KSM Hit By Madoff's Hedge Fund Scam

Locally-based Katz Sapper & Miller accounting firm and its financial arm, KSM Capital Advisors, lost millions in Bernard Madoff's massive hedge fund fraud according to Star business reporter Daniel Lee. Approximately 50 clients of KSM had approximately $15 million invested with Madoff according to the report. KSM expects to lose approximately 1% of its own book value due to Madoff investments. Lee shares a KSM official's reaction to the losses:

"To lose money through a fraud is just a horrible situation to be in," said Peter Reist, a managing director with KSM. He added that he began informing clients late last week of their potential losses from Madoff investments.

He said fewer than 50 clients, mostly individual investors from Indiana, had money tied up with Madoff. Those investments represent less than 4 percent of assets under advisement by KSM. Future Select Portfolio Management, a Redmond, Wash.-based investment fund, made the actual investments of KSM's clients' money into the Madoff investment program.

In addition, Katz Sapper & Miller, the Indianapolis accounting firm that is KSM's parent organization, could lose up to 1 percent of its book value from Madoff investments.

KSM said it is working with Future Select to try to recover money for clients. However, Reist said the size and scope of the apparent fraud make it hard to determine the prospects for financial recovery.

"That really is the big unknown," he said.