Argus, Tremont Agree to Settlement in Madoff Lawsuit

A pair of affiliated insurance firms -- Argus Group Holdings Ltd. and Tremont International Insurance Ltd. -- have reached a settlement with life insurance and annuity consumers in a lawsuit connected with the far-reaching Bernard Madoff fraud.

The lawsuit was filed by those suffering investment losses in connection with Madoff's defunct investment operation -- specifically, buyers and holders of annuity and life insurance policies drained in the Madoff fraud. The class-action suit claimed the insurers invested policy resources in funds "managed by one or more of the Tremont defendants who, in turn, invested with Madoff." The plaintiffs accused the defendants of failing "to conduct adequate due diligence" and failing "to monitor fund assets that were invested with Madoff."

Madoff has been convicted of running a massive Ponzi scheme and is currently serving a 150-year prison sentence.

Court papers filed in U.S. District Court for the Southern District of New York suggested the plaintiffs recognized "the difficulty of establishing jurisdiction over the Bermuda-based Argus defendants."

The settlement included loans to policyholders, the assignment of certain Argus claims to a litigation trust and cooperation from Argus International "in connection with litigation of the assigned claims." The settlement doesn't include a monetary payment.

When asked about the settlement deal, Argus' president and chief executive officer, Gerald Simons, called it "the next step in the legal proceedings," directing BestWire to a previous press statement. That May statement said, "The Argus Group and Argus International continue to deny all allegations of wrongdoing or liability whatsoever." But it added that the settlement was being agreed to so the company can "eliminate the burden, expense and uncertainty of litigation."

Argus has had its own legal conflict with Tremont. It had purchased Tremont International Insurance in 2006 and subsequently sued its previous owner, Tremont Group, claiming the seller overstated the property's value. Simon said in a statement, "It is quite clear that TIIL was not worth what Tremont said it was and that Argus has suffered losses and damage as a result."

In December, Massachusetts Mutual Life Insurance Co., its hedge-fund subsidiary and other affiliates were named in a class-action lawsuit related to the Madoff fraud (BestWire, Dec. 23, 2008). The defendants were Massachusetts Mutual; its subsidiary, Oppenheimer Acquisition Corp.; Tremont Group Holdings, a Rye, N.Y.-based investment firm that specializes in hedge funds and is a unit of Oppenheimer; Rye Investment Management Group; a division of Tremont; Harry Hodges, Rye's vice president of investor services who was an investment adviser; Rye Select Broad Market Prime Fund, a fund allegedly run by Madoff through his firm, Bernard L. Madoff Investment Securities; Rye Select Broad Market Fund, a fund also allegedly run by Madoff; and Tremont Partners, the Prime Fund's investment manager.

Argus Insurance Co. Ltd. has a current Best's Financial Strength Rating of A- (Excellent).