California Attorney General Edmund G. Brown on Tuesday filed a civil suit against Stanley Chais, described as the “Madoff middleman,” and will seek to recover $270 million in illicit fees, plus $25 million in civil penalties.
Chais, 82, is a longtime Beverly Hills businessman and philanthropist, who donated some $12.5 million annually to Jewish causes, including Soviet refugees, all of Israel’s major universities, Hillel, Jewish culture and the Jewish Joint Distribution Committee. He also invested in Israeli high-tech startups.
The first paragraph of the formal complaint, filed in Los Angeles County Superior Court, reads: “This action is brought against Stanley Chais, an unregistered investment adviser, who over the past 40 years has recklessly and clandestinely delivered hundreds of millions of dollars of investors’ money to his friend and associate Bernard Madoff.
“Chais, who fashioned himself as an ‘investment wizard,’ collected over $250 million in fees supposedly for exercising his skill and judgment in managing investments. In fact, all Chais did was turn over the entirety of his investors capital to Madoff without their knowledge or authorization and despite numerous indicia that Madoff was running a fraudulent scheme.”
Deputy Attorney General Alexandra Robert Gordon, who is prosecuting the case, told The Journal at a press conference that Chais, like Madoff, drew most of his investors from the Jewish community.
Also like Madoff, Brown added, Chais made it appear as if he were conferring a special favor on potential investors by allowing them to join the “club.”
Chais funneled the money to Madoff through three feeder funds – Brighton, Lambeth and Popham – which are also being investigated.
For his services, Chais charged investors an “astronomical” annual fee of 25 percent on all profits, Brown said.
Chais now resides in New York, and could not be reached for comment. At press-time Tuesday, his attorney, Eugene Licker of Loeb & Loeb LLP issued a statement saying that Chais had not yet been served, and had no further information other than press reports. “Mr. Chais and his family were major victims of the Madoff fraud,” the statement says, adding “The notiona that he was complicit in it is outrageous.”
Chais himself told The Journal last December, “Like everyone else who trusted and invested with Bernie Madoff, he betrayed my trust.” He added that his family lost “a huge amount of money.”
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