New York probe eyes Madoff 'feeder' company
New York probe eyes Madoff 'feeder' companyBY ANTHONY M. DESTEFANO | anthony.destefano @newsday.com
January 16, 2009
State officials have opened a securities fraud investigation into investment companies run by financier Ezra Merkin, whose companies fed client funds to accused Wall Street scammer Bernard Madoff, a source familiar with the probe said yesterday.
Three of Merkin's companies - Ascot Partners Lp, Ariel Management Corp. and Gabriel Capital Lp - are being subpoenaed in the investigation, said the source, who didn't want to be identified. In addition, subpoenas have been or will be going out to 15 nonprofit groups that lost money in the Madoff scandal, the source said.
The probe by the Charities Bureau of New York and Attorney General Andrew Cuomo is under the authority of the state's securities fraud law, the Martin Act, the source said.
Cuomo has declined to discuss the probe in detail, but said publicly earlier this week that "We are looking at frauds in charities and people who defrauded" them. He didn't mention Merkin by name.
Merkin's Ariel Fund and Gabriel Capital have been sued in state court by New York University. The school said it had lost millions of dollars because funds had been directed to Madoff, who investigators have said ran a $50-billion Ponzi scheme.
Lawyer Andrew Levander, who is representing Merkin's companies, said: "We will fully cooperate with any investigation by the New York attorney general's office."
A spokesman for NYU couldn't be reached.
Merkin resigned a week ago as chairman of the board at GMAC Financial Services, the financing arm of General Motors Corp.
Madoff, who is charged with federal securities fraud, is out on $10 million bail and is under house arrest at his Manhattan apartment. Investigators have said the investment scheme lost money for hundreds of investors, including charities and nonprofit groups.
This story was supplemented with an Associated Press report.
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