Ex-GMAC Chairman Faces Charges Over Madoff Plot

Ex-GMAC Chairman Faces Charges Over Madoff Plot - 4/6/2009

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Ex-GMAC Chairman Faces Charges Over Madoff Plot
Christine Caulfield

Securities Law 360. April 6, 2009
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EXCERPT: Hedge fund operator J. Ezra Merkin was charged Monday by New York Attorney General Andrew Cuomo for allegedly duping hundreds of investors by secretly steering $2.4 billion of their money into Bernard L. Madoff's massive Ponzi scheme. In a 54-page civil fraud complaint filed in the New York State Supreme Court, Cuomo alleges the Madoff middleman ignored irregularities and “glaring red flags” when he funneled clients' money to the disgraced financier for $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. “Merkin duped individual investors, nonprofits and charities into believing he was responsibly managing their investments, when in actuality he was dumping them into history's largest Ponzi scheme.” Merkin — the former chairman of GMAC Financial Services LLC — has also reportedly been hit with a civil suit by Mort Zuckerman, chairman of Boston Properties Inc. and the publisher of the New York Daily News, who is seeking the return of $40 million he claims to have entrusted with the fund operator. In a suit filed to the state Supreme Court, Zuckerman alleges that Merkin placed his assets with Madoff Investment Securities LLC without his knowledge, according to Bloomberg on Monday. Madoff admitted March 12 to running a $65 billion Ponzi scheme and pled guilty to 11 felony charges, including securities fraud, investment adviser fraud and perjury. On March 20, the U.S. Court of Appeals for the Second Circuit ruled that the financier would remain in prison until his sentencing, which is set for June 16. Cuomo's complaint, which names as co-defendants Merkin's management company Gabriel Capital Corp. and the three hedge funds he controlled, alleges the fund operator deliberately targeted prominent charities and nonprofit organizations.

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