DATELINE: December 24, 2008, Chicago
On the third day of Hanukkah, New York University gave J. Ezra Merkin a little present: A lawsuit demanding that Merkin and his Gabriel Capital LP and Ariel Fund Ltd. return the $24 million that NYU lost in due to Bernie Madoff’s Ponzi scheme. Yup, we had heard about Yeshiva, Tufts, and New York Law School. Now NYU has acknowledged that its endowment suffered losses. Lindsay Fortado, NYU Lost $24 Million with Madoff; Sues Merkin, Funds, Bloomberg.com (Dec. 24, 2008).
In its complaint, NYU alleged that:
Without making disclosures in the quarterly reports to investors, and in the face of an extraordinary number of ‘red flags,’ Merkin, for years, simply turned over a substantial portion of Ariel’s funds to Madoff.
In a limited review of NYU’s Form 990 filings, we see no evidence that Merkin is associated with NYU as a trustee. It is becoming even harder for us to see how Yeshiva University cannot sue Merkin for breach of fiduciary duties. As a member of Yeshiva’s board of trustees and the head of its investment committee, it would seem that Merkin owed at least the equivalent duties to Yeshiva as he owed to NYU. We would argue that given Merkin's conflicts of interest as a member of Yeshiva's board, Merkin owed a higher duty to Yeshiva. With this and what are likely to be other lawsuits against Merkin, it is going to become more difficult for Yeshiva to ignore such an obvious source for recovering some of its lost endowment dollars.
