New York State Attorney General Eric Schneiderman has publicly accused Irving Picard, the trustee handling infamous financier Bernard Madoff’s funds, of needlessly stalling while Schneiderman was successfully working to recover $410 million for the devastated victims of the convicted Ponzi schemer.
“The Trustee sat back watching while the NYAG developed a case,” Schneiderman stated in court papers. “But he waited too long. He should now have to live with the consequences of his strategy.”
Schneiderman is battling against Picard’s efforts to obstruct a $410 million settlement the Attorney General brokered with the disgraced hedge-fund operator Ezra Merkin, who functioned as one of the biggest Madoff “feeder” funds.
In 2009, then-Attorney General Andrew Cuomo sued Merkin for directing $5 billion of his investors’ money (including funds from New York University and real-estate magnate Mort Zuckerman) to Madoff, often without the investors’ awareness.
Merkin was really just a “glorified mailbox” when Madoff’s multibillion-dollar Ponzi scheme was discovered, Cuomo said.
Last June, the Attorney General’s office reached a $410 million settlement with Merkin, which was approved by the court-appointed trustees for Merkin’s conglomeration of funds. However, Picard has refused to participate in the settlement.
Several months after the deal was announced, the trustee assigned to clean up Madoff’s scheme sued to block the settlement between Schneiderman and Merkin.
In his lawsuit, Picard argued that he has priority in regard to handling any Merkin funds that are collected for the fraud’s victims. He also claimed that if the settlement is approved, he will have nothing left over for his victims.
Merkin’s camp also strongly criticized Picard’s suit seeking an injunction. Among other aspects, attorneys for Merkin argued that Picard is liable to win at most a comparatively paltry $8 million from Merkin’s Ascot fund, which was almost totally invested with Madoff.
A substantial portion of the Attorney General’s settlement is being funded by the sale of Merkin’s private art collection in 2009, which brought in $193 million after taxes.