Madoff scandal and General Motors

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By Barry Grey in the USA:

Former chairman of GM financial arm charged in Madoff-related fraud

9 April 2009

New York State Attorney General Andrew Cuomo on Monday charged J. Ezra Merkin, a multi-millionaire hedge fund manager and former chairman of GMAC Financial Services, the financial arm of General Motors, with bilking investors out of $2.4 billion by funneling their money, without their knowledge, to convicted Ponzi scheme operator Bernard Madoff.

According to the civil complaint filed by Cuomo with the New York Supreme Court, Merkin collected $470 million in management and incentive fees over a fifteen-year period by claiming to be carefully managing the money his clients invested in his three hedge funds, while funneling the bulk of the funds to Madoff’s operation.

Cuomo’s lawsuit seeks payment of damages and disgorgement of all fees by Merkin, as well as restitution and other “equitable relief.”

One of Merkin’s funds, Ascot Partners LP, was, from its inception in 1992, a “feeder fund” for Madoff, according to the complaint. It had reported net assets of $1.8 billion in December of 2008, when Madoff confessed to authorities that he had for years been running the world’s biggest pyramid scheme. Ascot was wiped out, along with hundreds of millions of dollars in two other Merkin funds that had been investing heavily with Madoff.