A retired businessman from New Jersey is suing Goldman Sachs after losing $15 million in the Bernie Madoff Ponzi scheme, claiming Goldman Sachs should have insisted that he follow its advice and remove money from the Madoff Fund.

In a lawsuit filed in federal court, Jerome Goodman claims that Goldman Sachs had a fiduciary duty to insist that Goodman follow its advice to remove $5 million of the $12 million from the Madoff Fund and invest it in a Goldman Sachs hedge fund.  Goodman didn't do so, the suit says, because the Madoff and Goldman Sachs funds had the same apparent risk level and he felt Goldman Sachs' advice was self-serving and not in line with his request for diversification.
 
But, then, Goodman goes on to claim that, "Goldman Sachs implemented an internal ban on investment with the Madoff Fund in or around 1999, after Goldman Sachs conducted or attempted to conduct satisfactory due diligence into the Madoff Fund,” and that this was further grounds for insisting that he diversify.

The plaintiff's lawyer, Richard Lippe of Meltzer, Lippe, Goldstein & Breitstone in Mineola, N.Y., who represents several Madoff victims, says, meanwhile, there is a precedent for the notion that an investment adviser who does not follow a mandate to diversify a portfolio can be liable.

C. Evan Stewart of Zuckerman Spaeder in New York, a lawyer for Goldman Sachs, responded that the lawsuit is without merit because the company never instituted an internal ban on Madoff.  Moreover, Stewart noted, Goodman was never a client of the firm.

—Source: Law.com