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Net widens in Madoff case

FEDERAL regulators filed securities fraud charges on Monday against a prominent California investment adviser and a New York brokerage firm said to be secretly controlled by Bernard Madoff, accusing them of funneling billions of dollars from investors into Madoff's pyramid scheme.

The Securities and Exchange Commission announced civil fraud charges against New York-based Cohmad Securities Corp, its Chairman, Maurice "Sonny" Cohn, his daughter, Chief Operating Officer Marcia Cohn, and Vice President and broker Robert Jaffe. Named in a second SEC lawsuit was investment adviser Stanley Chais, a longtime Beverly Hills philanthropist, who allegedly oversaw three funds that invested all of their assets - nearly US$1 billion - with Madoff.

While channeling billions in investor funds to Madoff, the associates together collected several hundred million dollars in fees from the now-disgraced money manager, the SEC alleged.

They were crucial to the success of Madoff's US$50 billion fraud scheme, targeting affluent yet financially unsophisticated investors by burnishing the impression that one could only invest with Madoff if one had special access to him or as a favor, the regulators said.

Cohmad and Chais were said to have gained nearly all their revenue from introducing investors to Madoff in a well-oiled marketing operation.

Madoff co-owned and secretly controlled Cohmad and used it to procure a steady stream of funds for his multibillion-dollar fraud, the SEC said.

Cohmad's main office was in the Lipstick Building on Manhattan's Third Avenue - the same address as Madoff's investment and securities brokerage firms.

Jaffe and Chais, through their attorneys, disputed the SEC's allegations.


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