Beacon/Madoff ERISA Litigation
Practice Area: Employee Benefits
Cohen Milstein represents Trustees and participants in the I.B.E.W. 43 Welfare Fund and Trustees of the Oswego Laborers’ Fund in a putative class action on behalf of ERISA -covered employee benefit plans whose assets were lost through investments made on their behalf by Beacon Associates LLC I and Beacon Associates LLC II (the “Feeder Funds”) in the investment schemes of Bernard L. Madoff, Bernard L. Madoff Investment Securities, LLC and their investment funds (“Madoff Securities”). Mr. Madoff is alleged to have been responsible for the loss of as much as $65 billion of investors’ money through a giant Ponzi scheme in which early investors were paid with the invested proceeds of later investors.
Summary of the Claims:
The lawsuit asserts claims against the Feeder Funds; Beacon Associates Management Corp.; Joel Danziger, President and Director of Beacon Associates; Harris Markhoff, Vice President, Secretary, Treasurer, and Director of Beacon Associates; Ivy Asset Management LLC; and twenty-four individuals who were officers and directors of Ivy (collectively “Defendants”). The lawsuit alleges that Defendants failed to conduct adequate due diligence which would have revealed the implausibility of the returns claimed by Madoff Securities and that if Defendants had taken steps to assure that each Feeder Fund assigned its assets to a manager that had been subjected to prudent due diligence, and had the Defendants made decisions based on diligent investigation, employee benefit plan assets held by the Feeder Funds would not have been subject to misappropriation by Madoff Securities, and the losses caused by Madoff Securities to each Feeder Fund would not have occurred.
The lawsuit further alleges that Defendants’ Offering Memoranda described their “Managing Member’s Large Cap Strategy” as involving “investments in a portfolio of ‘large cap’ stocks and the utilization of various hedging techniques involving options, with the primary objective being preservation of capital while achieving the maximum possible investment return.” Contrary to the language of the Offering Memoranda, the lawsuit alleges that each Feeder Fund employed no such strategy itself, but instead turned the portion of the Feeder Fund’s portfolio committed to the “Large Cap Strategy” over to the complete discretion and control of Madoff and Madoff Securities. From those accounts, the lawsuit alleges that Madoff misappropriated Feeder Fund assets as part of his Ponzi scheme.
Current Status:
The lawsuit, entitled Towsley v. Beacon Associates Management Corp. et al., No. 09-cv-4453 (S.D.N.Y), was filed on May 8, 2009. On June 4, 2009, the case was provisionally consolidated with a related lawsuit against the same Defendants for violations of securities laws. Plaintiffs in the Towsley action are cooperating with plaintiffs in the securities action, and a consolidated amended complaint alleging ERISA, securities, and derivative claims was filed on October 1, 2009. Cohen Milstein is representing the ERISA plaintiffs in the consolidated action. The case is currently proceeding as In re Beacon Associates Litigation, No. 09-cv-0777 (S.D.N.Y.).
Class Action Allegations:
The ERISA allegations are brought on behalf of the following class: All fiduciaries, participants and beneficiaries of any employee benefit plan covered by ERISA who invested in Beacon Associates LLC I and Beacon Associates LLC II at any time through the present (“the Class”). Excluded from the Class are defendants, their officers, employees, directors, partners, and members of the immediate families of any of the foregoing, or any of their heirs, successors or assigns.
Whom To Contact For More Information:
If you are a member of the proposed class or you have information which might assist us in the prosecution of these allegations, please contact one of the following persons:
Marc Machiz
Eva Schildhause eschildhause@cohenmilstein.com
Cohen Milstein Sellers & Toll PLLC
1100 New York Avenue, N.W., Suite 500
Washington, D.C. 20005
Telephone: 888-240-0775 or 202-408-4600