By Chad Bray Of DOW JONES NEWSWIRES NEW YORK -(Dow Jones)- New York Law School filed an investor lawsuit against J. Ezra Merkin, chairman of lender GMAC Financial Services, one of his funds and its auditor on Tuesday over investments made through Bernard L. Madoff Investment Securities LLC, whose founder has been charged in a massive Ponzi scheme.
The lawsuit, filed in U.S. District Court in Manhattan, alleges recklessness, gross negligence and breach of fiduciary duties by Merkin, who also heads money-management firm Gabriel Partners; the fund, Ascot Partners LP; and its auditor, BDO Seidman LLP.
The complaint alleges Merkin abdicated his responsibilities and duties as Ascot's general partner and manager in entrusting substantially all of its assets - $1.8 billion - to the Madoff firm and that Seidman failed to recognize "red flags" at the Madoff firm.
"As a proximate result of Merkin's bad faith breach of fiduciary duty, plaintiff and other class members have sustained damages, suffered mental and emotional distress and have lost most, if not all, of their respective investments in an amount yet to be determined," the lawsuit said.
The complaint is seeking class-action status for a group of persons and entities who invested in Ascot between Dec. 16, 2002, and Dec. 16, 2008. It was filed on the law school's behalf by law firm Abbey Spanier Rod & Abrams LLP.
One Ascot investor was a charitable trust established by real-estate magnate Mortimer Zuckerman, chairman of real-estate firm Boston Properties Inc. (BXP) and owner of the New York Daily News and U.S. News & World Report, The Wall Street Journal reported in its editions Tuesday.
Bernard Madoff, founder of Bernard L. Madoff Investment Securities LLC, was charged criminally with securities fraud in a massive Ponzi scheme on Thursday. The Securities and Exchange Commission also has brought civil charges in the matter.
A former chairman of the Nasdaq Stock Market and a force in Wall Street trading for nearly 50 years, Madoff, 70, allegedly told senior employees last week that the firm's investment-advisory business was "basically a giant Ponzi scheme," and he estimated the losses from the fraud were at least $50 billion, according to court documents.
In a Ponzi scheme, new investor funds are typically used to pay distributions and redemptions to existing investors.
Since Bernard Madoff's arrest last week, dozens of investors, charities and companies have emerged as victims, including the foundation of Nobel laureate Elie Wiesel and a charity of Academy Award winning director Steven Spielberg.
-By Chad Bray, Dow Jones Newswires; 212-227-2017; chad.bray@dowjones.com
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Publié le 16 Décembre 2008 Copyright © 2008 Dowjones