$410 Million Settlement Reached With Controller Of 4 Madoff Feeder Funds

NEW YORK - (Mealey's) In what he called "one of the largest agreements of its kind," New York Attorney General Eric. T. Schneiderman on June 25 announced that he had reached a $410 million settlement with J. Ezra Merkin for his role in the Bernard L. Madoff Investment Securities LLC (BLMIS) Ponzi scheme (The People of the State of New York v. J. Ezra Merkin, et al., No. 450879/2009, N.Y. Sup., New York Co.).

According to a press release announcing the settlement agreement, Merkin will pay $405 million "to compensate investors over a three-year period, and $5 million to the State of New York to cover fees and costs." 

"This is the first settlement resulting from a government action against Merkin," according to the press release. 

Over $2 Billion Invested 

Merkin controlled four feeder funds - Ariel Fund Ltd., Gabriel Capital L.P., Ascot Fund Ltd. and Ascot Partners L.P. - that invested more than $2 billion with Madoff.  According to the press release, investors in those funds lost more than $1.2 billion as a result of Madoff's Ponzi scheme. 

Schneiderman charged Merkin with violations of New York's Martin Act, General Business Law Section 352, and Executive Law Section 63(12) "for concealing Madoff's control of the Merkin Funds and for breaches of his fiduciary duty to manage the funds prudently." 

Schneiderman sought damages, disgorgement of all fees by Merkin and injunctive relief. 

The press release is available online at www.ag.ny.gov/print/35481

Counsel 

Schneiderman and senior trial counsel David N. Ellenhorn, Assistant Attorneys General Daniel Sangeap, Shmuel Kadosh, Veronica Montenegro and Harriet B. Rosen and Executive Deputy Attorney General for Economic Justice Karla G. Sanchez represent the State of New York. 

Merkin is represented by Andrew J. Levander, Gary J. Mennitt, Neil A. Steiner and Kristina A. Moon of Dechert in New York.

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