Connecticut bank probed in Madoff scam

The lawyers, Adam Rabin and Craig Stein, said they have been hired by a Florida couple who were persuaded by a promoter in the 1990s to put thousands of dollars of retirement savings into an account at Westport National Bank, without realizing their money would be entrusted to Madoff.

For more than a decade, the bank sent the couple statements tallying their profits, while it and the promoter collected annual fees totaling about 4 percent of their assets, the lawyers said, declining to identify the couple.

“It's our theory that fiduciary duties were owed” and that “many more” people may have been hurt by Madoff through an account at the bank, said Rabin, a partner at McCabe Rabin PA in West Palm Beach. The bank should have ensured “that wherever this money was going, it was invested safely, properly and certainly not in a fraudulent enterprise.”

The bank, based in Westport, denied responsibility for the losses. It is a division of Connecticut Community Bank, formed in the 2004 merger of Greenwich Bank & Trust Co. and Westport National.

Madoff, 70, was arrested Dec. 11 and charged in federal court in Manhattan with securities fraud after allegedly telling his sons his investment advisory business was a sham in which early clients had been paid with money from new ones. The business had catered mainly to rich people, as well as hedge funds, charities and universities. So far, few non-affluent individuals have said they were hurt by the scheme.

“Westport National Bank maintained a custodial account for a number of individuals and entities” and “served in a ministerial capacity only,” bank President Richard Cummings said in a statement Thursday. The bank “did not give any investment advice to any of its custodial customers,” he said. It also didn't invest any of its own money with Madoff's firm.

If clients sue, they may try arguing the bank should have acted as more than a custodian, depending on how the account was structured and what fees it collected, said Geoffrey Bobroff, an investment-management consultant in East Greenwich, Rhode Island, who previously worked as a trial attorney at the U.S. Securities and Exchange Commission.

“The bank has to be concerned about potential exposure,” he said.

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