Madoff crony charged with bilking house-cleaner of $124,000 life savings

Views on BG | January 3, 2009, Saturday // 00:00

Inquirer and Mirror

By Jason Graziadei
I&M Senior Writer

A Nantucket summer resident with ties to disgraced Wall Street financier Bernard Madoff has been accused of defrauding his island house cleaner of her life savings.

Frank Avellino, who owns a $10 million Nantucket estate on Cliff Road, was sued Monday in Nantucket District Court by his house cleaner, Nevena Ivanova, who alleges that she handed over $124,000 to Avellino in 2006 which he now claims has been entirely lost.

Ivanova and her island attorney, Michael Wilson, successfully petitioned Judge Joseph I. Macy to impose a $124,000 real estate attachment on Avellino's Cliff Road property, which he has just put on the market, according to court documents.

Avellino has surfaced in recent news reports as having substantial ties to Madoff, whose $50 billion Ponzi scheme has ruined investors worldwide. According to the U.S. Securities and Exchange Commission (SEC) documents and recent news reports, Avellino operated an illegal investment company in the 1980s and 1990s through which he funneled money to Madoff, promising investors huge returns.

According to an affidavit filed in Nantucket District Court on Monday, Ivanova was befriended by Avellino and his wife Nancy, after she was hired to clean their Cliff Road estate. The affidavit claims the Avellinos encouraged Ivanova and her then-husband, both Bulgarian immigrants, to invest her money in what she later discovered was a fictitious entity known as Kenn Jordan Associates, through which Avellino would manage her money.

From September 2006 through July 2008, the affidavit states, Avellino told Ivanova her money was secure and earning interest. Earlier this year Ivanova requested to withdraw her money in order to send her daughter to college and purchase a home, but was told by Avellino that she could not receive her money until the end of 2008.

On Dec. 1, Avellino told Ivanova that all her money had been lost. The lawsuit states "Avellino comingled plaintiff's funds with defendant's funds, and or utilitzed said funds for defendant's benefit."

The suit in District Court alleges a breach of contract, negligence, as well as fraudulent and deceptive practices perpetrated by Avellino.

Avellino's "conduct of failing to advise plaintiff of any risk associated with defendant's management of plaintiff's monies was unfair fraudulent and deceptive," the lawsuit states.

It was unclear from court documents exactly what type of agreement Ivanova had entered into with Avellino when she signed over her money in 2006, and Wilson, her attorney, declined to comment about the case.

Avellino did not return a phone message left at his New York City apartment, and no one picked up the phone at his Cliff Road home. Avellino's phone line at his home in Florida has been disconnected.

While he has been known for engaging in philanthropy on Nantucket, giving thousands to the Nantucket Atheneum, the Nantucket Preservation Trust and the Nantucket Shakespeare Festival over the years, Avellino was sued by the Securities and Exchange Commission (SEC) in 1992 for selling $441 million in unregistered securities to 3,200 individual investors. He then handed the funds over to Bernard Madoff Investment Securities, according to reports by Bloomberg News and the Wall Street Journal.

Avellino and his partner, Michael Bienes, operated as an unregistered investment company promising investors interest rates as high as 13.5 to 20 percent, but their company was later forced to return the funds, pay a $250,000 civil penalty, and both men were fined $50,000 individually by the SEC, according to SEC documents.

During the court proceedings in the early 1990s, Avellino was represented by attorney Ira "Ike" Sorkin, who now represents Madoff in his defense of a single count of securities fraud filed against him by the SEC. In another connection between Avellino and Madoff, Lee Richards, who was just appointed by the SEC as the receiver of all Bernard Madoff Investment Securities assets, also served as the court-appointed trustee over Avellino & Bienes during its legal dispute with the federal agency, according to Bloomberg.

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