A firm co-founded by Bernard Madoff has asked a U.S. bankruptcy judge to dismiss a roughly $100 million lawsuit accusing it of helping to fund billions of dollars to the now-imprisoned swindler.
Cohmad Securities Corp alleged that Irving Picard, the court-appointed trustee for Bernard L. Madoff Investment Securities LLC, was long on rhetoric and short on facts when he accused the firm in a June lawsuit of improperly funneling money to Madoff.
The purported red flags the complaint identifies are consistent with common business practices, and thus fail to show reckless participation in Madoff's fraud or attempts to conceal it, Cohmad's lawyers said in a filing Monday with the U.S. bankruptcy court in Manhattan.
Madoff is serving a 150-year sentence in a North Carolina federal prison for his estimated $65 billion Ponzi scheme. A Ponzi scheme is where money from later investors is used to pay off earlier ones.
Kevin McCue, a spokesman for Picard, was not immediately available for comment.
In June, Picard and the U.S. Securities Exchange Commission sued Cohmad, its chairman Maurice Cohn, its chief operating officer Marcia Cohn, and vice president Robert Jaffe in June.
The defendants have been accused of aggressively marketing Madoff's services for years, while concealing his fraud to customers and regulators.
Picard called the relationship between Cohmad and Madoff's advisory firm symbiotic and so pervasive that they acted in many respects as interconnected arms of the same enterprise.
Yet in the filing, Cohmad's lawyers maintained that Madoff and top deputy Frank DiPascali went to extreme lengths to hide their fraud, and that Cohmad was no different from the legions of others fooled by Madoff.
DiPascali admitted last week to helping Madoff commit fraud and, in a surprise, was denied bail.
Last week, Jaffe filed motions to dismiss parts of lawsuits filed against him by Picard and the SEC. The Cohns and Jaffe are trying to remove Picard's case from bankruptcy court and merge it with the SEC case.
The case is Picard v. Cohmad Securities Corp, U.S. Bankruptcy Court, Southern District of New York (Manhattan), No. 09-1305.