N.Y. Calls Madoff Trustee's Claims On Merkin 'Absurd'

Mar 7 2013 | 12:23am ET

New York's attorney general has dismissed the claims of the court-appointed trustee in the Bernard Madoff case as "absurd," as the two sides fight over New York's settlement with a Madoff feeder-fund manager.

Picard alleged last month that the $410 million deal between Attorney General Eric Schneiderman's office and J. Ezra Merkin would allow Merkin to use the money to defend himself against Picard. A lawyer for Schneiderman said in a court filing this week that the allegation was ridiculous.

Merkin's lawyers will be paid, as is "required and appropriate," David Ellenhorn wrote. And Schneiderman's office will get $5 million to pay for its litigation against Merkin. But "all of the remaining settlement funds, out of the $410 million, will be used to compensate victims of Merkin's wrongdoing. Not one penny will revert to Merkin."

Picard last year objected to Schneiderman's settlement, warning that it would imperil his efforts to maximize recovery from Madoff's $65 billion Ponzi scheme and to fairly distribute the proceeds. Picard is seeking $500 million from Merkin.

But Schneiderman's office and Merkin's lawyers told U.S. District Judge Jed Rakoff that Picard isn't likely to prevail in his suit against Merkin; the feeder fund manager's lawyers called it "extremely unlikely" that Picard would win.

Merkin has said that his three Madoff feeder funds face a shortfall of, at most, $8 million.

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