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UNITED STATES DISTRICT COURT- ". 4

SOUTHERN DISTRICT OF NEW YORK

CONSTRUCTION INDUSTRY AND : Civil Action No.LABORERS JOINT PENSION TRUST andPLUMBERS AND PIPEFITTERS UNION • CLASS ACTION

LOCAL 525 PENSION PLAN, on Behalf ofThemselves and All Others Similarly Situated, COMPLAINT FOR VIOLATION OF THE

FEDERAL SECURITIES LAW, ERISA ANDNEW YORK LAW

Plaintiffs, •

vs.

AUSTIN CAPITAL MANAGEMENT LTD.,CHARLES W. RILEY, BRENT A. MARTIN,JAMES P. OWEN, ROBERT WAGNER,DAVID C. BROWN, DAVID E. FRIEDMAN,ROTHSTEIN, KASS & COMPANY, P.L.L.C.,ROTHSTEIN, KASS & COMPANY •(CAYMAN) and DOES 1-100,

•Defendants. •

x DEMAND FOR JURY TRIAL

NATURE OF THE ACTION

1. This is a class action on behalf of investors in Austin Capital Management Ltd.

("Austin Capital" or the "Investment Manager") hedge funds between January 2, 2005 and

December 11, 2008 (the "Class Period"), seeking to recover losses resulting from Austin Capital's

placement of significant amounts of investor money into funds managed by Bernard Lawrence

Madoff ("Madoff') and his firm, and who were damaged thereby (the "Class"). A sub-class of Class•

members includes those employee benefit plans which invested with Austin Capital during the Class

Period, asserting claims under the Employee Retirement Income Security Act of 1974 ("ERISA") for

breach of fiduciary duty (the "Sub-Class"). Madoff has now been charged with running what may

be the largest Ponzi scheme ever. This action charges Austin Capital, its investment managers and

its outside auditors with violations of the federal securities laws and ERISA, breach of contract,

breach of fiduciary duty, unjust enrichment and negligence.

2. Unbeknownst to investors in its funds, Austin Capital had invested approximately

7.5% of its funds in Madoff-managed investments. This was contrary to the duties Austin Capital

had to its investors of good faith and fair dealing and contrary to the representations Austin Capital

had made regarding its processes for selecting fund managers. As a result of defendants' breaches

and false statements, Austin Capital investors made additional investments in Austin Capital and/or

held interests they would have redeemed.

JURISDICTION AND VENUE

3. These claims arise under and pursuant to §§10(b) and 20(a) of the Securities

Exchange Act of 1934 (the "1934 Act"), 15 U.S.C. §§78j(b) and 78t(a), under §12(a)(2) of the

Securities Act of 1933 ("1933 Act"), 15 U.S.C. §771(a)(2), and Securities and Exchange

Commission ("SEC") Rule 10b-5 promulgated thereunder, 17 C.F.R. §240.10b-5, and §§409 and

502(a)(2) and (3) of ERISA, 29 U.S.C. §1109, 1132(a), as well as under the laws of the State of New

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York. Jurisdiction is conferred by, and venue is proper pursuant to, §27 of the 1934 Act, 15 U.S.C.

§78aa, 28 U.S.C. §1331 and §502(e) of ERISA, 29 U.S.C. §1132(e), and pursuant to supplemental

jurisdiction. Madoff s Ponzi scheme was operated within this District. In connection with the acts

complained of, defendants used the instrumentalities of interstate commerce and the U.S. mails.

PARTIES

4. (a) Plaintiff Construction Industry and Laborers Joint Pension Trust acquired and

held Austin Capital shares through its purchase of shares in Austin Capital funds, as described in the

attached certification, and has been damaged thereby.

(b) Plaintiff Plumbers and Pipefitters Union Local 525 Pension Plan acquired and

held Austin Capital shares through its purchase of shares in Austin Capital funds, as described in the

attached certification, and has been damaged thereby.

5. Defendant Austin Capital is a limited partnership, based in Austin, Texas, that

oversees hedge fund investment portfolios for individual and institutional clients.

6. Defendant Charles W. Riley ("Riley") founded the Investment Manager and also

served during the Class Period as Senior Managing Director and Chief Investment Officer of Austin

Capital.

7. Defendant Brent A. Martin ("Martin") served during the Class Period as Senior

Managing Director of the Investment Manager and Chief Investment Officer of Austin Capital.

8. Defendant James P. Owen ("Owen") served during the Class Period as Senior

Managing Director of Austin Capital.

9. Defendant Robert Wagner ("Wagner") has served as Chief Executive Officer

("CEO") and Chairman of Victory Capital Management, Inc. ("Victory"), the asset management

subsidiary of KeyCorp, since 2005. Wagner additionally serves on the Austin Capital management

board. Victory acquired Austin Capital in January 2006.

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10. Defendant David C. Brown ("Brown") has served as Chief Operating Officer

("COO") and Senior Managing Director of Victory since 2004. Brown additionally serves as a

director of Austin Capital.

11. Defendant David E. Friedman ("Friedman") was Managing Director of Austin Capital

Safe Harbor ERISA Dedicated Fund, Ltd. and Managing Director of Austin Capital.

12. Defendants received substantial fees for their participation in the management of

shares in Austin Capital. Austin Capital received a management fee of 1%-1.5% of the net asset

value annually (paid monthly).

13. Defendants Rothstein, Kass & Company, P.L.L.C. and Rothstein, Kass & Company

(Cayman) (collectively "Rothstein Kass") were the outside auditors and accountants for Austin

Capital. Rothstein Kass has eight offices located in New York, New Jersey, California, Colorado,

Texas and the Cayman Islands. Rothstein Kass audited Austin Capital's financial statements as well

as reviewed Austin Capital's interim financial reports. Rothstein Kass was a top accounting firm for

hedge funds and was familiar with the practice of such funds and with red flags associated with

improper practices by such funds. Rothstein Kass falsely represented that it performed these audits

in accordance with Generally Accepted Auditing Standards ("GAAS") and issued materially false

and misleading unqualified audit opinions as to those financial statements during the Class Period,

claiming that the financial statements were prepared and presented in according with Generally

Accepted Accounting Principles ("GAAP").

14. Upon information and belief, Does 1-100 ("Doe Defendants") are individuals or

entities whose names and addresses are presently unknown. Plaintiffs do not know the specific

identities of the Doe Defendants at this time, however, plaintiffs plan to amend this Complaint once

their identities become known to plaintiffs.

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CLASS ACTION ALLEGATIONS

15. Plaintiffs bring this action as a class action on behalf of a class consisting of all

persons or entities who acquired or held interests in Austin Capital funds and for whom their

interests were invested in entities run by Madoff, including those who purchased interests pursuant

and/or traceable to false and misleading Austin Capital Offering Memoranda ("OM") and/or

Supplements thereto with accompanying sales materials (collectively the "Selling Documents")

during the Class Period and who were damaged thereby (the "Class"). The Sub-Class includes all

employee benefit plans, through their named fiduciaries, which named Austin Capital as an

investment manager and/or allowed Austin Capital to manage some or all of their plan assets, and

whose assets were invested in whole or in part by Austin Capital in any Madoff-related investment

during the Class Period. Excluded from the Class and Sub-Class are defendants, the officers and

directors of the defendants, at all relevant times, members of their immediate families and their legal

representatives, heirs, successors or assigns and any entity in which defendants have or had a

controlling interest.

16. The members of the Class and Sub-Class are so numerous that joinder of all members

is impracticable. While the exact number of Class and Sub-Class members is unknown to plaintiffs

at this time and can only be ascertained through appropriate discovery, plaintiffs believe that there

are dozens of members in the proposed Class and Sub-Class. Record owners and other members of

the Class may be identified from records maintained by Austin Capital and may be notified of the

pendency of this action by mail, using the form of notice similar to that customarily used in

securities class actions. Austin Capital issued hundreds of millions of dollars worth of shares.

17. Plaintiffs' claims are typical of the claims of the members of the Class as all members

of the Class are similarly affected, although to different degrees, by defendants' wrongful conduct in

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violation of federal and state law as complained of herein. Plaintiffs' claims are also typical of the

claims of members of the Sub-Class.

18. Plaintiffs will fairly and adequately protect the interests of the members of the Class

and Sub-Class and have retained counsel competent and experienced in class and securities

litigation.

19. Common questions of law and fact exist as to all members of the Class and

predominate over any questions solely affecting individual members of the Class. Among the

questions of law and fact common to the Class are: whether defendants violated the 1934 Act and/or

1933 Act; whether the Selling Documents issued by defendants to investors omitted and/or

misrepresented material facts about the structure of the investments placed with third party fund

managers; whether defendants breached their fiduciary duties under New York law; and to what

extent the members of the Class have sustained damages and the proper measure of damages.

20. Common questions of law and fact exist as to all members of the Sub-Class and

predominate over any questions solely affecting individual members of the Sub-Class. Among the

questions of law and fact common to the Sub-Class are whether defendant Austin Capital owed a

fiduciary duty to the plaintiffs and to the Sub-Class; whether Austin Capital breached its fiduciary

duties under ERISA; whether the Sub-Class members were harmed by Austin Capital's breaches;

and the extent to which Sub-Class members are entitled to damages and/or equitable relief.

21. A class action is superior to all other available methods for the fair and efficient

adjudication of this controversy since joinder of all members is impracticable. Furthermore, as the

damages suffered by individual Class members may be relatively small, the expense and burden of

individual litigation make it impossible for members of the Class to individually redress the wrongs

done to them. There will be no difficulty in the management of this action as a class action.

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BACKGROUND

22. Austin Capital, a division of KeyCorp, oversees a hedge fund investment portfolio.

The firm was founded in 1993. Austin Capital represents that:

Austin Capital manages a suite of hedge funds of funds that meet theinvestment needs of our diverse client base. All of our funds have absolute returntargets and are designed to avoid significant losses by managing portfolio volatilityand limiting drawdowns. The strategies that our funds focus on are long/short equity,event-driven, and relative value/arbitrage.

Our portfolio construction is executed in a core/satellite fashion. Managersare selected based on their strategy expertise and correlations to existing investments.Risk management is applied at both the strategy and the manager level via a riskbudget and is a critical component of the portfolio construction process. Theresulting mix of complementary managers produces a stable long-term investmentreturn stream and an attractive risk/return profile.

23. In 2006, KeyCorp's Cleveland, Ohio-based asset management unit, Victory, acquired

Austin Capital. It has subsequently been disclosed that one of the funds Austin Capital selected to

place investor money in was a fund managed by Madoff. The exposure to Madoff was through the

Rye Select Broad Market Prime Fund, LP ("Rye Select Fund"), which was a feeder fund managed

by Tremont Partners that directly invested in a managed account with Madoff. A managed account,

also called a separate account, is not a common hedge fund structure. However, Austin Capital

investors were not told of this unusual structure until Madoff was arrested.

24. Madoff is a former chairman of the NASDAQ stock exchange. He founded the Wall

Street firm Bernard L. Madoff Investment Securities LLC ("Madoff Securities") in 1960 and was its

chairman until December 11, 2008, when he was charged with perpetrating what may be the largest

investor fraud ever committed.

25. Madoff started his firm in 1960 with an initial investment of $5,000 that he said was

earned from working as a lifeguard and installing sprinklers. At first, the firm made markets (quoted

bid and ask prices) via the National Quotation Bureau's Pink Sheets. In order to compete with firms

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that were members of the New York Stock Exchange trading on the stock exchange's floor, the firm

began to use information technology to disseminate its quotes and set itself apart from competitors.

After a trial run, the technology the firm helped develop became the NASDAQ. At one point,

Madoff Securities was the largest "market maker" at the NASDAQ, both buying and selling.

26. By the 2000 Internet boom, Madoff Securities held approximately $300 million in

assets and was considered to be one of the top traders of securities in the nation. The operation was

conducted out of floors 17 to 19 of the Lipstick Building, with 18 and 19 used for administration and

stock-trading. The investment management division, which employees referred to as the "hedge

fund," was on the 17th floor, occupied by no more than 24 employees. Since funds controlling

billions of dollars, as Madoff Securities did, would usually require hundreds of employees for the

administrative work involved, employees from other floors say that they always assumed Madoff

had an office in another location in addition to the Manhattan headquarters.

27. In the early 1990s, Madoff told business reporters about his stock strategies: in the

1970s, he had placed invested funds in "convertible arbitrage positions" in large-cap stocks, which

generated investment returns of 18% to 20%. Madoff said that beginning in 1982, he began using

futures contracts on the stock index, and he said he was in index puts (a form of options contract)

during the 1987 stock market crash.

28. Barron 's Magazine reported in 2001 that a Madoff hedge fund document described

Madoff s strategy as follows: "Typically, a position will consist of the ownership of 30-35 S&P 100

stocks, most correlated to that index, the sale of out-of-the-money calls on the index and the

purchase of out-of-the-money puts on the index. The sale of the calls is designed to increase the rate

of return, while allowing upward movement of the stock portfolio to the strike price of the calls. The

puts, funded in large part by the sale of the calls, limit the portfolio's downside." Madoff s strategy

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• ,

as described in Barron 's is not a perfect hedge since options are purchased/sold on an index which

contains a much larger basket of stocks than the 30-35 purchased to hold. Rival fund managers were

unable to replicate the same returns using the strategies from Madoff s quarterly reports.

29. Madoff had a very successful track record year after year, with returns that were

"unusually consistent." A hedge fund run by Madoff, which described its strategy as focused on

shares in the Standard & Poor's 100-stock index, averaged a 10.5% annual return over the past 17

years. Through November 2008, amid a general market collapse, the fund reported that it was up

5.6% year-to-date, while the year-to-date total return on the S&P 500-stock index had been negative

38%.

30. Analysts had raised concerns with Madoff s firm through the years. One analyst,

Harry Markopolos, told the SEC in 1999 that they should investigate Madoff because it was

impossible to legally make the profits Madoff claimed using the investment strategies that he

claimed to use. In 2005, Markopolos sent a detailed 17-page memo directly to the SEC. The paper

described 29 red flags. Markopolos concluded that Madoff was either running a Ponzi scheme or

front running, placing favored orders before others when placing them in the market, but concluded

it was most likely a Ponzi scheme.

31. Madoff was arrested by the FBI on December 11, 2008, on criminal charges of

securities fraud — turned in by his sons after he allegedly told them that his business was "a giant

Ponzi scheme." That evening, Austin Capital began notifying clients of its exposure to Madoff in

certain of the funds. The investment through a feeder fund (Rye Select Fund) of a marketing agent

(Tremont) was contrary to Austin Capital's representations that its hedge funds invested in other

hedge funds selected by Austin Capital's investment managers.

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THE FALSE AND MISLEADING SELLING DOCUMENTS

32. During 2006-2008, defendants were marketing the Austin Capital funds. The Austin

Capital Safe Harbor ERISA Dedicated Fund, which had a $500,000 initial minimum investment

requirement, was promoted to investors as designed to produce high absolute investment returns

with less volatility.

33. The OM represented that the investment management would seek a strategy to reduce

volatility and risk. Relevant provisions of the OM included in part:

Investment Manager Evaluation and Selection Criteria

The Investment Manager will utilize its experience in evaluating andselecting hedge fund managers and private investment partnerships, as well asindependent consultants and other sources, to identify prospective investments forthe Master Account. The Investment Manager will strive to avoid chasing"yesterday's heroes" or style or strategy "fads" of the moment and will attempt,instead, to anticipate intermediate and long-term trends and select the MasterAccount's hedge fund managers accordingly. To maximize the chances for success,the following criteria are intended to be used to evaluate each hedge fund manager.

• The hedge fund manager should have a high absolute performancerecord. This does not mean that the only hedge fund managers withlong, established performance records will be selected. In someinstances, hedge fund managers with relatively short performancerecords may be evaluated and selected. It has been the InvestmentManager's experience that many hedge fund managers achieve theirbest results during the first few years of their performance.

• The hedge fund manager should invest a majority of his owninvestment capital in the same pool offunds that he invests for hisinvestors. The is intended to minimize possible conflicts of interestand to keep the hedge fund manager focused on managing theinvestment partnership.

• The hedge fund manager's primary compensation should be based onprofits (usually 20% of profits) generated for investors. This isintended to focus the hedge fund manager on generating positivereturns regardless of the direction of the stock market.

• The compensation of the hedge fund manager should be subject to a"high water mark" which requires that investors recoup any net losses

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,

before the hedge fund manager shares in the profits of the hedgefund.

• Total assets under management by the hedge fund manager shouldnot exceed an amount that would limit or restrict his investmentopportunities.

• The hedge fund manager should be knowledgeable, focused anddedicated with a clearly defined investment strategy. This isintended to aid the Investment Manager in selecting a diversifiedgroup of hedge fund managers.

• The hedge fund manager should be well respected in the investmentcommunity and have an excellent reputation that can be verifiedthrough reference checks.

• The hedge fund manager should run a "good shop." He should bewell organized and employ highly competent individuals in all keypositions.

• The private investment partnership managed by the hedge fundmanager must be audited by a well-known, reputable certified publicaccounting firm. Recent audited financial statements should beavailable for review.

• The hedge fund manager should spend only a limited amount of hispersonal time marketing the private investment partnership. Manysuch partnerships employ marketing personnel who handle almost allcontact with prospective investors, and in many cases, with existinginvestors. The Investment Manager believes that hedge fundmanagers that spend too much time marketing often neglect theirinvestment portfolios resulting in substandard performance.

34. Austin Capital's sales materials for its funds also were intended to reassure investors

as to the safety of the funds:

• Experienced Team

• Firm Established in 1993, Registered with SEC since 1997

• Cohesive team — no turnover amount investment professionals

• Significant alpha generation via investing in early state managers andcredit based strategies

• Significant experience investing in underlying strategies

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,

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• AUM [Assets Under Management] in excess of $1 billion

• Optimal size allows us to allocate across spectrum of Hedge Funds

• Culture of Risk Management

• Portfolio construction assumes the future is going to be worse thanthe past

• Asset allocation approach that emphasizes downsize deviation

• We focus on the volatility of the Alpha

• Risk managers are volatility scientists and people scientists

• Three Primary Strategies offered as traditional funds or incorporated inManaged Accounts or Structured Product (Portable Alpha, PrincipleProtected, etc)

• All Seasons Fund — Directional L/S Equity

• Next Generation Fund — Emerging Managers

• Safe Harbor Fund — Low Volatility, multi-strategy

• Wholly owned by KeyCorp

35. The selling materials also included a report on the April 2007 performance of the

Austin Capital funds which stated in part:

All Seasons Fund (ASQP: Apr + 1.70%; YTD +4.60%)

April marks nine consecutive positive months. More importantly, the AllSeasons Fund is positioned to weather a sell-off going into the historically volatilesummer months. . . .

Safe Harbor Funds (SHQP: Apr +1.47%; YTD +5.07%)

April marks 24 consecutive months of positive returns since we began usingour portfolio allocation model which emphasizes downside deviation. A review ofthe past two year's data shows we out-performed the HFRI Fund of FundConservative Index by 561bps — capturing 71% of our outperformance during themonths where the Index is negative and the 29% when the Index is positive. . . .

Next Generation Fund (NGQP: Apr +2.64%; YTD +4.74%)

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The Next Generation Fund just celebrated it second birthday and has enjoyeda 13.88% annualized return since inception while keeping volatility on a short leashat 4.84%. In addition to providing investors with access to ACM's emergingmanager ideas, the Fund has also provide to be of value to investors who investdirectly in hedge funds as a way of identifying emerging hedge funds early. TheFund benefited from a strong global equity market during April. However,performance was more driven by sector-focused managers invested in specific,event-driven opportunities. The Fund's strongest performance came from allocationsto the Master Limited Partnership ("MLP") sector as well as a global financialsmanager that has benefited from European corporation activity. Performance wasgenerally positive, with 15 of the Fund's 17 allocations producing positiveperformance.

36. The statements about the selection of fund managers were false and the investment

managers failed to comply with their obligations. The Austin Capital OM omitted to state that the

investment managers had not conducted adequate, if any, due diligence prior to investing with

Madoff such that the multi-manager strategy did not reduce overall risk. The investment managers

also ignored significant "red flags" with respect to Madoff, including the lack of transparency of

Madoff s operations. Also, options investors could not replicate Madoff s strategy to achieve the

returns he supposedly was achieving. As was recently reported about a Barron 's reporter's

experience in 2001:

It was one of these option traders who brought up Madoff. A strategist at amajor investment bank and trading firm, he insisted we talk in person. On an Aprilmorning in his company's cafeteria, he told me he'd been asked to run some figureson behalf of a client who was thinking of investing with Madoff.

"The numbers don't make sense," he said. "I've been replicating thisstrategy six ways to Sunday and I can't make the returns come out right."

I got a hold of offering documents for Fairfield Sentry, one of the feederfunds funneling money into Madoff. I then took the offering documents to severalindividuals whom I respected for their ability to formulate and implement complexoption trades.

Not one of them could replicate it; nor could they come up with the source ofMadoff s returns. Options were just not making that much money in 2001,especially with electronic trading pressing profit margins down to just pennies.

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A source at Merrill Lynch said he couldn't make sense of the returns andwithdrew client funds that his predecessor had invested with Madoff.

37. Despite the size of Madoff s operation, it was audited by a very small accounting firm

(with as few as three employees) named Friehling & Horowitz. Such a small firm would not be able

to obtain sufficient evidential matter to support an audit opinion for an entity purportedly Madoff s

size, even were Madoff the only client. As Pensions and Investment reported on December 22,

2008:

"There were a thousand red flags, if you did the work. It didn't take muchenergy to reverse-engineer Madoff s track record and find that his split-strikeconversion method just would not have worked in certain markets the way he said itdid," said the chief executive of a large institutional hedge fund-of-funds firm whoasked not to be identified.

"Madoff was a joke"

Many observers agreed with another hedge fund-of-funds executive who said,on condition of anonymity: "Among serious people in the industry, (Mr.) Madoffwas a joke. Some hedge fund problems are unknowable. Sowood (CapitalManagement LP) was unknowable. Long-term Capital Management (LP) wasunknowable. Amaranth (Advisors LLC) was somewhat knowable. Madoff was veryknowable. All the trouble signs were there, written in red."

38. New reports are surfacing that Madoff was not making any trades at all. Some former

clients describe the unusual secrecy Madoff sometimes demanded. On January 16, 2009, the

International Herald Tribune reported:

"It's a very strange set-up, since most prospectuses disclose the names of theactual portfolio managers," said Drago Indjic, a project manager at the Hedge FundCenter of the London Business School. "If you've been in the industry, this doesn'tpass the smell test."

39. Austin Capital also knew that Madoff was both the custodian and broker/dealer of the

managed account. It was unusual, if not unprecedented, for a hedge fund manager to not use an

independent custodian or prime broker. As a result, Madoff would supply statements to Rye Select

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Fund's accountants attesting to the existence of the assets. All trading in the fund was also through

Madoff. All trade confirmations were also generated by Madoff.

40. In fact, the lack of a disciplined approach and the search for larger gains would lead

to risks of the loss of most of the Class and Sub-Class members' investments in Austin Capital.

41. Moreover, defendants did not have risk management practices in place to prevent

employees of Austin Capital from engaging in highly risky investment practices. The

representations by defendants were made with knowledge that Austin Capital was going to

implement the high-risk strategies. As a result of these risky strategies, plaintiffs and the Class and

Sub-Class have suffered losses of the entire amount Austin Capital invested with the Madoff entities.

DISCLOSURES BEGIN TO EMERGE ABOUT PROBLEMSWITH THE SHARES

42. On December 11, 2008, Madoff was arrested by the FBI for securities fraud after he

told his sons the business was a giant Ponzi scheme. He later told the FBI there was no innocent

explanation for what he had done.

43. However, investors in Austin Capital reading the front-page news about Madoff did

not yet realize they were victims of this scheme.

44. On December 11, 2008, Austin Capital began to tell investors that part of their

investment had been run by Madoff. The investments in the Rye Select Fund occurred as early as

1997 and as late as March 2008. Austin Capital in fact did not perform the on-site checks,

background checks and business practices due diligence as represented to investors.

45. Plaintiffs have been harmed due to the improper assurances made about the shares

and the cessation of distributions and the decline in value of the shares.

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DEFENDANTS' FIDUCIARY DUTIES

46. As managers of a Texas Limited Partnership, defendants Riley, Martin, Owen,

Wagner, Brown and Friedman (the "Individual Defendants") have an affirmative fiduciary

obligation to refrain from self-dealing and act in the best interests of Austin Capital's investors to

preserve the assets of the funds. To diligently comply with these duties, the managers may not take

any action that:

(a) adversely affects the value of the assets of the funds and the return provided

to Austin Capital's investors;

(b) contractually prohibits them from complying with their fiduciary duties;

(c) otherwise adversely affects their duty to monitor, supervise and direct the

investments of Austin Capital for the funds' investors; and/or

(d) provides the managers with preferential treatment at the expense of, or

separate from, Austin Capital's investors.

47. In accordance with their duties of loyalty and good faith, the Individual Defendants,

as managers of Austin Capital, are obligated to refrain from:

(a) participating in any transaction where the managers' loyalties are divided;

(b) participating in any transaction where the managers are entitled to receive a

personal financial benefit not equally shared by the investors in Austin Capital; and/or

(c) unjustly enriching themselves at the expense or to the detriment of investors.

48. Plaintiffs allege herein that defendants Riley, Martin, Owen, Wagner, Brown and

Friedman, separately and together, and aided and abetted by the other defendants, violated their

fiduciary duties owed to plaintiffs and the other investors in Austin Capital in connection with their

operation of Austin Capital and the selection of fund managers, including their duties of loyalty,

good faith, candor, due care and independence, insofar as they were at least grossly negligent in their

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management of the Austin Capital funds' assets, engaged in self-dealing and/or obtained for

themselves personal benefits, including personal financial benefits, not shared equally by plaintiffs

or the Class and Sub-Class, and/or aided and abetted therein. As a result of the defendants' gross

negligence, self-dealing and divided loyalties, neither plaintiffs nor the Class and Sub-Class will

receive adequate or fair value for their investment in Austin Capital funds.

ROTHSTEIN KASS'S FAILURE TO PERFORM ITS AUDITS INCONFORMITY WITH GENERALLY ACCEPTED ACCOUNT STANDARDS

49. Rothstein Kass, a certified public accountant, was engaged by Austin Capital to

provide independent auditing and accounting services. Rothstein Kass's Dallas and Cayman offices

were engaged to examine and report on Austin Capital's financial statements, to perform review

services on Austin Capital's interim fiscal year results and to provide significant consulting, tax and

due diligence services throughout the Class Period. As a result of the far-reaching scope of services

provided by Rothstein Kass, Rothstein Kass personnel were intimately familiar with Austin Capital's

business.

50. Rothstein Kass participated in the wrongdoing alleged herein in order to retain Austin

Capital as a client and to protect the fees it received from Austin Capital and other hedge fund

clients.

51. The SEC has stressed the importance of meaningful audits being performed by

independent accountants:

[T]he capital formation process depends in large part on the confidence of investorsin financial reporting. An investor's willingness to commit his capital to animpersonal market is dependent on the availability of accurate, material and timelyinformation regarding the corporations in which he has invested or proposes toinvest. The quality of information disseminated in the securities markets and thecontinuing conviction of individual investors that such information is reliable arethus key to the formation and effective allocation of capital. Accordingly, the auditfunction must be meaningfully performed and the accountants' independence notcompromised.

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Relationships Between Registrants and Independent Accountants, SEC Accounting Series Release

No. 296, 1981 SEC LEXIS 858, at *8-*9 (Aug. 20, 1981).

Rothstein Kass Ignored the Audit Evidence It Gathered

52. GAAS, as set forth in AU §326A, Evidential Matter, requires auditors to obtain

sufficient competent evidential matter through inspection, observation, inquiries and confirmations

to afford a reasonable basis for an opinion regarding the financial statements under audit:

In evaluating evidential matter, the auditor considers whether specific auditobjectives have been achieved. The independent auditor should be thorough in his orher search for evidential matter and unbiased in its evaluation. In designing auditprocedures to obtain competent evidential matter, he or she should recognize thepossibility that the financial statements may not be fairly presented in conformitywith generally accepted accounting principles or a comprehensive basis ofaccounting other than generally accepted accounting principles. In developing his orher opinion, the auditor should consider relevant evidential matter regardless ofwhether it appears to corroborate or to contradict the assertions in the financialstatements. To the extent the auditor remains in substantial doubt about any assertionof material significance, he or she must refrain from forming an opinion until he orshe has obtained sufficient competent evidential matter to remove such substantialdoubt, or the auditor must express a qualified opinion or a disclaimer of opinion.

AU §326A.25 (footnotes omitted).

53. Rothstein Kass's responsibility, as Austin Capital's independent auditor, was to

obtain "[s]ufficient appropriate audit evidence. . . to afford a reasonable basis for an opinion

regarding the financial statements under audit" as to "the fairness with which they present, in all

material respects, financial position, results of operations, and its cash flows in conformity with

generally accepted accounting principles." AU §§110.01, 150.02.

54. In violation of GAAS, and contrary to the representations in its report on Austin

Capital's financial statements, Rothstein Kass did not obtain sufficient, competent, evidential matter

to support Austin Capital's assertions regarding its selection of fund managers.

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Rothstein Kass Ignored Numerous Red Flags

55. As a large audit firm for hedge funds, Rothstein Kass was well aware of the

strategies, methods and procedures required by GAAS to conduct a proper audit. Also, Rothstein

Kass knew of the audit risks inherent at Austin Capital because of the comprehensive services it

provided to Austin Capital during much of the Class Period and its experience with other clients. In

connection with Austin Capital's operations, Rothstein Kass had virtually limitless access to

information concerning the nature of Austin Capital's practices in selecting fund managers and was

aware of the red flags with respect to the Madoff-run funds, including that:

• The apparent strategy Madoff employed and results achieved could not be replicated.

• Madoff s auditor was so small it was impossible it could adequately audit Madoff.

• Madoff was manager, broker-dealer and custodian of the funds.

• Madoff s results were essentially too good to be true.

56. As to its audits of Austin Capital during the Class Period, Rothstein Kass was

required to perform its audit in conformity with Statement of Accounting Standard ("SAS") Nos. 99

and 113, Consideration of Fraud in a Financial Statement Audit, which includes auditing for

misstatements arising from the misappropriation of assets. Rothstein Kass failed to comply with

SAS No. 99 in its audit of Austin Capital's financial statements. During the course of its audit of

Austin Capital's financial statements during the Class Period, Rothstein Kass knew of or should

have discovered the impropriety and excessive risk of one of Austin Capital's key investments, the

Madoff-run Rye Select Fund.

COUNT I

For Violation of §10(b) of the 1934 Act and Rule 10b-5Against All Defendants on Behalf of the Class

57. Plaintiffs incorporate ¶111-56 by reference.

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. .

58. During the Class Period, the defendants disseminated or approved the false statements

specified above, which they knew or deliberately disregarded were misleading in that they contained

misrepresentations and failed to disclose material facts necessary in order to make the statements

made, in light of the circumstances under which they were made, not misleading.

59. These defendants violated §10(b) of the 1934 Act and Rule 10b-5 in that they:

(a) employed devices, schemes and artifices to defraud;

(b) made untrue statements of material facts or omitted to state material facts

necessary in order to make the statements made, in light of the circumstances under which they

were made, not misleading; or

(c) engaged in acts, practices and a course of business that operated as a fraud or

deceit upon plaintiffs and others similarly situated in connection with their purchases of Austin

Capital interests during the Class Period.

60. Plaintiffs and the Class have suffered damages in that, in reliance on Austin Capital's

assurances, they paid artificially inflated prices for Austin Capital interests. Plaintiffs and the Class

would not have purchased Austin Capital interests at the prices they paid, or at all, if they had been

aware of Austin Capital's actual practices.

COUNT II

For Violation of §20(a) of the 1934 ActAgainst Austin Capital and the Individual Defendants on Behalf of the Class

61. Plaintiffs incorporate 71-60 by reference.

62. The Individual Defendants acted as controlling persons of Austin Capital within the

meaning of §20(a) of the 1934 Act. By reason of their positions with the Company, the Individual

Defendants had the power and authority to cause Austin Capital to engage in the wrongful conduct

complained of herein. Austin Capital controlled the Individual Defendants and all of its other

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employees. By reason of such conduct, these defendants are liable pursuant to §20(a) of the 1934

Act.

COUNT III

For Violation of §12(a)(2) of the 1933 ActAgainst Austin Capital and the Individual Defendants on Behalf of the Class

63. Plaintiffs repeat and reallege the allegations set forth above as if set forth fully herein.

For purposes of this Count, plaintiffs expressly exclude and disclaim any allegation that could be

construed as alleging fraud or intentional or reckless misconduct, as this Count is based solely on

claims of strict liability and/or negligence under the 1933 Act.

64. By means of the defective Offering Memorandum ("OM"), which operated in the

same fashion as a prospectus, the Individual Defendants assisted in sale of Austin Capital interests to

plaintiffs and the Class.

65. The OM operated in the same manner as a prospectus in that it was the vehicle for

Austin Capital to sell shares in the funds to various investors.

66. The OM contained untrue statements of material fact, and concealed and failed to

disclose material facts, as detailed above. Defendants named herein owed plaintiffs and the Class

who purchased Austin Capital interests pursuant to the OM the duty to make a reasonable and

diligent investigation of the statements contained in the OM to ensure that such statements were true

and that there was no omission to state a material fact required to be stated in order to make the

statements contained therein not misleading. These defendants, in the exercise of reasonable care,

should have known of the misstatements and omissions contained in the OM as set forth above.

67. Plaintiffs did not know, nor in the exercise of reasonable diligence could have known,

of the untruths and omissions contained in the OM at the time they acquired their interests in Austin

Capital funds.

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, .

68. By reason of the conduct alleged herein, Austin Capital and the Individual Defendants

violated §12(a)(2) of the 1933 Act. As a direct and proximate result of such violations, plaintiffs and

the Class who purchased Austin Capital interests pursuant to the OM sustained substantial damages

in connection with their purchases of the interests. Accordingly, plaintiffs and the Class who hold

such interests have the right to rescind and recover the consideration paid for their interests, and

hereby tender their interests to the defendants sued herein.

COUNT IV

Claim for Breach of Fiduciary Duties and/or Aiding and AbettingBreach of Fiduciary Duty Under New York Law

Against All Defendants on Behalf of the Class

69. Plaintiffs incorporate 1111-56 by reference.

70. Austin Capital and the Individual Defendants have violated the fiduciary duties of

care, loyalty, candor, good faith and independence owed to the investors in Austin Capital funds and

have acted to put their personal interests ahead of the interests of Austin Capital fund investors,

and/or have aided and abetted therein.

71. By the acts, transactions and course of conduct alleged herein, defendants, aided and

abetted by Rothstein Kass, failed to exercise the care required, and breached their duties of loyalty,

good faith, candor and independence owed to investors in the Austin Capital funds by:

(a) failing to properly preserve the assets of the Austin Capital funds; and

(b) ignoring or not protecting against the failure to properly evaluate fund

managers, which resulted in fund assets being managed by Madoff entities.

72. By reason of the foregoing acts, practices and course of conduct, defendants have

failed to exercise ordinary care and diligence in the exercise of their fiduciary obligations toward

plaintiffs and the other members of the Class, and/or have aided and abetted therein.

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73. As a result of the actions of defendants, plaintiffs and the Class have been and will be

irreparably harmed in that portions of their investments have evaporated in a Ponzi scheme.

COUNT V

Breach of Fiduciary Duty Under ERISAAgainst Defendant Austin Capital on Behalf of the Sub-Class

74. Plaintiffs incorporate ¶111-73 by reference.

75. This Count is brought on behalf of the Sub-Class against defendant Austin Capital.

76. The Count is brought pursuant to §502(a)(2) and (3) for violations of ERISA.

77. Section 404(a) of ERISA requires that a fiduciary to an employee benefit plan act

"with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent

man acting in a like capacity and familiar with such matters would use in the conduct of an

enterprise of a like character and with like aims." 29 U. S.C. §1104(a)(1)(B).

78. Defendant Austin Capital is a fiduciary which owed a duty of loyalty to plaintiffs and

the Sub-Class members under ERISA, in that it was required to act solely and exclusively in the

interests of fund participants and beneficiaries. As part of its fiduciary duty, defendant Austin

Capital owed a duty to prudently manage and invest the assets of the fund. Defendant Austin Capital

breached that duty by, inter alia,

(a) failing to sufficiently investigate the Madoff-related funds to insure that they

were a safe, prudent, honest and suitable investment for employee pension benefit plans and their

participants and beneficiaries; and

(b) failing to locate or give sufficient attention to warning signs about the

unreliability of Madoff-related funds as investment vehicles.

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, .

79. As a result of the above-described conduct, defendant Austin Capital has acted in

violation of §§404, 405 and 409 of ERISA, 29 U.S.C. §§1104, 1105 and 1109, to the detriment of

Plaintiffs and the Sub-Class.

COUNT VI

Unjust Enrichment AgainstAustin Capital and the Individual Defendants on Behalf of the Class

80. Plaintiffs incorporate ¶J1 -56 and 69-73 by reference.

81. As a result of the conduct described above, defendants will be and have been unjustly

enriched, in the form of unjustified management fees.

82. All the payments and benefits provided to the defendants named herein were at the

expense of plaintiffs and the Class. Plaintiffs and the Class did not receive the benefit from these

payments promised by Austin Capital and the Individual Defendants, with respect to care and

diligence in selecting fund managers. Plaintiffs and the Class were damaged by such payments.

83. These defendants should be required to disgorge the gains which they have and/or

will otherwise unjustly obtain at the expense of plaintiffs and the Class. A constructive trust for the

benefit of plaintiffs and the Class should be imposed thereon.

COUNT VII

Claim for Negligence AgainstAustin Capital and the Individual Defendants on Behalf of the Class

84. Plaintiffs incorporate 11-56, 69-73 and 80-83 by reference.

85. As investment managers with discretionary control over the assets entrusted to them

by plaintiffs and the Class, Austin Capital and the Individual Defendants owed plaintiffs and the

Class a duty to manage and monitor the investments of plaintiffs and the Class with reasonable care

as previously alleged herein.

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86. Austin Capital and the Individual Defendants breached this duty of care as alleged

herein.

87. By failing to carry out the following duties, Austin Capital and the Individual

Defendants further breached their duty of care:

(a) To take all reasonable steps to ensure that the investment of the assets of

plaintiffs and the Class were made and maintained in a professional and prudent manner;

(b) To take reasonable steps in seeking to preserve for plaintiffs and the Class

the value of their investments;

(c) To refrain from entrusting the assets of plaintiffs and the Class to any fund

manager whose interests were completely opposed to or otherwise in conflict with the interests of

plaintiffs and the Class;

(d) To perform all necessary due diligence and to remain attentive to ensure that

the performance results of any fund in which the assets of plaintiffs and the Class were invested

were being accurately and timely reported, and to maintain oversight and transparency as to the

activities of any fund manager that is investing any of the assets of plaintiffs and the Class; and

(e) To exercise generally that degree of prudence, caution and good business

practice that would be expected of any investment professional.

88. As a direct and proximate result of Austin Capital's and the Individual Defendants'

gross negligence, plaintiffs and the Class have suffered damages and are entitled to such damages

from defendants, jointly and severally, as well as a return of all fees paid to defendants.

COUNT VIII

Claim for Breaches of ContractAgainst Austin Capital on Behalf of the Class

89. Plaintiffs incorporate 41111-56, 69-73 and 80-88 by reference.

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. .

90. This is a claim for contract breaches against Austin Capital.

91. Plaintiffs and the Class agreed to invest in Austin Capital based on Austin Capital's

assurances about its care in selecting fund managers. Austin Capital was to be paid a fee of 1%-

1.5% annually of the net asset value (paid monthly) for its services in selecting fund managers.

92. The terms of the contract are included in substantially identical written materials

distributed to each Class member. These documents include substantially identical sales materials to

prospective investors and substantially identical OM.

93. Austin Capital did not provide the agreed-upon services. Material terms of the

contract required Austin Capital to carefully select fund managers. In the face of significant "red

flags," Austin Capital placed fund assets with Madoff-managed funds.

94. Plaintiffs and the Class have fully performed under the terms of the OM with Austin

Capital.

95. Pursuant to the OM, Austin Capital had a contractual obligation to prepare a new OM

if the selection criteria was changed in a way to make the OM "inaccurate or misleading." Austin

Capital never prepared a new OM describing the increased risks the investment selection process

was causing the Class, including, but not limited to investing with Madoff funds.

96. Plaintiffs and the Class have been damaged as a result of Austin Capital's breaches.

COUNT IX

Claim for Negligent MisrepresentationAgainst All Defendants on Behalf of the Class

97. Plaintiffs incorporate ¶J1 -56, 69-73 and 80-96 by reference.

98. This is a claim for negligent misrepresentation against all defendants on behalf of the

Class.

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99. Defendants made materially inaccurate written representations and omissions in

substantially identical written materials distributed to plaintiffs and the Class.

100. The OM and other Selling Documents distributed by Austin Capital told investors to

rely upon the Selling Documents. The defendants expected investors to rely upon the Selling

Documents.

101. The OM and other Selling Document contained materially false and misleading

statements and omissions as alleged above.

102. Plaintiffs and the Class did rely upon these documents. It was the plaintiffs' and the

Class's reasonable expectation — as is common industry practice and sound business practice — that

defendants would update the OM to reflect material changes in the process of selecting fund

managers.

103. Defendants had a special duty of care to accurately and completely represent all

material facts to Austin Capital investors because:

(a) they owed such investors a fiduciary duty as alleged above; and

(b) they made an undertaking in the OM to provide updates to reflect significant

changes or defects in the selection of fund managers.

104. Austin Capital was responsible for distributing the OM to plaintiffs and the Class.

Defendants therefore knew or should have known that investors would act or refrain from taking

action on the basis of information provided in it.

105. Plaintiffs and the Class took action or refrained from taking action on the basis of

defendants' negligent statements and omissions as follows:

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,

(a) if defendants had imparted complete and accurate information in the OM, the

investors would have demanded a higher interest rate to compensate investors for the true risk of

the investment;

(b) if defendants had properly updated the OM consistent with their duties and

undertakings, plaintiffs and the Class would have protected their investment capital by (i) insuring

against the increased risk; or (ii) redeeming their Austin Capital interests; and

(c) but for defendants' misrepresentations and omissions, the Austin Capital

interests could not have been unmarketable.

106. Plaintiffs and the Class have suffered damages as a result of defendants' negligent

misrepresentation.

PRAYER FOR RELIEF

WHEREFORE, plaintiffs pray for relief and judgment, as follows:

A. Determining that this action is a proper class action and certifying plaintiffs as Class

and Sub-Class representatives;

B. Awarding compensatory damages in favor of plaintiffs and the other Class and Sub-

Class members against all defendants, jointly and severally, for all damages sustained as a result of

defendants' wrongdoing, in an amount to be proven at trial, including interest thereon;

C. Awarding plaintiffs and the Class and Sub-Class their reasonable costs and expenses

incurred in this action, including counsel fees and expert fees;

D. Awarding rescission or a rescissory measure of damages; and

E. Awarding such additional equitable/injunctive or other relief as deemed appropriate

by the Court.

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JURY DEMAND

Plaintiffs hereby demand a trial by jury.

DATED: April 8, 2009 COUGHLIN STOIA GELLERRUDMAN & ROBBINS LLP

SAMUEL H. RUDMANDAVID A. ROSENFELD

AMUEL H. RUDMAN

58 South Service Road, Suite 200Melville, NY 11747Telephone: 631/367-7100631/367-1173 (fax)

COUGHLIN STOIA GELLERRUDMAN & ROBBINS LLP

DARREN J. ROBBINSDAVID C. WALTON655 West Broadway, Suite 1900San Diego, CA 92101-3301Telephone: 619/231-1058619/231-7423 (fax)

Attorneys for Plaintiffs

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