According to Zuckerman's suit, which also filed in State Supreme Court in Manhattan, Merkin represented that he "exercised reasonable care" in selecting managers and made "periodic reviews." "There is no way Merkin could make such a representation without learning basic facts about Madoff's operation, including the fact that Madoff had not made any stock purchases for at least 13 years," the complaint stated.
Merkin's attorney Andrew Levander said Zuckerman's suit "is entirely baseless and without merit." He continued: "Mr. Zuckerman claims that he believed and that the Offering Memorandum provided that Ascot Partners would be invested in a diversified range of investments. In fact, the Offering Memorandum specifically warned Mr. Zuckerman against the "Lack of Diversification" and that "The Partnership's investment plan does not constitute a balanced investment plan.""
Over the years Merkin had extensive involvement in more than 30 charities and educational institution. He sat on the boards of nonprofits like Carnegie Hall, the United Jewish Appeal, Yeshiva University, which is alleged to have lost $110 million, and the Fifth Avenue Synagogue. At New York University, where he sat on the finance committee, he placed millions with Madoff. He also placed with Madoff money from Tufts University. NYU is suing Merkin and his $1.8 billion Ariel hedge fund over $24 million of the school's funds the billionaire investor allegedly lost with Madoff .
"NYU's own ongoing legal action against Mr. Merkin limits what we can say," said NYU spokesman John Beckman. "However, we are gratified by the Attorney General's action today on behalf of those who have been harmed by Mr. Merkin, and we will cooperate with their investigation."
Beckman said NYU could not expand on the issues stated in NYU's suit which was begun in December shortly after Madoff was arrested on December 11th, and Merkin on the same day began disclosing the losses his three funds had suffered by placing money with Madoff. Merkin' Ascot Fund placed all of its money under management with Madoff, losing the entire $1.8 billion. His other two funds, Gabriel and Ariel had invested about a third of their assets with Madoff, according to published reports.
Madoff is currently in federal prison in Manhattan awaiting sentencing after pleading guilty to running his $50 billion Ponzi scheme.