Although it has received little coverage lately, a bombshell of a lawsuit inching its way through the superior court of Alaska has revealed the financial strain visited on state workers there and promises to have ramifications for public pensions across the country.

The Alaska Retirement Management Board, a state agency, filed the suit in 2007 against Mercer, the human resources consulting firm. The lawsuit says that Mercer’s mistakes hindered the ability of Alaska’s retirement system to meet its obligations to former public employees.

Mercer, the agency contends, made multiple errors as the state’s actuarial consultant when it estimated the amounts that two of the state’s retirement plans needed to set aside for health care and pension benefits. The agency seeks damages of $2.8 billion.

Read the full story here on the New York Times website.

The total of cash losses by investors in Bernard L. Madoff’s giant Ponzi scheme has climbed to $21.2 billion, the court-appointed trustee overseeing victim claims said Wednesday. That is significantly higher than the tally of about $13 billion provided to the court by federal prosecutors when Mr. Madoff was sentenced for his crimes at the end of June, The New York Times’s Diana B. Henriques reports.

Both figures represent the total of the cash losses sustained by the roughly 2,300 accounts held by investors who put more into the scheme than they withdrew over time. Holders of another 2,660 accounts withdrew more than they had deposited.

These cash losses contrast with paper losses in the fraud of almost $65 billion, which includes the fictitious profits Mr. Madoff added to customer accounts over the years. That was the total of all the account statements that Mr. Madoff mailed to customers last November.

Read the full story here on the New York Times website.

Since early this year, a basic assumption about Bernard L. Madoff’s enormous Ponzi scheme was that the trades shown in his clients’ account statements were fictional — created out of thin air by a key Madoff aide, Frank DiPascali Jr.

That is not quite true, according to the trustee liquidating Mr. Madoff’s assets for the benefit of his victims.

According to a court document filed late on Friday, other longtime Madoff employees were in charge of managing 245 accounts for Madoff friends and family, and for them at least a few of the reported trades actually occurred. The individuals were not named in the document.

These details, in a civil brief filed with the federal bankruptcy judge overseeing the Madoff case, expand what is known publicly about the inner workings of the fraud and raise new accusations about how many people were involved.

The trustee, Irving H. Picard, citing his own findings, asserted that 245 of the almost 5,000 active Madoff accounts were directly managed by other Madoff staff members, not by Mr. DiPascali.

Read the full story here on the New York Times website.

The receiver overseeing R. Allen Stanford's businesses announced Thursday that he is suing two former employees of the Texas financier's capital management firm for more than $11 million.

In papers filed in federal court in Dallas, receiver Ralph Janvey said the money should be returned to investors the government alleges were defrauded in a $7 billion Ponzi scheme. Janvey said the payments were for three months work and came from revenue "not generated by legitimate business activities."

The payments were made in November 2008, three months before the government filed federal charges against Stanford and his top officers.

The announcement comes a day after Stanford was seen bleeding from his mouth during a criminal court hearing in Houston. Stanford has been jailed without bond following his June indictment.

The receiver's complaint names Christopher Aitken of Ponte Vedra, Fla., and Stephen Thacker of Baltimore. It says Aitken received nearly $8.7 million and Thacker nearly $2.6 million.

Read the full story here on the WTOP website.

Two investors who lost more than $2.4 million investing with failed financier Bernard Madoff sued the U.S. Securities and Exchange Commission Wednesday, blaming the agency for failing to detect the epic multi-decade fraud that involved tens of billions of dollars.

Investors Phyllis Molchatsky, a disabled retiree, and Dr. Steven Schneider, filed the lawsuit in U.S. District Court in Manhattan.

The lawsuit said the SEC had ''countless opportunities to stop the Ponzi scheme Madoff operated over 16 years, and botched all of them.'' The lawsuit said the SEC directly caused the investors to lose their investment.

SEC spokesman John Heine said Wednesday that the SEC would contest the lawsuit.

''Based on our initial understanding of the matter, we believe there is no merit to the complaint,'' he said.

Attorney Howard R. Elisofon, representing Molchatsky and Schneider, said the lawsuit was the first lawsuit filed on behalf of Madoff investors against the SEC.

''Instead of watching the backs of Ms. Molchatsky and Dr. Schneider and the backs of the other investors, the SEC -- through its negligence -- was effectively watching Bernie Madoff's back,'' Elisofon said in a statement. ''Now it is time for the SEC to be held accountable and for the federal government to do what the law says it must do: compensate the victims for its negligence.''

The SEC has faced heavy criticism for not discovering the multibillion-dollar fraud since it was revealed last December, when Madoff was arrested after confessing the fraud to his sons. He is serving a 150-year prison sentence after pleading guilty to fraud charges.

Read the full story here on the New York Times website.

Next to a Chinese restaurant in Burlington, Vt., lurks a quiet guardian of Wall Street — an obscure insurance company that is supposed to protect big-money investors in the event of a catastrophic failure of a major brokerage firm.

A failure, for instance, like the one that brought down Lehman Brothers nearly 11 months ago. Now, after years in the shadows, the insurer, the Customer Asset Protection Company, could finally be put to the test, and questions are starting to swirl.

If it were overwhelmed by claims, the banks and brokerage companies that own Capco, as it is known, could end up owing billions of dollars.

Capco representatives dismiss such concerns, but state insurance regulators are keeping an eye on the company. Officials at the New York State Insurance Department are concerned about the company’s ability to withstand the Lehman bankruptcy, the largest in history.

Read the full story here on the New York Times website.

A San Francisco attorney who interviewed imprisoned swindler Bernard Madoff in a federal prison this week said on Wednesday he plans to amend a lawsuit to include possibly several fund managers who funneled investor money to Madoff's $65 billion Ponzi scheme.

Joseph Cotchett obtained the lengthy interview with Madoff, 71, after suing the former Nasdaq commissioner's wife, Ruth, his sons and brother, along with other parties, on behalf of duped investors in Wall Street's biggest investment fraud.

"We had been negotiating with his lawyers and his wife's lawyers for the past two months," Cotchett told Reuters. "We said if Bernie would sit down with us, we would give great consideration to letting Ruth out" of the lawsuit.

REad the full story here on the Reuters website.

Louis H. Pollak of the U.S. District Court for the Eastern District of Pennsylvania upheld the jury's December award in an errors and omissions reinsurance dispute with United National Group and Aon's London subsidiary, Aon Ltd.

He agreed with United National's request for prejudgment interest, bringing the total award to $32.2 million.

"We would hope that Aon will now accept the jury's verdict," said Jerome C. Katz, a partner at Ropes & Gray and lead trial counsel for United National. "But if they do choose to appeal, we look forward to vindication in the Court of Appeals."

Find the rest of this article here on the Trading Markets website.

The Securities and Exchange Commission is seeking a court order requiring that broker-dealer Morgan Keegan & Co. repurchase illiquid auction-rate securities after allegedly failing to warn its customers about the liquidity risks associated with the ARS market.

The agency said Morgan Keegan , owned by Regions Financial Corp. (RF), sold about $925 millionNovember 2007 but failed to warn them about increased risks even as the firm decided to stop supporting the ARS market in February 2008. of ARS to its customers over a nearly five-month period beginning in

The SEC alleges Morgan Keegan misrepresented to customers the ARS were safe, highly liquid investments that were comparable to money-market funds.

Read the full story here on the Morningstar website.

An investigation by U.S. Securities and Exchange Commission (SEC) has cleared Fairfax Financial Holding Ltd., based in Toronto, of any wrongdoing in its use of a controversial product known as finite reinsurance, a finding that will strengthen Fairfax’s case against a group of hedge funds.

The SEC has sent Fairfax a letter saying that the agency did not plan to take any enforcement action related to its use of finite reinsurance.  Fairfax has filed a lawsuit alleging that a group of hedge funds and their employees conspired to bring down the firm’s stock price by releasing false information through analysts.  A lawyer said that the letter will be a crucial factor in its lawsuit now in proceedings in a court in New Jersey.

Read the full story here on the GlobeAdvisor website.

New York's attorney general filed civil fraud charges Monday against a hedge fund manager who funneled $2.4 billion to Wall Street swindler Bernard Madoff without telling clients where their money was going.

The complaint accuses J. Ezra Merkin, the former chairman of GMAC Financial Services, of telling a "panoply of lies" to give the impression that he had a sophisticated investment strategy, when in fact he was simply a middleman who handed most of his cash to Madoff.

A majority of investors had no idea where their money really went until after Madoff's arrest in December, when Merkin sent a brief note informing them that their money was probably gone forever, the suit said.

"Merkin duped individual investors, non-profits, and charities into believing he was responsibly managing their investments, when in actuality he was dumping them into history's largest Ponzi scheme," Attorney General Andrew Cuomo said in a statement.

The suit said Merkin, the son of a respected New York philanthropist, charged his clients $470 million in management fees but did little actual work other than "routine bookkeeping."

Read the full story here on the CLTV website.

The U.S. Supreme Court said unanimously Wednesday parents could use 19th century civil rights law to sue public schools for child sexual harassment.

The ruling in the case out of Hyaniss, Mass., means parents can use an 1871 civil rights law in tandem or in place of 1972's Title IX of the Education Amendments, which bans school discrimination.

During the 2000-01 school year, the kindergarten-age daughter of Lisa and Robert Fitzgerald told her parents an 8-year-old boy was forcing her to lift her skirt and pull down her panties on the bus. But the boy denied the allegation and the school principal ruled it could not be corroborated. Local police also refused to act.

The parents began driving the girl to school, but the child said the incidents continued at school. The parents then filed suit in federal court alleging violations of the 1871 civil rights law and Title IX. The parents lost their Title IX claim in court, and the lower federal courts ruled the Title IX claim barred the civil rights claim.

The impact on the errors and omissions insurance sector from the Bernard Madoff Ponzi scheme scandal will be astronomical and worldwide, according to an E&O specialist.

Jonathan Legge, a managing director with Mercator Risk Services, said the reverberations will likely register as investment advisors and banks that invested clients’ money through Mr. Madoff are hit with actions by investors.

Mr. Legge said insurers initially may have been looking at their exposure to Mr. Madoff specifically, but now they are finding that many big investment advisors, funds and banks had significant money from clients invested through Mr. Madoff. Some had as much as 40 percent of their clients’ money invested through Mr. Madoff, said Mr. Legge.

As a result, clients could make allegations concerning “lack of due diligence” for those who were steering money to Mr. Madoff, he said.  

Read the full story here on the National Underwriter website.

"The use of technology is interwoven into the agency procedures and practices. It is more often the failure or lack of use of the technology that leads to the agency finding themselves in the unfortunate position of being unable to provide a strong defense against a[n] [errors and omissions] claim, "says Sabrena Sally, CPCU, senior vice president of commercial insurance with Westport Insurance Corporation, a subsidiary of Swiss Re, one of the largest writers of insurance agents' errors and omissions coverage.

Sally talked with Insurance Journal recently about the additional errors and omissions exposures created by the use, misuse and lack of use of current technology by agents; providing great insight into the exposures analyzed during the underwriting process related to insurance agency technology.

Read the full article here on the MyNewMarkets.Com website.

In an article written by Peter Biging, a Partner in the New York office of Lewis Brisbois Bisgaard & Smith LLP, he notes that Courts considering agent and broker errors and omissions claims are relying more and more on a presumption that agents and brokers are—and present themselves as—experts in insurance coverage.   This trend means that more juries may be charged with deciding whether a very general request for coverage from a customer can form the basis of a claim for negligence or breach of contract against his or her agent or broker when it turns out the customer doesn’t have sufficient insurance to cover a specific loss.