Former money manager J. Ezra Merkin has agreed to turn over hundreds of millions of dollars to duped investors in Bernard Madoff’s Ponzi scheme.
In a settlement announced Monday by New York Attorney General Eric Schneiderman, Mirkin agreed to 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. It is the first settlement resulting from a government action against Merkin.
Merkin, a close business associate of Madoff’s, controlled four funds that invested more than $2 billion with Madoff on behalf of hundreds of investors, including many New Yorkers and charitable organizations.
While investors in Ariel Fund Ltd., Gabriel Capital LP, Ascot Fund Ltd. and Ascot Partners LP, whose assets were largely handled by Madoff, lost in excess of $1.2 billion, Merkin received hundreds of millions of dollars in management fees.
“By holding Mr. Merkin accountable, this settlement will help bring justice for the people and institutions that lost millions of dollars,” Schneiderman said in a statement.
According to the statement, for nearly two decades Merkin presented himself as a skilled money manager and used his social and charitable connections to raise more than $4 billion from hundreds of individuals, charities and other investors. Merkin turned over to Madoff all of the money in the Ascot Funds, and a substantial portion of the Ariel and Gabriel Funds.
In misleading offering documents and quarterly reports, Merkin concealed Madoff’s role and misrepresented the role he was playing in managing the funds, the statement said. Acting primarily as a marketer and middleman, Merkin obtained hundreds of millions of dollars in management and incentive fees from his investors.
Investors could recover more than 40 percent of their cash losses. Investors who were not aware of Madoff’s role will receive a higher percentage of their losses, while those who were aware of Madoff’s role will be eligible to receive a smaller percentage.
Among the victims, according to The Associated Press, were the the Metropolitan Council on Jewish Poverty, New York Law School, Bard College, Harlem Children’s Zone and Homes for the Homeless.
Merkin also is being pursued by Irving Picard, the court-appointed trustee charged with returning money to Madoff’s victims. Picard is trying to claw back $500 million from Merkin and the funds.