Jones, Snead, Wertheim & Wentworth, P.A. (“The Jones Firm”) and NEA-New Mexico jointly held a press conference on June 24, 2009 to announce that the state court in Santa Fe unsealed an action against Austin Capital Management Ltd. (“Austin Capital”) on behalf of the New Mexico Educational Retirement Board (ERB) and the State Investment Council (SIC). The law suit seeks to recover approximately $25 million in losses of public money resulting from Austin Capital’s investment in funds managed by admitted fraudster Bernard L. Madoff (“Madoff”).
NEA-NM brought the action as the so-called qui tam plaintiff under the New Mexico Fraud Against Taxpayers Act which permits private parties to seek recovery of losses of public money.
The complaint charges Austin Capital with having ignored several red flags that should have kept it from placing money with Madoff and with having failed to disclose its longstanding business relationship with Madoff to investors. Austin Capital is a limited partnership that oversees hedge fund investment portfolios.
Unbeknownst to investors, Austin Capital had invested approximately 7.5% of its funds in Madoff-managed investments and allegedly failed to perform an appropriate investigation into the suitability and risk associated with the Madoff investment, a process known as due diligence.
“We wanted our general counsel to bring this lawsuit to do whatever we can to insure the integrity of the teacher and public school retirement system,” said NEA-New Mexico President Sharon Morgan.
“This case is about Austin Capital’s not doing their homework on Bernie Madoff. Our investigation appears to be unique in having uncovered Austin Capital’s longstanding relationship with Madoff, a reason they missed all the red flags,” attorney John Wertheim said.
The ERB is a retirement fund for New Mexico’s public school teachers and employees, and the SIC is charged with investing the Land Grant and Severance Tax Permanent Funds, as well as other public funds.
Established in 1948, The Jones Firm specializes in complex litigation on behalf of plaintiffs and it has served as general counsel to NEA-New Mexico since 1968.
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