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 A jury in Seattle sided with FutureSelect Portfolio Management Inc
in finding the auditing firm was negligent in its work for funds
that funneled money to Madoff.
Steven Thomas, FutureSelect's lawyer, confirmed the verdict. Ernst &
Young did auditing work for funds managed by Tremont Group Holdings
Inc's Rye Investment Management unit.
The jury found damages of $20.3 million and found Ernst & Young
liable for half of that, Thomas said. Prejudgment interest could
bring FutureSelect's award to $25 million, he said.
"This jury found that Ernst & Young's job was to try to find this
fraud," Thomas said in an interview. "They were the gatekeeper and
didn't do their job."
The trial was the first in which an auditor had been held liable for
its role auditing one of Madoff's so-called feeder funds.
Madoff, 77, is serving a 150-year prison term after pleading guilty
in 2009 to running a scheme that cost investors an estimated $17
billion or more in principal.
Ernst & Young spokeswoman Amy Well said in a statement that the jury
rejected the "vast majority" of FutureSelect's claims. The
investment firm had been seeking $112 million.
But she said the firm continues to believe it was not responsible
for any of these investors losses, and noted it was among many other
auditors of funds that used Madoff as their investment advisor.
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"While we regret the investors' losses, no audit of a Madoff-advised
fund could have detected this Ponzi scheme," she said. "We are
reviewing filing an appeal."
FutureSelect, which first invested with the Rye funds in 1998, sued
in 2010, after losing more than $195 million in the Madoff fraud
investing with the Rye funds.
The lawsuit also named Tremont and an affiliate of OppenheimerFunds
Inc, which bought Tremont in 2001. Both settled confidentially.
The case is FutureSelect Portfolio Management Inc. v. Ernst & Young,
Superior Court of the State of Washington for King County, No.
10-2-30732-0.
(Reporting by Nate Raymond in New York; editing by Grant McCool)
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