Austria Takes Over Bank Crushed By Madoff

Name plate of the Bank Medici in Vienna, Austria, on Friday, Jan. 2, 2009. The Austrian government on Friday appointed a supervisor to oversee Medici Bank, reeling from more than US$3 billion in losses blamed on Wall Street money manager Bernard Madoff. (AP Photo/Ronald Zak) AP Photo/Ronald Zak

Written by CBS News investigative producer Laura Strickler.

An Austrian bank suffering more than $3 billion in losses from the collapse of Bernard L. Madoff's investment scheme was taken over by the Austrian government today, according to a statement on the Web site of Austria's financial regulator Finanzmarktaufsicht.

Bank Medici's CEO Peter Scheithauer also resigned.

Messages at Bank Medici's offices in Vienna were not immediately returned.

In Washington, lawmakers on Capitol Hill are preparing for the first Congressional hearing on Madoff's $50 billion Ponzi scheme on Monday.

One of the key witnesses will be the Securities and Exchange Commission's (SEC) top internal cop, David Kotz, the agency's Inspector General.

CBS News has learned Kotz's investigation will include an examination of possible conflicts of interest with the SEC's New York office. The agency has been sharply criticized for ignoring complaints about Madoff's investments.

Kotz's first investigative report will be out in a few months and may be closely followed by a series of reports. If Kotz's investigators find serious problems with the way the SEC's New York office responded to complaints about Madoff, the IG's office will consider recommending changes to the SEC's current Madoff investigation.

On Wednesday, Madoff's lawyers turned over a complete list of Madoff assets to the SEC's New York office.

More victims of the Ponzi scheme continue to emerge. The latest are in Montana, more than 2,000 miles from Madoff's Upper East Side penthouse.

"We have a 94 and a 95-year-old widow, these are not sophisticated investors - they relied on an investment advisor who invested their money in a Ponzi scheme," Lynne Egan, Montana's Deputy Securities Commissioner, told CBS News.

Egan said she received a call on Monday from an investment adviser in Bozeman who told her 33 of his clients lost over $18 million. Egan claims the adviser, who she will not name, lost millions personally in addition to his clients' funds and is "shell-shocked."

The adviser told Egan he was alerted to the Madoff collapse by a phone call from one of his clients who had seen the news on television. Egan said the adviser placed millions in the Madoff feeder fund Tremont Capital and another unidentified feeder fund since 2002. Egan added that her office will conduct a parallel investigation into Madoff to see what can be done in the future to prevent this kind of fraud.

Meanwhile, the hunt for Madoff money overseas continues. The Cayman Islands Monetary Authority posted a statement indicating, "An initial check of the Companies Registry shows no Madoff-related entity incorporated in the Cayman Islands."

But there are registered Cayman entities matching the names of feeder funds that are now being sued by their investors, such as: Ascot Fund Limited, Ariel Fund Limited and Maxam Absolute Return Fund.

However, CBS News has learned the main Madoff-related vehicles for Fairfield Greenwich Group, a major Madoff feeder fund, are registered in the British Virgin Islands.
By Laura Strickler
  • Laura Strickler

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