(Corrects identity, spellings of receivers in seventh paragraph.)

May 19 (Bloomberg) -- New York financier J. Ezra Merkin, who was sued earlier this month for $557.8 million by a trustee liquidating Bernard Madoff’s money-management firm, agreed to the appointment of receivers for three of his fund groups in a deal with New York Attorney General Andrew Cuomo.

Cuomo sued Merkin and his Gabriel Capital Corp. in April for secretly placing $2.4 billion of client funds with Madoff, who used the money in the largest Ponzi scheme ever. Merkin steered the assets to the money manager in exchange for $470 million in fees, Cuomo alleged.

David Markowitz, chief of Cuomo’s Investor Protection Bureau, told New York State Supreme Court Justice Richard Lowe in a hearing today in Manhattan that a deal had been reached in which Merkin would cede control of Madoff-related assets, according to a transcript.

“The purpose of this is to make sure that the victims of the fraud here have independent trustees and fiduciaries overlooking what’s left of their assets,” Markowitz told the judge. Markowitz said it was particularly important because of so-called clawback lawsuits filed against the funds by Madoff trustee Irving Picard. Merkin’s lawyer Andrew Levander said in a statement that his client has agreed to a receiver.

150 Years

Madoff, 71, pleaded guilty in March to defrauding investors of as much as $65 billion and faces as many as 150 years in prison at his sentencing in June.

Investors including prominent charities entrusted their funds to Merkin, who held himself out to be an “investing guru” when in reality he was “a master marketer,” Cuomo alleged in his complaint. Other Merkin entities included the Ascot Fund Ltd., Ariel funds and Gabriel, his management company.

Markowitz said the settlement involved naming Bart M. Schwartz of Guidepost Partners LLC as receiver for Merkin’s Ariel and Gabriel groups of funds. He said Cuomo’s office also recommended David Pitofsky of Goodwin Procter LLP as the receiver of Merkin’s Ascot funds.

Markowitz asked for a week to submit the settlement for approval. He said the attorney general’s office wants victim groups to have an opportunity to weigh in on the order, as well as New York University, which separately filed suit against Merkin over its investments.

The parties are due back in court May 28.

The case is New York v. Merkin, 09-450879, New York State Supreme Court (Manhattan.)

To contact the reporter on this story: Karen Freifeld in New York State Supreme Court at kfreifeld@bloomberg.net

Last Updated: May 19, 2009 15:58 EDT