Tweet
NEW YORK (Dow Jones)--Boston Properties Inc. (BXP) Chairman and New York Daily News owner Mortimer Zuckerman sued money manager J. Ezra Merkin for fraud Monday over $25 million of his charitable trust's funds that were allegedly lost to convicted Ponzi schemer Bernard Madoff.
The lawsuit, filed in New York State Supreme Court in Manhattan, alleges Zuckerman was "stunned" when Merkin, the former chairman of GMAC Financial Services, informed him through a fax in December that "substantially all" of Merkin's Ascot Fund Ltd. was invested with Madoff and likely lost.
Zuckerman's CRT Investments Ltd. had invested $25 million in the Ascot Fund, the complaint said.
"Never once during their numerous meetings and calls did Merkin mention to Zuckerman the name Madoff," the complaint said. "Never once did Merkin reveal that 100% of Ascot Fund was invested with Madoff. Moreover, the written offering materials provided by Merkin failed to disclose that the fund acted purely as a feeder into Madoff."
Zuckerman also personally invested $15 million through a hedge fund run by Merkin and his Gabriel Capital Corp. - 30% of the Gabriel Capital fund's assets had been invested with Madoff and was likely lost, the lawsuit said.
He intends to institute an arbitration proceeding against Merkin covering the personal investment in Gabriel Capital, according to the complaint.
The lawsuit also names Gabriel Capital and audit firm BDO Seidman LLP as defendants.
Lawyers for Merkin and for Gabriel Capital didn't immediately return phone calls seeking comment Monday.
Merkin's lawyer has previously said Merkin and his family were among the largest victims in the Madoff case.
"BDO Seidman did not audit Madoff Securities, the institution where this scandal took place," the accounting firm said in a statement. "BDO Seidman's audits of Ascot Partners and Gabriel Capital conformed to all professional standards and we will vigorously defend ourselves against these unfounded allegations."
On March 12, Madoff was ordered directly to jail after he pleaded guilty to 11 criminal counts in connection with a decades-long Ponzi scheme that bilked thousands of investors out of billions of dollars.
Madoff, 70 years old, is expected to be sentenced in June and faces what could amount to be a life sentence.
<span style="font-weight: bold">Separately, New York Attorney General Andrew Cuomo filed a civil fraud suit against Merkin, alleging he funneled $2.4 billion in investor funds to Madoff without his clients' knowledge. </span>
-By Chad Bray, Dow Jones Newswires; 212-227-2017; chad.bray@dowjones
<span style="font-style: italic"> i read about Merkin case earlier today an dang, here comes dis lawsuit later awn in di said day....tings a hot up fi real...an dem a stawt chat bout wat MRS Madoff did leading up to wen har hubby blow di whistle pon himself...dis a get really interesting but whe di money deh...dem a spen nuff money but mi no see whe dem recoup any yet </span>