UPDATE: This article has been updated to correct the nature of the lawsuit filed by the pension fund. The lawsuit is an ERISA action that asserts a claim for breach of fiduciary duty, not a securities class action. A copy of the complaint is available here.
Pension Fund for Hospital and Health Care Employees-Philadelphia and Vicinity, a Philadelphia-area pension fund, has become the first pension fund to file a class action related to losses from Bernard Madoff’s investment firm. The fund’s complaint alleges that Austin Capital Management lost millions of dollars in pension fund investments because it failed to fully investigate and research investments that ultimately put money in Madoff’s company, the Statesman reports.
The pension fund alleges that it lost $700,000 in Madoff-related securities and investments after investing $10 million with Austin Capital in July 2008. Austin Capital allegedly directed a portion of that investment to Tremont Holdings, which in turn invested with Madoff.
Ted Lieverman, a partner at the law firm Spector Roseman Kodroff & Willis, which is representing the Philadelphia pension fund, said that as a fiduciary for the pension fund, Austin Capital should have realized that something was not right about Madoff’s firm and its returns. “They didn’t have to see the dragon,” he said. “They just had to see the smoke trailing up from the cave.”
According to Dow Jones Financial News, the lawsuit is the first filed by a pension fund in the Madoff matter.