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Two US Madoff victims file suit against SEC
2009-10-14
WASHINGTON (AFP) - Two victims of the Ponzi scheme operated by New York swindler Bernard Madoff have filed a lawsuit accusing the Securities and Exchange Commission (SEC) of "gross negligence" and seeking compensation. Documents obtained by AFP on Wednesday showed the complaint was submitted to a New York court by a disabled retiree and a doctor who between them lost "more than 2.4 million dollars" in Madoff's fraudulent investment fund. The complaint essentially repeats the findings of the SEC's inspector general, who in August denounced the regulatory agency's failure to stop the Madoff fraud, despite numerous warnings that his activities were suspect. "Bernard Madoff is obviously the chief culprit in the scheme that imploded so shockingly in December 2008. However, the SEC must be held accountable and responsible for its own negligent actions and inactions that directly and proximately caused by the loss of billions of investor funds," lawyers for the two wrote. The complaint says the SEC's "rank negligence, incompetence, inexperience, inattentiveness, and laziness" allowed Madoff to proceed unhindered. The pair are demanding "compensatory damages in the amount of their net principal investments in Madoff's scheme, plus reasonable attorney's fees, costs and such other and further relief the court deems just and proper." The suit claims that between 1992 and 2008 "the SEC received a steady stream of at least eight complaints or submissions indicating that Madoff was operating a Ponzi scheme." "Indeed over many years, although the SEC was presented with innumerable smoking guns unveiling Madoff's wrongdoing, the SEC staff failed to follow up and failed to recognize any of them for what they were -- the key to unraveling possibly the largest financial fraud in history," the suit says. An SEC spokesman questioned by AFP brushed off the lawsuit. "Based on our initial understanding of the matter, we believe there is no merit to the complaints," said John Heine. The federal agency has immunity from litigation based on its decisions, making it difficult for lawsuits against it to succeed. Madoff was sentenced to 150 years in prison for his role in what has been called the biggest fraud in history -- a multi-billion dollar scheme that bankrupted thousands of organizations and individuals, ranging from retirees to Hollywood stars.
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