Tag Archives: Ezra Merkin

No golfing for Walter

Walt Noel has written and explained that he will not be running for Caddy Chief at Round Hill Club nor any other position there. By way of explanation he sends this link to the sad story of that other Madoff collaborator, Ezra Merkin, whose ascendancy to chief  somethingorother at a New York Synagogue is “tearing the community apart”. I don’t know Walt, you may be selling yourself short (should have done that with your Madoff investments, yuck yuck yuck – get it? Get it?). It’s entirely possible that the Round Hillers are still so deep in martinis that they haven’t bothered opening their FGG statements the past six months. If so, then you’re still the genius who made them rich and so of course they’ll welcome you. Why don’t you trot across the street and pop in for a mojito at that shabby bar? Let us know how it goes.

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Thank goodness that the library offers free ineternet access

So we can continue to hear from Walter Noel after he and Monica remove themselves from the Round Hill cottage and move to a cardboard box in Baldwin Park. News today that thea Madoff trustee has sued a second feeder fund, former GMAC Chairman Ezra Merkin, for $558 million in fees he took out when he “knew or should have known” that Bernie was a fraud. At the rate of one feeder fund every other day, I’d expect Walter and the Fairfield Greenwich Group to be teed up Monday or Wednesday, depending on whether that Rye firm (Trenton? How quickly we forget) goes first.

As trustee, Mr. Picard can sue investors for any money withdrawn from Mr. Madoff’s firm “in bad faith,” including if they knew or should have known Mr. Madoff was engaged in fraud. Mr. Picard is relying on records he collected from the Madoff firm going back to 1995 and, for now, will be able to seek funds withdrawn only in that period.

Mr. Picard, an attorney with Baker & Hostetler LLP, is expected to sue more feeder funds, said lawyers involved in the Madoff bankruptcy case. But even if he wins in court, Mr. Picard may have trouble collecting much of what he is seeking. That’s because most of the money has already been distributed to the funds’ clients [unless, like Walt, you were pulling out $270 million a year for yourself - Ed].  If those clients had no inkling there was fraud, Mr. Picard won’t be able to touch funds they withdrew from their accounts, those lawyers said.

In his first suit alleging bad-faith withdrawals, Mr. Picard targeted the assets of another individual who ran a feeder fund, Stanley Chais. The suit seeks the return of $1 billion that Mr. Chais and his family withdrew from Mr. Madoff’s firm since 1995. Mr. Chais allegedly “knew or should have known” of the fraud because his family’s personal investment accounts with Mr. Madoff averaged annual returns of 40%, in some cases reaping 300% in one year, according to the complaint.

Mr. Merkin’s investments differ from those of Mr. Chais. The returns for Mr. Merkin’s funds averaged 11% to 16% annually. And, unlike Mr. Chais, Mr. Merkin didn’t have personal accounts with Mr. Madoff’s firm. Instead, Mr. Merkin collected a management fee.

In Thursday’s lawsuit against Mr. Merkin, Mr. Picard said that as a sophisticated fund manager, Mr. Merkin should have noticed the myriad warning signs that could have indicated Mr. Madoff was engaged in fraud. Among the clues: Purported trades made by Mr. Madoff, which were listed in account statements sent to Mr. Merkin, could never have taken place, a fact that Mr. Merkin could easily have detected, the suit alleges.

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Cuomo apes Massachusetts’s lead, Blumenthal to follow

Andrew Cuomo, who sat back in the weeds while Massachusetts assembled a civil fraud case against Madoff feeder funds, has now charged Ezra Merkin and his feeder fund, Ascot, with the same claim. Connecticut’s courageous Attorney General, Dick Blumenthal, now has a pretty good feel for which way the wind’s blowing and we can expect him to join in the fray any month now – probably after his betters get past the initial court hurdles. But he’ll be there at the end to claim credit, in front of the cameras, I promise you.

The Ascot fund was formed by Mr. Merkin in 1992 exclusively as “feeder” fund for Mr. Madoff, says the Attorney General. It grew to hold $1.7 billion from 300 investors by the end of December, 2008. Mr. Madoff then used the money in a massive Ponzi scheme.

About 85% of the investors in the Ascot fund did not know their money was siphoned to Mr. Madoff, the complaint says. For those that knew, the truth about the size and scope of the investment was obfuscated, says Mr. Cuomo. Mr. Merkin collected an annual fee from Ascot’s investors amounting to 1% to 1.5% of the total assets in the fund – a fee that included the fictitious Madoff returns, says the complaint. By 2008, Mr. Merkin was collecting about $25.5 million a year from managing Ascot.

And if you think that set up was similar to Walter’s, try this:

Mr. Merkin was not personally heavily invested in his own Ascot fund. He did not reinvest his $169 million in management fees for the years 1995 to 2007 back into his own fund, says the complaint. All told, Mr. Merkin invested personally and through family trusts and foundations $7 million in Ascot in its first six years, and less than $2 million over the following 10 years.

I’m waiting for criminal fraud charges to compliment the civil ones but I expect those will come from out-of-state, rather than Hartford. Tough to put your golfing buddy in jail, I guess.

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Is there anyone who didn’t know Madoff was a crook?

Ezra Merkin, a Madoff scam “victim” used former “Yuppie Five” felon as financial advisor while advisor was still in jail. The most amusing part? The crook warned Merkin that Madoff was making up imaginary numbers for his reported profits. But why stop when you’re charging big fees? Walter didn’t, either.

One of the top advisers to the money manager J. Ezra Merkin, who invested $2 billion of his clients’ money with Bernard L. Madoff, is a convicted felon who worked for Mr. Merkin while still in federal prison, according to recently filed court documents.

The adviser, Victor Teicher, who had been convicted of federal securities fraud and was barred from the securities industry, advised Mr. Merkin on the management of his Ariel Fund Ltd. through phone calls made to Mr. Merkin’s Park Avenue office from a New Jersey prison.

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