Some Charities to Benefit From Madoff Settlement
Some Charities to Benefit From Madoff Settlement
The attorney general's office in New York State has ordered Wall Street hedge fund manager Ezra Merkin to pay $405 million over three years to his investors, many of whom were unaware he had ties to convicted Ponzi schemer Bernard Madoff, the New York Times reports.
The civil settlement, which was approved by a judge late on Friday, is one of the largest to date involving an individual investor in the Madoff case and will benefit investors in Merkin's four private funds — Ariel Fund Ltd., Gabriel Capital LP, Ascot Fund Ltd., and Ascot Partners. More than 10 percent of the money invested in the four funds belonged to charities and nonprofit institutions.
Merkin was accused of collecting hundreds of millions of dollars in management fees on funds he simply handed over to Madoff to manage. His funds lost more than $1 billion when Madoff's scheme fell apart in December 2008. Under the settlement, organizations that did not know of Merkin's ties to Madoff will recover a larger percentage of their losses than those who did.
According to the Times, while the agreement is good news for many, bankruptcy court trustee Irving H. Picard is likely to challenge the settlement. Indeed, Picard and his law firm, Baker Hostetler, are seeking to recover $500 million from Merkin, which would be added to a compensation fund that eventually will be disbursed to all eligible Madoff investors through bankruptcy court.
"To the extent any third-party settlement seeks to divert funds [sought by the trustee], we will have to consider taking appropriate steps," said Amanda Remus, who represents Picard.
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