New York University (NYU), the largest private university in the US by number of students, became the latest known victim of Bernard Madoff’s alleged US$50 billion Ponzi scheme when it sued a fund manager over US$24 million in losses.
J. Ezra Merkin, his Gabriel Capital LP fund and Ariel Fund invested NYU money with Madoff without telling investors or proper due diligence, according to a complaint filed on Wednesday in New York state court in Manhattan.
NYU, which said it had US$94 million invested in Ariel, alleged Merkin made all the investment and executive decisions for the fund.
“When Merkin proposed investing the university’s money with Madoff without telling us he had already done so, he was explicitly told this was not a proper investment vehicle,” NYU spokesman John Beckman said in a statement. “Merkin didn’t exercise reasonable judgment in investing NYU’s money.”
A judge issued a temporary order on Wednesday, barring Merkin from liquidating Ariel Fund.
The order, which expires on Jan. 6, will have no impact on plans announced Dec. 18 to wind down the Ariel fund, Merkin’s attorney Andrew Levander said in a statement. He said the investment manager would not receive fees and attorneys had promised to preserve documents.
“Mr. Merkin remains committed to obtaining for shareholders the best results possible in the wake of the terrible fraud committed by Bernard Madoff,” the statement said.
The claim adds NYU to a growing list of alleged victims of Madoff, including Liliane Bettencourt, the world wealthiest woman and the daughter of L’oreal SA founder Eugene Schueller; Spanish billionaire Alicia Koplowitz; US filmmaker Steven Spielberg; Nobel laureate Elie Wiesel and Yeshiva University.
Madoff, 70, was arrested Dec. 11 at his Manhattan home after allegedly confessing to his sons that his business was a “giant Ponzi scheme” that may have cost investors US$50 billion, according to an FBI complaint.
Madoff has been charged by federal prosecutors with one count of securities fraud and faces as much as 10 years in prison if convicted. He is under house arrest in his Manhattan apartment on US$10 million bail.
Clients of Madoff had about US$36 billion with his firm, according to a Bloomberg tally that may include some double counting.
Meanwhile, the charitable foundation run by Nobel laureate and Holocaust survivor Elie Wiesel acknowledged on Wednesday losing US$15 million to Madoff — nearly all its assets.
“We are deeply saddened and distressed that we, along with many others, have been the victims of what may be one of the largest investment frauds in history,” the Elie Wiesel Foundation for Humanity said on its Web site.