Marblehead businessman files lawsuit tied to Madoff

MARBLEHEAD – A Marblehead businessman on Monday filed a lawsuit against a Boston law firm, alleging one of its partners led him to invest and lose $2 million to financial swindler Bernard L. Madoff.Kenneth D. Bane, 3 Oceanmeadow Lane, is requesting an Essex Superior Court jury trial against defendant Bingham McCutchen, the law firm where longtime Bane family friend and financial adviser M. Gordon “Bud” Ehrlich is a law partner.Ehrlich introduced Bane to Robert M. Jaffe of Weston and Palm Beach, Fla., who served as a conduit to Madoff, according to allegations in the lawsuit that specifically contend, “Ehrlich led Bane to believe that he was a friend of Jaffe’s and that Jaffe was trustworthy. As a result of illegal activities by Madoff, Bane’s entire $2 million has been lost.”Ehrlich was Bane’s father’s estate planning lawyer in the mid-1980s. In 1987, Bane’s father created the George H. Bane 1987 Family Trust, which included two nursing homes. Bane and his brother, Richard, were given equal shares. Ehrlich handled the legal work involved in creating the family trust.In 1995, Ehrlich again acted as a Bane family attorney by creating the Kenneth D. Bane 1995 Family Trust. Four years later, Bane sold his interest in the nursing homes to his brother, who was also represented by Bingham McCutchen.According to the lawsuit, Ehrlich asked Bane what he intended to do with the proceeds of the sale. Bane told Ehrlich he did not know since he never before had such significant funds. “Bane discussed with Ehrlich that after payments to his former wife and for payment of taxes, he would be left with $2 million,” court documents reveal.It was at this juncture that Ehrlich informed Bane about Madoff, whom he described as an investment adviser with a track record that averaged a 17 percent return for his clients over the past 34 years, according to the lawsuit.Ehrlich told Bane that other Bingham clients had invested with Madoff – naming well-known North Shore businessman and philanthropist Robert Lappin, the lawsuit states.Another allegation in the lawsuit maintains Ehrlich informed Bane that Madoff required a minimum investment of $2 million, coincidentally the same amount Bane had reaped from his share of the nursing homes. “Ehrlich also told Bane that he had to place his money with Madoff through Jaffe, and he encouraged Bane to contact Jaffe,” the lawsuit alleges.Jaffe, son-in-law of Boston philanthropists Carl and Ruth Shapiro, purportedly confirmed to Bane that $2 million was the minimum investment but that Madoff might not be accepting new clients. “Around this time, Ehrlich placed a telephone call to Bane and told him that he thought Madoff was closing his fund,” the lawsuit states. “However, Ehrlich told Bane that he was going to be taken into the fund. Ehrlich told Bane that he was a ‘lucky guy’ to have been able to ‘get in with Madoff’.”In filing the lawsuit, Bane, through his Boston attorneys at Gelb & Gelb, has accused Ehrlich of negligence and breaching his fiduciary duty. He is seeking to recoup the $2 million invested with Madoff.A response to the lawsuit, filed in Salem Superior Court by attorney Richard Zielinski on behalf of Bingham McCutchen and Ehrlich, counters Bane’s claims. According to Zielinski, Bane received more than $3.2 million from the sale of the nursing homes to his brother, funds he transferred into a trust account at Eastern Bank in 1999.”As a result of communications between Bane and Ehrlich, Bane contacted Robert Jaffe, a Boston-based investment professional widely known as an entry point for individuals who wished to place money under management with Madoff’s investment advisory firm, Bernard L. Madoff Investment Securities,” Zielinski acknowledges in court documents, noting Ehrlich then held a favorable view of Madoff and his investment organization as consistent and conservative.”Ehrlich had no relationship with Madoff or his firm. He received no compensation of any sort from any investment with Madoff,