Death may not end his trou­bles

Sev­eral civil cases against Stan­ley Chais, tied to Bernard Mad­off, may con­tinue.

Los Angeles Times - - Business - Stu­art Pfeifer

The week­end death of Bev­erly Hills money man­ager Stan­ley Chais, who steered hun­dreds of mil­lions of dol­lars to the Ponzi scheme op­er­ated by Bernard L. Mad­off, puts an end to a crim­i­nal in­ves­ti­ga­tion by the U.S. at­tor­ney’s of­fice in New York.

But a spate of civil law­suits will prob­a­bly con­tinue as the govern­ment and an­gry in­vestors try to lay claim to any as­sets he left be­hind.

Chais, 84, who died Sun­day in New York, had been un­der crim­i­nal in­ves­ti­ga­tion since Jan­uary 2009, sus­pected of op­er­at­ing a so­called feeder fund that chan­neled mil­lions of dol­lars from clients to Mad­off while telling in­vestors he was mak­ing huge gains through eq­ui­ties and other fi­nan­cial in­stru­ments. Pros­e­cu­tors had been con­sid­er­ing con­spir­acy, money laun­der­ing and wire fraud charges, an as­sis­tant U.S. at­tor­ney said in an af­fi­davit filed last year. No charges were filed.

In ad­di­tion to the crim­i­nal re­view, Chais was fac­ing law­suits filed by the trustee liq­ui­dat­ing Mad­off’s as­sets, the Se­cu­ri­ties and Ex­change Com­mis­sion, Cal­i­for­nia Atty. Gen. Jerry Brown and in­vestors. The law­suits al­leged that Chais knew, or should have known, that Mad­off was op­er­at­ing a Ponzi scheme be­cause he had pro­duced un­fath­omable prof­its, year af­ter year, de­spite mar­ket con­di­tions.

The SEC law­suit al­leged

that Chais made about $270 mil­lion in fees for in­vest­ing his clients’ wealth with Mad­off and that he with­drew hun­dreds of mil­lions more from his Mad­off ac­counts than he de­posited. The law­suits will prob­a­bly con­tinue, with the fo­cus switched to Chais’ es­tate and sur­vivors.

“We’re sorry to hear about the death of Mr. Chais. Claims against a de­fen­dant who is de­ceased sur­vive and can be as­signed to his suc­ces­sor-in-in­ter­est,” Brown’s spokes­woman Chris­tine Gas­parac said Tues­day. “But there are pro­ce­dural is­sues to con­sider, and we are now con­tem­plat­ing the best course of ac­tion.”

SEC spokesman John Nester de­clined to com­ment on whether the com­mis­sion in­tended to pur­sue the civil charges it filed against Chais in June 2009. A judge had sus­pended the law­suit since De­cem­ber at the request of the U.S. at­tor­ney’s of­fice in New York, which said the lit­i­ga­tion would have in­ter­fered with its on­go­ing crim­i­nal in­ves­ti­ga­tion.

Chais had ve­he­mently de­nied wrong­do­ing, say­ing he too was a vic­tim of Mad­off and not a par­tic­i­pant in the largest and long­est-run­ning Ponzi scheme in U.S. his­tory.

“I have been ac­cused of some ter­ri­ble and un­true things,” Chais said in a 2009 let­ter to the judge over­see­ing the law­suit filed against him by Irv­ing H. Pi­card, the trustee liq­ui­dat­ing Mad­off’s as­sets on be­half of in­vestors. “Al­most all of my money was lost in the Bernard Mad­off fraud.”

In the spring, Chais spent sev­eral days tes­ti­fy­ing in video­taped de­po­si­tions as part of law­suits brought against him by in­vestors, said Barry Weprin, an at­tor­ney for the plain­tiffs. Be­cause of Chais’ fail­ing health, the de­po­si­tions were limited to three hours a day and could take place no more than three con­sec­u­tive days. Weprin said he was pro­hib­ited from dis­cussing the de­tails of Chais’ tes­ti­mony.

“He did tend to tire dur­ing the course of the three hours. I know he was un­der­go­ing sub­stan­tial treat­ment,” Weprin said. “We’d go three days and then we’d have to wait a month. He was very ill, but he seemed lu­cid.”

If the law­suits go to trial, video of Chais’ tes­ti­mony could be played be­fore the jury, Weprin said. He said he hoped the trial would be held in 2011.

“We are cer­tainly plan­ning to pur­sue our … case on be­half of the in­vestors,” said Weprin, a part­ner in the New York of­fice of Mil­berg. The in­vestor and Brown law­suits have been con­sol­i­dated be­fore Los An­ge­les County Su­pe­rior Court Judge El­iz­a­beth Allen White. “We think li­a­bil­ity will be easy to es­tab­lish,” Weprin said.

Chais had moved from South­ern Cal­i­for­nia to New York be­cause he was re­ceiv­ing med­i­cal treat­ment at Me­mo­rial Sloan-Ket­ter­ing Can­cer Cen­ter near his Fifth Av­enue apart­ment. He had spent decades as a pri­vate in­vest­ment ad­vi­sor, man­ag­ing money for sev­eral prom­i­nent fig­ures, in­clud­ing Os­car-win­ning screen­writer Eric Roth, who wrote “The Cu­ri­ous Case of Ben­jamin But­ton,” and Mark Peel, ex­ec­u­tive chef and part owner of Cam­panile res­tau­rant in Los An­ge­les.

Many of Chais’ in­vestors’ lost their life sav­ings when the Mad­off scheme was ex­posed, Weprin said. Mad­off, who pleaded guilty to 11 felony charges, is serv­ing a 150year sen­tence.

“None of my clients even knew the name Bernie Mad­off,” Weprin said. “They in­vested with Stan­ley Chais be­cause they trusted him.”

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