Fund Manager Faces Civil Charge In Madoff Fraud
ARI SHAPIRO, host:
A New York hedge fund manager with ties to Bernard Madoff is facing civil fraud charges. Yesterday, New York officials accused J. Ezra Merkin of lying to clients about how much of their money was being funneled into Madoff's firm. NPR's Jim Zarroli reports.
JIM ZARROLI: Merkin was a prominent figure in financial circles. He headed Gabriel Capital Management, which he invested money on behalf of numerous individuals and charities. He was also chairman of the big finance company GMAC.
New York Attorney General Andrew Cuomo says Merkin portrayed himself as a skilled money manager investing in distressed securities among other things. But Cuomo says he was little more than a glorified bookkeeper. He says Merkin funneled almost two and a half billion dollars worth of his client's money directly into Madoff's firm without stopping to ask how Madoff made such remarkable returns.
Jerry Reisman is an attorney who represents some of Madoff's victims.
Mr. JERRY REISMAN (Attorney): All he did was solicit investors, obtain money, millions and millions of dollars, turn around, invest it into Madoff, and earn a management fee.
ZARROLI: Merkin himself has said he didn't know about the extent of Madoff's fraud and was himself a victim of the Ponzi scheme. And New York officials don't dispute that, but they say Merkin ignored red flags about Madoff's operations. They say Merkin had been warned by colleagues that Madoff's returns were too good to be true and had even seen press reports raising questions about Madoff.
But Cuomo's office says Merkin failed to perform due diligence about where his client's money was going and they say he actively concealed from them how much money was being invested with Madoff. The suit says some of Merkin's investors explicitly told him they didn't want their money invested with Madoff, but Merkin ignored their request.
Merkin's lawyer yesterday insisted that investors were well aware that money was being invested with Madoff. He called the charges against his client hasty and ill-conceived. And he said Merkin will vigorously fight the charges against him.
Jim Zarroli, NPR News, New York.
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