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Fairfield Loses Appeal of Madoff Suit

FAIRFIELD, Conn. — Fairfield suffered a setback in its quest to get back the rest of the $42 million its pension fund lost to Bernard Madoff’s Ponzi scheme. The Connecticut Appellate Court on Wednesday upheld a state Superior Court decision to reject the town’s lawsuit against a Greenwich hedge fund and Madoff’s brother, Peter.

For years, Fairfield invested portions of its pension accounts with a hedge fund run by Sandra L. Manzke, the Maxam Absolute Return Fund, which invested heavily in Madoff’s Ponzi scheme. When federal prosecutors shut down the scam in 2008, Fairfield had invested more than $15 million in the fund, which had supposedly increased in value to $42 million.

The town filed a lawsuit in 2009 against 18 defendants, including Peter Madoff and another hedge fund, the Fairfield Greenwich Group. The town’s suit claimed Peter Madoff and the hedge fund’s principals worked to “feed” investments such as the town's into the Ponzi scheme through their recommendations.

The judges ruled, however, that the Fairfield Greenwich Group and the Madoffs had no direct relationship with the town of Fairfield and the town had no grounds for a lawsuit.

“Although the plaintiff's complaint is rich with allegations that the Fairfield Greenwich defendants acted in concert with Madoff or in furtherance of Madoff’s fraudulent plan,” Judge Thomas A. Bishop wrote in the court’s decision, “it is devoid of any allegation that the Fairfield Greenwich defendants played any role in inducing the plaintiffs to invest in the Maxam Fund or in any other feeder fund, or with Madoff directly.”

Fairfield’s case against Maxam Management Inc. and Manzke is still pending. A status conference is scheduled for Thursday morning in Stamford. Fairfield could still appeal to include Madoff and Fairfield Greenwich Group through the Connecticut Supreme Court.

Should the town continue its fight to regain the money it lost in the Madoff scheme? 

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