Ex-Merrill CEOs, Execs. Lose In Madoff-Linked Hedge Fund

Feb 2 2009 | 1:53am ET

Two former Merrill Lynch CEOs and another one-time top executive said last week that they lost money very indirectedly invested with accused Ponzi schemer Bernard Madoff.

Daniel Tully, who served as CEO for four years in the mid-1990s, and Barry Friedberg, who led the firm’s investment bank until his retirement in 2002, lost some of their ample fortunes in a hedge fund founded by John Steffens, another former Merrill college. Steffens’ Spring Mountain Capital had invested some $40 million in three feeder funds run by J. Ezra Merkin that had almost all of their assets invested with Bernard L. Madoff Investment Securities.

According to Bloomberg News, both Tully and Friedberg described the extent of their losses as “very little.”

Tully’s successor as CEO, David Komansky, also invested with Spring Mountain, according to The Wall Street Journal. Steffens had been widely tipped to take the top job when Tully retired, but the post instead went to Komansky. Steffens, who headed the firm’s brokerage unit. left Merrill Lynch in 2001.

Spring Mountain manages about $2 billion, $800 million of which is in its Madoff-scarred funds of hedge funds—although the Journal notes that one of its funds, Spring Mountain Capital Partners QP I, could have had as much as 7% of its assets invested with the Merkin funds. The firm acknowledged its Madoff exposure in December, shortly after news of the scandal broke.

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