A FINRA panel has put Robert M. Jaffe, an embattled former broker who worked with Ponzi scheme mastermind Bernard Madoff, on the hook to pay $1.1 million in compensatory damages to Turbo Investors LLC.
The decision comes after Turbo, a listed Madoff victim, first brought its claim to FINRA in September 2009 against Jaffe and his former employer, Cohmad Securities Corp., a New York-based broker-dealer. Respondents also named with Cohmad include the firm’s Chairman Maurice J. Cohn and Chief Operating Officer Marcia B. Cohn.
Turbo’s claim followed the SEC’s June 2009 charges against those same defendants, alleging they raised billions of dollars on behalf of Madoff’s scheme. The SEC complaint also alleged that the defendants either ignored or participated in the scheme. Jaffe, according to the SEC, allegedly brought in more than $1 billion in investor funds into the investment scheme.
Turbo was comprised of a group of individual investors who teamed up around 2001 to invest in Madoff, according to their lawyer Richard Fosher, a partner at St. Louis-based law firm Oakes & Fosher. Turbo’s investors were mostly Massachusetts-based and only invested in Madoff through that limited liability company.
“The case that we brought on behalf of Turbo was very similar to the SEC’s complaint,” Fosher said.
Turbo requested $15 million in compensatory damages, plus unspecified punitive damages, attorneys’ fees, interest, costs, forum fees and other relief. Turbo alleged causes including fraud, intentional misrepresentation or omission and breach of fiduciary duty, unjust enrichment, civil conspiracy, negligence and negligent supervision related to investments in Bernard Madoff Investment Services.
Cohmad and the Cohns requested the statement be dismissed, and they be awarded attorney’s fees and other costs and expenses incurred while defending the arbitration. Jaffe requested the statement be dismissed with prejudice.
Turbo notified FINRA on Jan. 21 of this year that it had resolved its claims against Cohmad and the Cohns, the FINRA filing said. Fosher declined to comment on those proceedings.
Cohmad settled with Turbo for undisclosed terms, while the Cohns were dismissed from the arbitration, said Vinson & Elkins LLP Partner Steven Paradise, who represented Cohmad and the Cohns in the case.
“Neither Maurice nor Marcia Cohn had ever heard of [the] claimant or any of its members before it filed its arbitration and neither of them nor Cohmad earned one penny from [the] claimant’s investment,” Paradise said in an e-mail statement.
The FINRA panel decision, dated March 25, makes Jaffe liable for $1.1 million in compensatory damages to Turbo, plus 12% annual interest from 30 days after the award date until it is paid. All other relief, including punitive damages, was denied.
“We were very satisfied that the arbitration panel found and concluded that Jaffe had engaged in wrongdoing,” Fosher said.
With the proceedings, Cohmad will pay $10,000 in member fees, while Jaffe will also pay $1,500 for adjournment and cancellation fees. Turbo and Jaffe will split $10,700 in discovery-related motion and hearing session fees and assessments.
More details of the panel proceedings were not disclosed.
Jaffe’s legal representation at Arkin Kaplan Rice LLP declined comment