New York Attorney General Eric Schneiderman told a federal judge that the Bernard Madoff brokerage trustee’s three-year delay in trying to stop a $410 million settlement with a Ponzi scheme investor is contrary to the legal principle that plaintiffs must be vigilant and not wait an “unreasonable” time while efforts are expended by other parties with claims against the alleged offender.
“For over three years, the NYAG expended significant resources in pursuing and resolving the action against Merkin,” Schneiderman said in a Jan. 25 filing in federal court in Manhattan, referring to the former Madoff investor J. Ezra Merkin. “A total of ten NYAG attorneys completed the initial precomplaint investigation, leading to the filing of the complaint in April 2009. Seven NYAG attorneys invested significant portions of their time over three years in pursuing the action from filing to settlement. Hundreds of Merkin investors were contacted and interviewed during the initial investigation.”
U.S. District Judge Jed Rakoff in Manhattan last month pulled the case out of bankruptcy court, where it was started by trustee Irving Picard, saying it requires a ruling by a higher court.
Schneiderman had agreed to settle a state lawsuit against Merkin by allotting most of the settlement money to investors in Merkin’s hedge funds and the rest to the state. Picard responded by suing Schneiderman in bankruptcy court to stop the deal, saying it obstructs his own efforts to collect $500 million from Merkin and his funds for a different group of investors.