Citco Strikes Deal With Investors In Madoff Feeder Fund Suit

Published in Law360, New York (July 23, 2015, 8:57 PM ET) By Cara Salvatore

Hedge fund manager and administrator Citco Group Ltd. told a New York federal judge on Thursday that it’s reached a settlement with Madoff feeder fund customers and is withdrawing a motion to dismiss their suit.

There was little additional information in the letter that a lawyer for Citco sent to U.S. District Judge Victor Marrero on Thursday, but lawyer Andrew Gordon of Paul Weiss Rifkind Wharton & Garrison LLP said that the defendants have reached a settlement with the plaintiffs, pending standard measures like court approval.

“Plaintiffs and the Citco defendants have reached an agreement … to resolve the claims asserted against the Citco defendants,” the letter said.

In March, Citco and PricewaterhouseCoopers LLP said they would fight class certification yet again, weeks after a second certification took hold. In a letter, Citco and PwC asked Judge Marrero to hold off on scheduling any decisions in the case while the firms fight the renewed class certification.

The certification had been granted earlier that month on evidence that investors had relied on PwC’s and Citco’s erroneous valuations and audit reports in choosing to invest in Fairfield Greenwich Ltd.-managed funds — including the Madoff scheme’s single largest feeder fund.

Judge Marrero had granted that certification after the Second Circuit vacated his decision to certify last year. The class of about 1,000 individuals and businesses lost at least $7.5 billion to the Ponzi scheme as a result of their investments with Fairfield Greenwich, according to court documents.

The investors’ argument — that their relationship with PwC and Citco was close enough to establish a “duty of care” under New York law — was accepted by Judge Marrero, who said Fairfield Greenwich’s emails to PwC stating that “investors have been requesting the audits for the past couple months” showed that PwC knew the plaintiffs were relying on its reports, according to court documents.

As for Citco, its internal-procedures manual explicitly stated that shareholders and partners will make investment decisions based on its net asset value reports, according to the judge.

PwC is represented by Andrew Genser, Amy Crawford, Brenton Rogers, Emily Nicklin, George Bauer and Timothy Duffy of Kirkland & Ellis LLP.

Citco is represented by Paul Weiss Rifkind Wharton & Garrison LLP and Gilbride Heller & Brown PA.

Lead plaintiffs are represented by David Barrett, Stuart Singer, Howard Vickery II and Eli Glasser of Boies Schiller & Flexner LLP, Christopher Lovell and Victor Stewart of Lovell Stewart Halebian Jacobson LLP, and Robert Finkel and Natalie MacKiel of Wolf Popper LLP.

The case is Anwar et al. v. Fairfield Greenwich Ltd. et al., case number 1:09-cv-00118, in the U.S. District Court for the Southern District of New York.