SEC charges 4 with helping Madoff

Agency claims that firms and executives recruited investors and fed money for giant Ponzi scheme.

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By Aaron Smith, staff writer

Bernard Madoff, here in his mug shot, cultivated aura of exclusivity with help of accomplices, SEC says.

NEW YORK ( -- The Securities and Exchange Commission on Monday charged a brokerage firm and several individuals with raising money from investors to feed Bernard Madoff's Ponzi scheme.

The SEC brought a civil enforcement action against Cohmad Securities Corp., its chairman Maurice Cohn, chief operating officer Marcia Cohn and registered representative Robert Jaffe with securities fraud. The SEC filed the case in U.S. District Court in Manhattan.

The Cohns and Jaffe are accused of courting investors for Madoff's massive scheme, which used fresh investments from unsuspecting investors to make payments to more mature investors and creating the false appearance of legitimate returns.

Separately, the SEC charged California-based investment adviser Stanley Chais with securities fraud. Chais is accused of operating feeder funds that poured money into Madoff's Ponzi scheme.

The defendants helped Madoff "cultivate an air of exclusivity by pretending that he was too successful to trouble himself with marketing to new investors," while providing "a constant in-flow of funds to sustain his fraud," said Robert Khuzami, director of the SEC's enforcement division, in a prepared statement.

Both SEC complaints seek injunctions, financial penalties and court orders requiring the defendants to turn over ill-gotten gains.

Over two decades, the Cohns and Jaffe raised billions of dollars from hundreds of investors for Madoff and were paid $100 million for their troubles, according to the SEC. The SEC accuses the defendants of being fully aware that Madoff was operating a Ponzi scheme.

Defense lawyers for Jaffe called the SEC complaints "baseless."

"The complaint filed today, which we learned about only from the press, smacks of impulsiveness and efforts at self-justification," Jaffe's lawyers at the firm Arkin Kaplan Rice said in a statement. "It is unfair, baseless in the law, and is inaccurate in its understanding of the facts and of Mr. Jaffe."

Lawyers for the Cohns were not immediately available for comment.

The SEC described Chais as an investment adviser for 40 years who "has held himself out as an investing wizard, purporting to execute a complex trading strategy on behalf of hundreds of investors, despite in actuality being an unsophisticated investor who did nothing more than turn all of the investors' assets over to Bernard Madoff."

Between 1995 and 2008, Chais charged $269 million in fees, and withdrew $546 million from Madoff accounts, said the SEC. The government agency said Chais was "a close friend of Madoff since at least the 1960s."

But Chais' lawyer, Eugene Licker, said that Chais is actually a victim, not a perpetrator, of Madoff's scheme.

"The complaint filed today by the SEC paints a distorted and false picture of Stanley Chais, borrowing liberally from baseless allegations by private plaintiffs trying to benefit themselves," wrote Licker, in a statement to "Like so many others, Chais was blindsided and victimized by Bernard Madoff's unprecedented and pervasive fraud. Mr. Chais and his family have lost virtually everything - an impossible result were he involved in the underlying fraud."

Madoff has been locked up in the Metropolitan Correctional Center since March 12, when he pleaded guilty to masterminding the most massive Ponzi scheme of all time. He orchestrated the scheme through his firm, Bernard L. Madoff, which he founded in 1960.

Madoff's maximum sentence is 150 years in a federal prison, based on his guilty plea to 11 criminal counts, including fraud, money laundering, perjury, false filing with the Securities and Exchange Commission and other crimes. Madoff is set to be sentenced on June 29.

Thus far, investigators have identified 1,341 investors in Madoff's firm with losses exceeding $13 billion. To top of page

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