Madoff-tainted Merkin pocketed $35M a year

J. Ezra Merkin made $688 million over 20 years for funneling $4.4 billion of investor funds to jailed swindler Bernard Madoff and others

J. Ezra Merkin, one of Bernie Madoff’s most important sources of cash, pocketed an average of $35 million in fees every year for funneling money to the Ponzi schemer and other investment firms.

The fallen financier, a scion of one of the city’s most prominent families, raised a total of $4.4 billion over his nearly 20-year career as a money manager. About half of that went to Mr. Madoff, as investors flocked to the man who seemed to possess a golden touch. In turn, Mr. Merkin received $688 million in management and incentive fees, according to a court document filed late Monday by the New York attorney general’s office, which in April sued Mr. Merkin for defrauding investors of $2.4 billion.

The figures provide the most detailed look yet into Mr. Merkin’s fortune. They illustrate how he could afford to assemble one of the world’s finest collections of Mark Rothko paintings and acquire a two-floor apartment at 740 Park Ave. In June, Mr. Merkin agreed to sell the core of his art collection for $191 million in order to partially repay cheated investors.

Mr. Merkin didn’t actually manage any money himself in exchange for the hefty fees he charged, according to the attorney general’s office. His annual fee was usually 1% of the assets and 20% of the investment gains. In 2003, he increased the management fee to 1.5% for one of his funds, from which he funneled money almost exclusively to Mr. Madoff.

more at

http://www.investmentnews.com/apps/pbcs.dll/article?AID=/20090804/FREE/908049979/-1/RSS02&rssfeed=RSS02

Ezra Merkin relinquishes hedge funds to trustees

Hedge fund manager Ezra Merkin, who invested billions of dollars worth of his clients' money with disgraced Wall Street financier Bernard Madoff, has agreed to turn over control of his investment pools to court-appointed trustees.

The New York attorney general's office had requested that Mr Merkin relinquish control of the funds as part of its civil complaint against the money manager, the Associated Press (AP) reports.

It said the move, which could be approved by a court later this week, does not represent a settlement of the case.

New York attorney general Andrew Cuomo alleges that Mr Merkin funneled $2.4 million to Mr Madoff without his investors' knowledge and earned millions in management fees, despite simply passing clients' money on to the fund manager.

He is also accused of ignoring "glaring red flags" regarding Mr Madoff's business activities.

Mr Merkin denies the charges and maintains he had no knowledge of Mr Madoff's $65 billion Ponzi scheme until the broker's arrest in December.

His lawyer, Andrew Levander, told the AP that handing over control of the funds are part of his "continuing efforts to maximize the returns to investors".

Merkin 'performed due diligence' on Madoff investments

The hedge fund chief facing fraud charges for funneling $2.4 billion to Bernard Madoff without his investors' prior knowledge has told lawyers that he performed due diligence on the broker and cooperated with authorities investigating his Ponzi scheme.

Reuters cites court papers made public yesterday (April 19th), which show that Ezra Merkin - who ran the Gabriel Capital fund manager - claims to have spent a "fair amount of time" discussing Mr Madoff's investment strategies.

The papers relate to a civil case brought by New York University, which invested with Mr Merkin. They were made public following a successful petition filed by the Fox Business Network.

According to the transcripts of Mr Merkin's deposition, he claimed to have performed "lots of due diligence on Mr Madoff's trading strategy - and on the returns and on the levels of volatility".

However, he said he cannot remember a "specific conversation and a specific test sequentially connected".

Mr Merkin was charged with fraud by Mr Cuomo's office on April 6th.

He is not accused of being aware of Mr Madoff's $65 billion Ponzi fraud and his lawyer claims his funds have been victims of the swindle.

Madoff middleman charged with fraud

A fund manager has been charged with fraud after he allegedly funnelled $2.4 billion to Bernard Madoff's firm without investors' knowledge.

New York attorney general Andrew Cuomo said Ezra Merkin was a self-styled "investment guru" who was in fact just a "master marketer". When investors entrusted their money to him, he passed it off to third-party fund managers like Mr Madoff.

The civil complaint states that for two decades, he made millions in management and performance fees, despite pumping investors' cash into the biggest Ponzi scheme in history. Many of his clients - which included a number of prominent charities - lost hundreds of millions of dollars when the Madoff fraud was uncovered in December.

Mr Cuomo also alleges that Mr Merkin ignored "glaring red flags" relating to Mr Madoff's business. Indeed, two of the fund manager's closest lieutenants warned that Mr Madoff's returns were too good to be true, but Mr Merkin took no action, the court papers state.

Furthermore, Mr Merkin is said to have told concerned investors that little or no assets from his Ascot fund were invested with Mr Madoff, when in fact the entire fund was in the broker's hands.

Mr Madoff pleaded guilty last month to running a $65 billion Ponzi scheme.

Madoff assets will not be disclosed

The Securities and Exchange Commission (SEC) is to withhold public access to a list of Bernard Madoff's assets filed earlier this week, according to reports.

The move will come as a "disappointment" to investors looking to recover their money through legal actions, the Telegraph said.

It comes as the list of high-profile victims of the Wall Street broker's alleged $50 billion Ponzi scheme continues to grow.

Among the latest to confirm losses are ex-hedge fund manager Michael Steinhardt, who told Bloomberg that he has lost around $2 million investing with the financier Erza Merkin, who funneled the money to Mr Madoff's brokerage firm.

"If [Mr Merkin] gave some of my money to Madoff and earned fees for doing so, it was not inconsistent with his agreement to manage my money in the best way he could," Mr Steinhardt said.

New York University has also filed a $24 million action against Mr Merkin and his funds for investing with Mr Madoff without performing due diligence.

Elsewhere, the Hollywood actor Kevin Bacon is said to have lost "millions" to the Madoff scandal, the Telegraph noted.