Jaffe, Cohmad charged in Madoff case
Boston broker Robert M. Jaffe was charged with securities fraud today by the Securities and Exchange Commission for allegedly ignoring signs of trouble as he funneled $1 billion in client funds to convicted swindler Bernard L. Madoff.
The SEC said Jaffe and the brokerage he worked for, Cohmad Securities Corp., and its two principals, chairman Maurice J. Cohn and chief operating officer Marcia B. Cohn, actively marketed investments with Madoff "while knowingly or recklessly disregarding facts indicating that Madoff was operating a fraud." Marcia Cohn is Maurice Cohn's daughter. The complaint was filed today in US District Court for the Southern District of New York.
In a statement, Jaffe's lawyers denied the SEC's allegations. “The complaint filed today by the Securities and Exchange Commission, which we learned about only from the press, smacks of impulsiveness and efforts at self-justification. It is unfair, baseless in the law, and is inaccurate in its understanding of the facts and of Mr. Jaffe,” The lawyers, including Stanley S. Arkin at Arkin Kaplan Rice in New York, said.
Also today, Irving H. Picard, the trustee charged with liquidating Madoff's businesses and recouping funds for investors, filed a complaint against Cohmad Securities and a number of its principals -- including the Cohns, and Jaffe. Picard's complaint in US Bankruptcy Court alleges Cohmad and related people reaped more than $100 million in exchange for sending clients to Madoff. At least 90 percent of the income to Cohmad and the related people came from referrals to Madoff.
“Although Madoff stated he was operating alone, our investigation has yielded significant evidence that, in fact, a variety of other people helped Madoff prey on innocent victims,” said David Sheehan, counsel for the Trustee and a partner at Baker & Hostetler, the court appointed counsel for Mr. Picard. “We are bringing this lawsuit to help recover, at the very least, the commissions that Madoff’s enablers generated for knowingly introducing unsuspecting investors to Madoff,” said Mr. Picard.
According to the complaint, Madoff shrouded himself with an unapproachable, "Wizard of Oz-like aura eschewing unknown investors," while Cohn, Jaffe and others recruited more than 1,000 customer accounts for the now-convicted Ponzi artist.
Jaffe, 65, is related by marriage to the wealthy Shapiro family in Boston. He has maintained he did not know Madoff was conducting a fraud. The Shapiros, well-known philanthropists in Boston, lost upwards of $400 million to Madoff.
In the SEC complaint, regulators said that Jaffe pocketed at least $150 million for his referrals to Madoff between 1996 and 2008. He received those payments not as regular commissions, but rather as investment returns in his personal Madoff accounts, the government said. He received annual returns of up to 46 percent, the SEC alleged, while his clients typically saw gains ranging from 12 percent to 18 percent.
The SEC additionally alleges that Jaffe knew, or was reckless in not knowing, that Madoff employees entered fictitious, backdated trades onto trade confirmations and account statements for Jaffe's personal accounts with the firm.
The regulators' complaints against Jaffe raise questions for the Shapiros -- contributors to such Boston institutions as Brigham and Women's Hospital, Brandeis University and the Museum of Fine Arts. According to the complaint, Madoff sought out Jaffe to run the Cohmad operation in Boston because he was the son-in-law of one of his longtime clients, Carl Shapiro.
A spokesman for the Shapiro family declined to comment, as did a spokeswoman for the Shapiro foundation.
An attorney for the Cohns was not available. Their lawyer has maintained in the past that the Cohns were unaware of Madoff's fraud.
In a separate complaint filed in the same court, the SEC charged California-based investment adviser Stanley Chais, who oversaw three funds that invested all of their assets with Madoff. When the Ponzi scheme collapsed, Chais investors’ accounts were valued at nearly $1 billion.
(Beth Healy, Globe Staff)
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