Indianapolis investment firm KSM Capital Advisors disclosed today that the scandal unfolding around New York hedge fund manager Bernard Madoff could cost its clients as much as $15 million.

Making matters worse: KSM's parent, accounting firm Katz Sapper & Miller LLP, could lose up to 1 percent of its book value as a result of its own investments in the alleged Ponzi scheme. The firm would not put that loss in dollar terms.

KSM Managing Director Peter Reist said the firm began calling clients with the bad news on Friday, and that the past few days have been one of the worst stretches of his life.

"Many of them are devastated and shocked," Reist said. "It's very tragic."

KSM didn't put it or its clients money directly into Madoff-affiliated funds. Rather, it put money into a fund that invested in another fund that was invested with Madoff.

Fewer than 50 KSM clients were affected, Reist said.

Today's disclosure is the first local announcement of a loss through Madoff, though more may be in the offing as investors assess the carnage.

Katz Sapper is in good company. Firms ranging from Japan-based Nomura Holdings to Royal Bank of Scotland have said they lost money through Madoff.

Investigators believe Madoff, the former chairman of the NASDAQ stock market, may have orchestrated one of the world's largest financial frauds. Madoff told investigators he had taken as much as $50 billion from investors.

Most of the $500 million KSM manages is for individuals; most of those people are in the Indianapolis area.

KSM parses clients' investments among a number of investment firms and investment vehicles. One of those firms is Redmond, Wash.-based Future Select Portfolio Management Inc. Future Select in turn invested through Tremont Capital Management, which in turn placed the money with Bernard L. Madoff Investment Securities LLC.

Reist held out hope that some of the losses can be recovered.

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