On Friday January 30th 2009, Maxam Capital Management LLC, yet another "feeder fund" to Bernie Madoff, sued its own auditors for not detecting the alleged fraud at Bernard Madoff Investment Securities. Apparently the Maxam Absolute Return Fund LP placed all of its $280 million in holdings with Madoff. That fund has now sued McGladrey & Pullen LLP and Goldstein Golub Kessler LLP for professional negligence on Jan. 30 in Connecticut state court. The case is Maxam Absolute Return Fund LP v. McGladrey & Pullen LLP, Connecticut Superior Court (Bridgeport).
According to the complaint, while the auditors issued opinions that Maxam’s financial statements conformed with general accounting principles, they “negligently relied solely on documents created by Madoff and sought no independent confirmation that trades had been executed or that assets existed.” The complaint continues “Assets were grossly overstated based on fraudulent trading tickets and fraudulent account statements provided by” Madoff.
From Bloomberg News, "Goldstein Golub, based in New York, did the Maxam fund’s 2006 audit, according to the complaint. McGladrey & Pullen, based in Bloomington, Minnesota, did its 2007 audit after Goldstein Golub partners joined that firm. McGladrey & Pullen General Counsel Richard Miller didn’t immediately return a call for comment. Two phone numbers for Goldstein Golub in New York ring through to RSM McGladrey Inc., a professional-services firm that “operates in an alternative practice structure with McGladrey & Pullen,” according to its Web site. Goldstein Golub no longer conducts audits, according to the complaint."
Darien, Connecticut-based Maxam Capital Management LLC was started in 2006 by Sandra Manzke after she left Tremont Capital which she founded in 1985. Tremont Capital suffered major losses due to the money that it had placed with Madoff. Ms. Manzke apparently started in investing almost exclusively with Madoff after she started her new firm. There are conflicting reports about how Maxam marketed itself and whether it highlighted itself as women and/or minority owned in order to attract investor funds as a start-up.