Merkin 'performed due diligence' on Madoff investments

20 April 2009

The hedge fund chief facing fraud charges for funneling $2.4 billion to Bernard Madoff without his investors' prior knowledge has told lawyers that he performed due diligence on the broker and cooperated with authorities investigating his Ponzi scheme.

Reuters cites court papers made public yesterday (April 19th), which show that Ezra Merkin - who ran the Gabriel Capital fund manager - claims to have spent a "fair amount of time" discussing Mr Madoff's investment strategies.

The papers relate to a civil case brought by New York University, which invested with Mr Merkin. They were made public following a successful petition filed by the Fox Business Network.

According to the transcripts of Mr Merkin's deposition, he claimed to have performed "lots of due diligence on Mr Madoff's trading strategy - and on the returns and on the levels of volatility".

However, he said he cannot remember a "specific conversation and a specific test sequentially connected".

Mr Merkin was charged with fraud by Mr Cuomo's office on April 6th.

He is not accused of being aware of Mr Madoff's $65 billion Ponzi fraud and his lawyer claims his funds have been victims of the swindle.

Become a bobsguide member to access the following

1. Unrestricted access to bobsguide
2. Send a proposal request
3. Insights delivered daily to your inbox
4. Career development