Hedge Fund Firm Sued for Madoff Investments

April 9, 2009 (PLANSPONSOR.com) - Coughlin Stoia Geller Rudman & Robbins LLP announced that a class action has been commenced on behalf of institutional investors in Austin Capital Management Ltd. hedge funds during the period between January 2, 2005, and December 11, 2008.

According to the announcement, the suit seeks to recover losses resulting from Austin Capital’s placement of significant amounts of investor money into funds managed by Bernard L. Madoff and his firm. The action includes a sub-class of employee benefit plans which invested with Austin Capital during the class period, asserting claims under the Employee Retirement Income Security Act (ERISA) for breach of fiduciary duty.

The complaint charges Austin Capital, its investment managers and its outside auditors with violations of the Securities Exchange Act of 1934 and ERISA by placing 7.5% of its funds in Madoff-managed investments unbeknownst to investors in its funds. This was contrary to the duties Austin Capital had to its investors of good faith and fair dealing and contrary to the representations Austin Capital had made regarding its processes for selecting fund managers, the law firm said.

The suit claims that as a result of defendants’ breaches and false statements, Austin Capital investors made additional investments in Austin Capital and/or held interests they would have redeemed.

This is not the first such suit against Austin Capital over Madoff investments. In February, the Philadelphia law firm of Spector Roseman Kodroff & Willis said the firm filed a suit on behalf of the Pension Fund for Hospital and Health Care Employees – Philadelphia and Vicinity (see Union Sues Over Madoff Pension Losses).