Fund manager charged after investing billions with Madoff
NEW YORK -- A Manhattan hedge fund manager who channeled more than $2 billion of investors' money to Ponzi scheme architect Bernard Madoff was hit with civil fraud charges Monday by New York Attorney General Andrew Cuomo.
J. Ezra Merkin was accused of violating New York State's anti-corruption Martin Act and other statutes by allegedly concealing the Madoff investments from prominent charities, non-profits and other investors.
The New York Supreme Court complaint alleges that Merkin ignored red flags and other irregularities regarding Madoff's operation for years while collecting $470 million in management and incentive fees.
"Merkin profited enormously from Madoff's scheme, reaping huge commissions while investors lost all their money," Cuomo said in a statement issued after filing the 54-page complaint. "Merkin duped individual investors, non-profits and charities into believing he was responsibly managing their investments, when in actuality he was dumping them into history's largest Ponzi scheme."
Although Merkin was widely known as an investment expert who ran Ascot Partners and Ascot Fund Limited, the complaint claims the Manhattan businessman instead used his extensive social and charitable community ties to funnel more than $4 billion to Madoff and other third-party money managers.
"In fact, Merkin did little work for Ascot other than routine bookkeeping and engaging in occasional telephone conversations with Madoff," the complaint says.
Merkin also was accused of falsely marketing two other funds, Gabriel Capital and Ariel Fund Limited, as vehicles for investing in distressed debt and bankruptcy-related securities. But, beginning around 2000, he secretly funneled more than a third of the assets of those funds to Madoff, the complaint charged. Merkin's Ariel Fund is not associated with Ariel Investments' fund of the same name.
The state lawsuit seeks payment of restitution, damages and disgorgement of all fees received by Merkin, a former chairman of GMAC Capital Services, financing arm of General Motors.
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