A Hartford jury said Wednesday that the Connecticut bank that was custodian for two investors in Bernard Madoff’s Ponzi scheme was not liable for their losses.
I wrote about the Alice-in-Wonderland-style trial in a story for The New York Times on July 8. The bank’s former president said he didn’t know what due diligence the bank might have done to be sure the customer’s assets existed, and didn’t know how the bank maintained accurate records. The president, who’d been in the banking business for 36 years, had a degree in finance from Georgetown University.
Another doozy in the trial was the bank’s former custodial manager, who said he would get three or four “very thick envelopes” of trade confirmations from Madoff some weeks. He put them in a file drawer and never reviewed the documents. (Except that he occasionally took a peek because he was curious about what Madoff might be buying or selling, but not curious enough to do any checking on behalf of the bank’s customers.)
The Hartford trial began in June as a consolidation of three lawsuits with similar allegations. But two of those cases settled for $7.5 million just before the jury began its deliberations, leaving the jury with only the case of two elderly Florida investors to decide. You can read my story about the verdict today for The Times here. Take a lesson from this: When a financial outfit tells you it is your custodian, don’t make the mistake of assuming that means they have custody of your money.