Merkin Investors Awarded $12.7 Million in Madoff Case
Investors in J. Ezra Merkin’s Gabriel Capital LP, a feeder fund for Ponzi schemer Bernard Madoff, were awarded about $12.7 million by a panel of arbitrators.
Sandalwood Debt Funds A and B claimed that Merkin engaged in common-law fraud, breach of fiduciary duty and negligent misrepresentation, according to an award made public yesterday in New York State Supreme Court. The panel awarded $10.5 million to Fund B and $2.1 million to Fund A without explaining its reasoning. The arbitrator also assessed fees of about $112,000. Sandalwood has asked a judge to confirm the award.
The funds “alleged that they had been induced to make and retain their investments in Gabriel on the basis of misrepresentations and non-disclosures with respect to the fact that a portion of the capital had been invested” with Madoff, according to the award.
New York Attorney General Andrew Cuomo has sued Merkin and Gabriel, claiming Merkin secretly placed money with Madoff in exchange for $470 million in fees. The trustee overseeing the bankruptcy of Bernard L. Madoff Investment Securities LLC and investors also have sued Merkin, a New York financier who denies wrongdoing.
Closed Doors
The arbitration involved six days of evidentiary hearings in May, with seven witnesses testifying behind closed doors, according to the award. Sandalwood offered 85 exhibits and Merkin, the only respondent, entered 41 exhibits.
Andrew Levander, an attorney for Merkin in other Madoff litigation, didn’t handle the Sandalwood case, said a spokeswoman. His lawyer for the arbitration, Guy Petrillo, didn’t immediately return a call seeking comment. Laurence B. Orloff, a Sandalwood attorney, declined to comment.
Sandalwood A and B are limited partnerships with offices in Roseland, New Jersey, according to the award.
Merkin, 57, was closely associated with Madoff on a business and social level since at least the 1990s, according to court filings by investors suing him.
Madoff, 72, is serving a 150-year term in federal prison in Butner, North Carolina, after pleading guilty to orchestrating history’s biggest Ponzi scheme. His investors lost about $20 billion in principal.
The case is Sandalwood Debt Fund A v. Merkin, 651441/2010, New York State Supreme Court, New York County (Manhattan).
To contact the reporter on this story: David Voreacos in New York at dvoreacos@bloomberg.net.
Rate These Stories
Rate this Page