing possible legal action," Blumenthal said in a news release. "Our investigation is focused on allegations that Westport National Bank, PSCC and Mr. Silverman operated investment funds that fed cash into Madoff's massive fraud, skimming off millions of dollars in fees for themselves.

"I expect to make a decision soon regarding possible legal action to recover money stolen from investors, including illegitimate and illegal fees."

Commissioner Pitkin urged Connecticut consumers who may have been affected by the alleged violations to contact the Banking Department at (800) 831-7225.


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