Merkin To Turn Over Madoff Funds To Receivers

May 20 2009 | 1:04pm ET

J. Ezra Merkin has agreed to turn his three Bernard Madoff feeder funds over to receivers, six months after Madoff’s arrest on fraud charges.

Merkin, the former GMAC Financial chairman who has been hit with hundreds of millions in lawsuits by investors, regulators and the court-appoint trustee in the Madoff case, reached the agreement to give up control with New York Attorney General Andrew Cuomo. Cuomo sued Merkin earlier this month, alleging he “recklessly” steered billion in investor money to Madoff. Madoff pleaded guilty in March to running a $65 billion Ponzi scheme.

At a court hearing yesterday, David Markowitz, who heads Cuomo’s Investor Protection Bureau, told Judge Richard Lowe that a deal had been reached. He said that, in the wake of Madoff trustee Irving Picard’s $557.8 million lawsuit against Merkin, it was important to “have independent trustees and fiduciaries overlooking what’s left of their assets.”

Under the deal, Bart Schwartz of Guidepost Partners will be named receiver for Merkin’s Ariel Fund and Gabriel Capital Corp. Cuomo has recommended that David Pitofsky of law firm Goodwin Procter be named receiver for Ascot Partners.

Markowitz said it would take a week to put together a formal settlement for approval. He said victims would have a chance to have their say on it, as well as New York University, which has sued Merkin separately. NYU lawyer Beth Kaswan told Lowe that it wants time to review the settlement.

The next hearing in the case is scheduled for May 28.

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