Lawsuit Filed Against Mass Mutual in Madoff Case

A new lawsuit filed by Berman DeValerio claims that Massachusetts Mutual Life Insurance Company and its agents bear legal responsibility for investing client funds with Bernard L. Madoff Investments without conducting adequate due diligence.

The lawsuit was filed in federal court in Massachusetts on Friday by investors in Rye Select Broad Market Fund LP, a hedge fund managed by Tremont Partners Inc. that placed money with Madoff. It is believed to be the first complaint filed in Massachusetts in connection with the Madoff scheme, according to Berman DeValerio, the Boston law firm representing the plaintiffs.

The complaint names Tremont, its controlling entity, Oppenheimer Acquisition Corp., and Oppenheimer’s parent company, Mass Mutual. Although it was filed in U.S. District Court in Boston, it makes claims under Massachusetts state law.

As of November 2008, Rye Select Broad Market stated it had $2.4 billion in assets under management. That money has disappeared, according to the lawsuit, which claims the defendants had designated Madoff to manage Rye’s assets since 1994.

Tremont reportedly invested a total of $3.1 billion with Madoff, who in December admitted to authorities that he operated a $50 billion Ponzi scheme. The lawsuit, which is seeking class action status, claims that the defendants knowingly and recklessly misrepresented and/or omitted material facts to clients about their investments and breached their contractual and fiduciary duties to investors.

“MassMutual had just as much of an obligation as Tremont did to ensure that its clients’ assets were safe,” said Bryan Wood, a partner with Berman DeValerio in Boston. “Defendants ignored serious questions that were being raised publicly about the legitimacy of Madoff’s hedge fund as early as 2001 and patently failed to conduct an investigation that would have prevented them from exposing their clients’ assets to Madoff’s fraudulent scheme.”