Madoff (with the money)

The ingenuity of lawyers is always amazing. The New York Law School is suing a firm of auditors (BDO Seidman) not because they were the auditors of the fund run by the fraudster Madoff, but because they were the auditors of a fund that invested in Madoff's fund.

Presumably the auditors verified the value of the investments by looking up the price in a list and didn't think it was up to them to enquire about the substance of the Madoff fund. The Madoff fund had been audited, but by a rather insubstantial firm. Perhaps this is one of the disadvantages of over-reliance on market prices. If theory tells you the market can't be wrong, then the market price is conclusive evidence of value.

I wonder how the case is going to turn out and whether the law school is also suing its investment advisors.