NY trustee in Madoff scandal sues LA money manager

NEW YORK — A longtime Los Angeles money manager and philanthropist raked in more than $1 billion in false earnings from disgraced financier Bernard Madoff, a trustee overseeing the liquidation of Madoff’s assets claimed Friday.

In a complaint filed in Bankruptcy Court in Manhattan, court-appointed trustee Irving Picard alleged that Stanley Chais must have known Madoff was running a massive Ponzi scheme and should be forced to forfeit the earnings to help pay claims from thousands of burned investors.

Chais, who also handled investment accounts for Hollywood luminaries such as Steven Spielberg, has insisted he was a victim of Madoff. The swindle, he said, wiped out the Chais Family Foundation, which made millions of dollars in annual contributions to various Jewish causes.

A lawyer for Chais said Friday that he hadn’t seen the complaint, but he reiterated the claim the Chais family had been burned by Madoff, too.

“To the extent that the Trustee has alleged that Mr. Chais and his family received any kind of preferential or beneficial treatment from Madoff, it is important to understand that Mr. Chais and his family have suffered astounding and ruinous losses from the Madoff scheme,” the attorney, Eugene Licker, said in a statement.

Madoff, 70, pleaded guilty in March to charges that his secretive investment advisory operation was a multibillion-dollar fraud. The former Nasdaq chairman faces up to 150 years in prison.

The complaint against Chais alleges that his family’s accounts earned wildly inflated returns — between 40 percent and 300 percent — since 1995 through Madoff. The trustee says that the money was never actually invested in the market and that the returns came from the pockets of more recent investors.

The claim “is the first of several actions that will be brought against entities that either acted as insiders with Bernard Madoff … or that benefited from Madoff’s scheme to the severe detriment of other customers of (Madoff’s firm),” David Sheehan, a lawyer representing Picard, said in a statement.

Accounts managed by Chais “received unrealistically high and consistent annual returns of between 20 and 24 percent,” the complaint said.

The complaint called those returns “implausible.” It also claimed that Chais and Madoff had a close relationship spanning decades.

“Chais’ telephone number is the first speed dial entry on a telephone list at (Madoff’s firm),” the complaint said. “He therefore enjoyed unusually intimate access to Madoff, allowing him an opportunity to gain special access to extensive information about the operations of (the firm).”