Friday, May 8, 2009


The Deal of the NYTimes reports on Irving Picard's (Madoof SIPC trustee) lawsuit filed against Ezra Merkin. Merkin (pictured to the right from Bloomberg) ran three hedge funds and allegedly turned at least $1 billion of his investors' money to Madoff to invest. There are some reports that Merkin turned all of his investors' money over to Madoff. For this, Merkin allegedly earned over $400 million in fees.

Irving Picard is suing Merkin to get him to return over $500 million withdrawn over the last five years. Picard says that Merkin either knew or should have known that the Madoff scheme was not on the up and up.

I always like when someone says, 'he either knew or should have known'. The other person, in this case Merkin, is boxed in a corner. What does he say? 'I didn't know and I shouldn't have known?' Merkin alledgedy had all his investors' money with Bernie. He should have been all over Madoffs books and records. Picard sets forth over 500 trades on Merkin's funds' statements that showed stock transactions at prices that were outside the range the stocks actually traded at on those days. That doesn't look good for Merkin.

He collected over $400 million of fees from his investors. He probably didn't tell them, 'don't expect much because I don't know much about investing.' He probably has sales information touting his investment expertise and there will probably be investors willing to testify as such.

Furthermore, until earlier this year, he was the chairman of GMAC! It is going to be hard for him to plead that he wasn't up to the task, very hard.

Cheers, Mike

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