California attorney general files $25 million lawsuit against alleged Madoff associate

Calif. AG sues alleged Madoff associate for fraud

LOS ANGELES — The California attorney general on Tuesday sued a Beverly Hills money manager accused of funneling hundreds of millions of dollars in investments to con man Bernard Madoff.

The lawsuit filed in Los Angeles County Superior Court accuses Stanley Chais of securities fraud, unfair competition and other state business violations. It seeks at least $25 million in fines, plus restitution and a court injunction barring Chais from future operations.

“For decades, Stanley Chais posed as an investment wizard, but in truth, he was nothing more than a Madoff middleman,” Attorney General Jerry Brown said in a statement.

Chais, 83, already faced several investor lawsuits, and in June, the Securities and Exchange Commission filed civil fraud charges against him in New York.

His New York attorney, Eugene Licker, said he had not seen the latest lawsuit and could not immediately comment. However, he previously described Chais as a victim who had no knowledge of Madoff’s scheme.

In May, Chais, who was known for lavish philanthropy in California, wrote to a federal bankruptcy judge in New York that he had lost nearly all of his own money to Madoff.

The state lawsuit claims that from the early 1970s until December 2008, Chais steered hundreds of millions of dollars to Madoff through three investment funds.

The lawsuit claims Chais attracted hundreds of investors by promising returns of 20 percent to 25 percent while charging them $270 million in fees.

“Chais claimed that he generated these high returns through superior skill and experience, use of advanced technology and connections to sophisticated brokers in New York,” according to a news release from the attorney general’s office. “In reality, Chais turned over all of the Chais Funds’ investments to Madoff, who relied on such feeder funds and middlemen to attract the cash flow needed to prop up his Ponzi scheme.”

Chais now lives in New York, where he is undergoing treatment for myelodysplasia, a blood disorder.

Licker, his attorney, said Chais has frequent blood transfusions and is too fragile to return to Los Angeles to face trial.

“He is not going back to L.A. He’s stuck here and he feels, based on his doctor’s advice, that even getting on an airplane puts him at risk,” Licker said.

Madoff, 71, pleaded guilty in March to 11 felony counts. He is serving 150 years in prison for defrauding investors.