Litwin Foundation Sues SEC for `Negligence' Over Madoff Investment Losses
The Litwin Foundation, a victim of convicted con man Bernard Madoff, sued the U.S. Securities Exchange Commission for “negligence” in failing to uncover the $65 billion Ponzi scheme.
The New Hyde Park, New York-based foundation seeks to recover at least $19 million and other unspecified damages against the agency for failing to prevent losses at Madoff’s investment firm.
The government’s “sovereign immunity” from lawsuits should be waived under a law that allows cases to be brought against the U.S. if its workers were negligent, the foundation said in the complaint. The organization was established in 1989 and contributes to nonprofits that include Lincoln Center for the Performing Arts and the Brooklyn Botanical Garden.
The SEC “had countless opportunities to stop the Ponzi scheme Madoff operated over 16 years and botched all of them,” the foundation said in the complaint.
The plaintiffs said that during a period of 16 years, the SEC investigated Madoff on multiple occasions and failed to expose the fraud.
“The SEC failed to do so because the assigned staff committed numerous negligent, non-discretionary acts and inactions due chiefly to their inexperience, incompetence, bureaucratic pettiness, laziness, inattentiveness, and an agency culture of deference to powerful industry figures,” the foundation said in the complaint.
John Heine, a spokesman for the SEC, declined comment on the lawsuit.
Last year a related lawsuit was filed by Phyllis Molchatsky, a disabled retiree and single mother who lost $1.7 million, and Steven Schneider, a doctor who lost almost $753,000.
Madoff, 72, is serving a 150-year sentence for running the fraud. His family members and his biggest investors have been sued for as much as $15 billion by the bankruptcy liquidator.
The case is The Litwin Foundation v. United States of America, 10-CV-7367, U.S. District Court, Southern District of New York (Manhattan).
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