Merkin, New York settle Madoff lawsuit for $410m.
New York State has settled a lawsuit for $410 million with J. Ezra Merkin over claims that Merkin funds secretly placed client money with Bernard L. Madoff.
The agreement provides $405m. to compensate investors and $5m. for the state, according to a statement Sunday by the office of New York Attorney General Eric Schneiderman. In the case, filed in 2009 by his predecessor, Andrew Cuomo, the state claimed Merkin steered assets to Madoff and concealed Madoff’s role.
“Many New Yorkers entrusted their investments to Mr. Merkin, who then steered the money to Madoff while receiving millions of dollars in management and incentive fees,” Schneiderman said in the statement. “By holding Mr. Merkin accountable, this settlement will help bring justice for the people and institutions that lost millions of dollars.”
The state claimed in its complaint that Merkin betrayed hundreds of investors, including charities, that entrusted him with their savings by “recklessly” feeding their funds to Madoff’s Ponzi scheme while falsely claiming he actively managed their funds.
Madoff, who pleaded guilty to running a Ponzi scheme that authorities say swindled investors of about $17 billion, is serving a 150-year prison sentence.
Merkin controlled four funds that invested more than $2b. with Madoff on behalf of investors, according to Schneiderman. As a result of Madoff’s scheme, the investors in the funds – Ariel Fund Ltd., Gabriel Capital LP, Ascot Fund Ltd. and Ascot Partners LP – lost in excess of $1.2b., the office said. More than 10 percent of the assets obtained by Merkin belonged to charities and nonprofit organizations, Schneiderman said.
Andrew Levander, an attorney for Merkin, said in a statement that Merkin “is pleased to have achieved a resolution that is fair to his investors.”
“With this settlement, Ezra Merkin has made an enormous personal commitment to addressing his investors’ losses from Madoff’s unthinkable fraud,” Levander said.
Under the agreement, Merkin will pay $405m. to investors over a three-year period. Depending on the size of their losses, eligible investors will be entitled to more 40% of their cash losses, Schneiderman said.
Under a claims process, investors who were not aware of Merkin’s delegation to Madoff will receive a defined percentage of their losses, while those who were aware of Madoff’s role will be eligible to receive a smaller recovery, according to Schneiderman. (Bloomberg)