South Florida Arbitration & Litigation Lawyer Blog
Madoff News:
December 17, 2010:
A machinery manufacturer last week sued New York Life Insurance Co., claiming it had lost money in variable universal life policies that were invested in funds linked to the Madoff scandal. Experts say similar suits are likely to follow.
Cummins Inc. filed a lawsuit Dec. 10 in U.S. District Court for the Southern District of New York against New York Life, Tremont Capital Management Inc., Tremont’s parent, MassMutual Life Insurance Co., Rye Investment Management and a slate of other related entities.
According to its complaint, Cummins put $122.6 million toward five VUL policies with New York Life. The insurer invested all of the money into The Tremont Opportunity Fund III, which had about 22% of its assets in three Rye Select funds. The Rye funds were exposed to Bernard L. Madoff Investment Securities LLC, Cummins alleges.
The machinery manufacturer charges that New York Life had breached its fiduciary duties because it failed to perform any due diligence on the investments selected for its VUL products. The manufacturer also alleges that the insurer breached an implied covenant of good faith and fair dealing. In addition, the manufacturer alleges that Tremont violated its fiduciary duties by failing to supervise and monitor the Tremont and Rye funds. Cummins is suing for compensation, interest and legal fees.
“New York Life has strong legal and factual defenses to lawsuits involving investments by policyholders in the Tremont Funds,” spokesman William Werfelman wrote in an e-mail. “The policies at issue in these two lawsuits were purchased through independent insurance brokerage firms that were affiliated with outside broker-dealers. The Tremont Funds were among many investment options available under this program.”
Cummins’ suit is one of several pending actions against the Tremont entities, some of which were consolidated and are now overseen by U.S. District Judge Thomas P. Griesa.
Cummins filed the suit on the second anniversary of Mr. Madoff’s admission that he was operating a Ponzi scheme – and thus before the two-year statute of limitations on investor fraud claims expired. But more suits could still be ahead for the Tremont entities and other insurers, said Kevin M. Flynn, an attorney at Kevin M. Flynn & Associates and the lead counsel for Cummins.
“The statute of limitations doesn’t run until a victim discovers the fraud, and in the case of our defendant, the mere fact that Madoff confessed his fraud on Dec. 10, 2008, didn’t, of course, reveal that others were culpable with him,” Mr. Flynn said.
“Arguably, for investors who haven’t yet filed a case and are still thinking about it, the statute of limitations might not run out for a reasonable period of time following Madoff’s disclosures,” he added.
Though Mr. Flynn has not heard of other plaintiffs filing suits against insurers for investing in a Madoff related-fund, he noted it was a possibility.
“There are likely other insurance companies that used the Tremont fund as an investment option for their insurance customers,” he said.
Contact Us
With extensive courtroom, arbitration and mediation experience and an in-depth understanding of securities law, our firm provides all of our clients with the personal service they deserve. Handling cases worth $25,000 or more, we represent clients throughout Florida and across the United States, as well as for foreign individuals that invested in U.S. banks or brokerage firms. Contact us to arrange your free initial consultation.
At the Fort Lauderdale Law Office of Russell L. Forkey, we represent clients throughout South and Central Florida, including Fort Lauderdale, West Palm Beach, Boca Raton, Sunrise, Plantation, Coral Springs, Deerfield Beach, Pompano Beach, Delray, Boynton Beach, Hollywood, Lake Worth, Royal Palm Beach, Manalapan, Jupiter, Gulf Stream, Wellington, Fort Pierce, Stuart, Palm City, Jupiter, Miami, Orlando, Maitland, Winter Park, Altamonte Springs, Lake Mary, Heathrow, Melbourne, Palm Bay, Cocoa Beach, Vero Beach, Daytona Beach, Deland, New Smyrna Beach, Ormand Beach, Broward County, Palm Beach County, Dade County, Orange County, Seminole County, Martin County, Brevard County, Indian River County, Volusia County and Monroe County, Florida. The law office of Russell L. Forkey also represents South American, Canadian and other foreign residents that do business with U.S. financial institutions, investment advisors, brokerage and precious metal firms.