Head of Madoff UK arm 'had no idea'

STEPHEN RAVEN, the head of Bernard Madoff's UK company, says he knew so little about Mr Madoff's American operation that he visited it only once in eight years and "didn't realise there was a third floor".

It was from that third floor - on the 17th floor of the "Lipstick" office tower in Manhattan - that Mr Madoff is alleged to have run what may turn out to be the biggest Ponzi scheme in history with investor losses of up to $50 billion.

Mr Raven, who has known Mr Madoff since the 1970s, said Madoff Securities International, based on Berkeley Street in London, was an entirely separate entity, with its own UK directors and £105 million in capitalisation at the end of last year.

The UK company had no retail or institutional clients and no formal relationship with Mr Madoff's other businesses.

Rather, it was a proprietary trading operation with 28 staff, including 15 traders, who used Madoff family money to place short-term bets on European equities.

Between £20 and £30 million was at risk at any given time, while the rest of the money was in gilts. Last year, it made £3 million after expenses.

"I had a vague idea that he ran an advisory business but I had no idea of the size or nature of the business," said Mr Raven.

He said he was so out of the loop that he learned Mr Madoff had been arrested when he saw the television news on Thursday night.

"I was absolutely amazed. I was literally shaking," said Mr Raven. He then spent several fruitless hours trying to reach someone in the Madoff operation in New York, and called an emergency meeting of his London directors for Friday morning.

They decided to suspend the business and wound up their trading positions.

It is not clear what will happen next. A US judge has frozen Mr Madoff's assets and placed a receiver over the London business.

Mr Madoff owned 88.8 per cent of Madoff International and served as its executive chairman. His wife, brother and two sons owned virtually all of the rest.

Both Madoff sons and Mr Madoff's brother Peter served as non-executive directors of the London company.

A long-time member of the council of the London Stock Exchange and a former director of SG Warburg, Mr Raven first met Mr Madoff in the late 1970s. They had dinner together occasionally when Mr Madoff was in London.