ROBERT SIEGEL, host:
From NPR News, this is All Things Considered. I'm Robert Siegel. The scandal surrounding Bernard Madoff and his alleged Ponzi scheme grew deeper today. Police say the head of an investment firm tied to Madoff was found dead in his office, an apparent suicide. The man was Rene-Thierry Magon de la Villehuchet. He founded Access International Advisors, which reportedly had invested more than $1 billion with Madoff. Access was one of numerous feeder funds, that means they took money from investors and funneled that money to Madoff's firm. As NPR's Jim Zarroli reports, many of those funds now face big legal problems.
JIM ZARROLI: Until a few weeks ago, Bob Chew had no inkling his retirement fund was in any jeopardy. He had put some $650,000 into an investment fund run by a California money manager named Stanley Chase, who had been investing for his wife's family for decades. Chew says Chase was secretive about what he did with his clients' money.
Mr. BOB CHEW (Cofounder, Vice President, A Better Community for All): He wouldn't offer, and when we did try to ask specifics, we weren't given the answers.
ZARROLI: But the fund made good, steady returns, and so Chew learned not to ask questions. Then, on December 11th, everything began to unravel.
Mr. CHEW: The person that was handling our family fund called and said, we're wiped out. And then I said, well, what do you mean? He says, there's this fellow Madoff that's been arrested and all of our money went to him. Who's Madoff? Who's this guy Bernard Madoff? We had no - never heard the name before.
ZARROLI: As it turned out, Chew's money had been placed in one of numerous feeder funds that delivered investors to Madoff's firm. For years, Madoff was known as a spectacularly successful money manager. Ordinary investors were barred from putting money in his funds. They could, however, go to one of the feeder funds which, for a fee, would send their money on to Madoff. Dan Strachman, who wrote the book "The Long and Short of Hedge Funds," says these feeder funds have become increasingly popular with investors.
Mr. DAN STRACHMAN (Author, "The Long and Short of Hedge Funds"): They want a bite of the forbidden fruit, and organizations like Fairfield Greenwich and others in some cases provide that access. Someone like Madoff seems to have been able to take advantage of that by using these people.
ZARROLI: Fairfield Greenwich is a hedge fund company that operated what's believed to be Madoff's largest feeder fund. It's said to have lost $7.5 billion dollars. Many other funds have now lost all or part of their investors' money, and they're expected to spend years fighting lawsuits. Attorney Jeff Zwerling, who's representing some of Madoff's victims, says some of these funds are virtually bankrupt, and it will be difficult for these investors to recover any money from them, but Zwerling says there are exceptions.
Mr. JEFF ZWERLING (Lawyer; Zwerling, Schachter & Zwerling, New York): If the feeder fund did not invest all its assets in there but lost, say, 50 percent of its investment and is still an ongoing entity, then I think the investors have a much better shot of recovering at least some significant portion of their investment.
ZARROLI: Zwerling points out that some of the feeder funds were tied to bigger companies with deep pockets. Massachusetts Mutual Life Insurance Company was sued this week because one of its subsidiaries was tied to a company that invested with Madoff. Robert Chew says regulators need to go further by demanding that feeder funds become more transparent. He says the fund operated by his money manager wasn't registered with the government because it was so small and so it was able to escape scrutiny.
Mr. CHEW: Had we been able to see what was going on, if we have - would have been able to pull that curtain to the side and see the black box and what it was doing, we would have been able to make a better investment decision. And maybe, in fact, we would have kept going, but at least we would have known.
ZARROLI: Chew says he's speaking out on the issue because he wants to prevent future financial disasters. As for him, it's probably too late to recover much of the money he and his family lost. And for now, he's left to sort out the damage caused by a man he'd never heard of before this month. Jim Zarroli, NPR News, New York.