Goldman Sachs Group Inc. won dismissal of an investor’s lawsuit accusing it of negligence and breach of duty after the man lost more than $15 million in Bernard Madoff’s Ponzi scheme.
Jerome Goodman, who invested in Madoff’s fund through a company that Goldman bought, can’t pursue a claim that the bank owed him a duty to give reasonable financial advice and failed to warn that he put too much money in the scheme, U.S. District Judge Freda Wolfson ruled Dec. 14 in Trenton, New Jersey.
Goodman, 69, a retired owner of a collection agency, claimed he would have divested if Goldman warned he was “dangerously over-concentrated in a single investment” and informed him of its own alleged internal ban on investing with Madoff. Wolfson dismissed his claims for gross negligence, negligent misrepresentation and breach of fiduciary duty.
“A gross negligence claim requires allegations of reckless conduct that border on intentional wrongdoing,” the judge said. Goodman “has failed to make any such allegations,” according to the judge.
Goodman, who sold his business for $20 million in 1997, invested most of his money in 1998 with Ayco Co. LP, the judge wrote. Ayco advised Goodman to put $4 million into Madoff’s fund in 1998 and increase it to $12 million in 2004, according to the opinion. By 2008, he had invested $15 million, or 87 percent of his wealth. Goldman Sachs bought Ayco in 2003, she wrote.
David Wells, a spokesman for New York-based Goldman Sachs, declined to comment.
Madoff is serving is serving a 150-year sentence in federal prison for running the largest Ponzi scheme in history.
Goodman claimed that in 2004, his son met with an Ayco employee and a Goldman vice president in the private wealth-management group, Christopher Duda, to get investment advice. At the Seven Seas diner in Great Neck, New York, Duda recommended that Goodman keep $7 million with Madoff and put $5 million in Goldman hedge funds, according to the opinion.
Goodman apparently “left all of his investment” with Madoff, the judge wrote.
The case is Goodman v. Goldman, Sachs & Co., 10-cv-01247, U.S. District Court, District of New Jersey (Trenton).