It’s not a good day to be Ezra Merkin. The prominent New York financier who once chaired GMAC was charged by New York Attorney General Andrew Cuomo with fraud this morning. And now comes the word that he’s being sued by Mort Zuckerman over $40 million in losses from Bernie Madoff’s Ponzi scheme.
Zuckerman said Merkin placed his assets with Bernard L. Madoff Investment Securities LLC. Madoff, 70, was convicted on federal charges last month of using his firm to run the biggest Ponzi scheme ever. He is awaiting sentencing and may receive as much as 150 years in prison.
“Merkin represented that he ‘exercised reasonable care’ in selecting managers and made ‘periodic reviews,'” Zuckerman said in a complaint filed today in New York State Supreme Court in Manhattan. “There is no way Merkin could make such a representation without learning basic facts about Madoff’s operation, including the fact that Madoff had not made any stock purchases for at least 13 years.”
Zuckerman’s lawsuit includes claims of fraud and negligent representation and seeks unspecified punitive damages. He claimed that Merkin had a “huge incentive not do disclose Madoff’s role, especially to investors like Zuckerman,” because he charged clients “substantial fees” to manage both his Ascot Partners LP and Gabriel Capital.
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