| NEW YORK
NEW YORK Feb 17 Hedge fund founder Ezra Merkin
engaged in "deliberate ignorance" to benefit from investing
client money with Bernard Madoff, a lawyer for a university
suing Merkin and his funds said on Tuesday.
A lawyer for New York University (NYU) made the assertion
in New York State Supreme Court, where a judge last month
temporarily barred Merkin from liquidating his Ariel Fund Ltd,
a defendant in a lawsuit brought by NYU related to the alleged
A lawyer for Merkin told the court that according to the
Ariel Fund prospectus, Merkin had the right to invest client
money with third parties. He has said Merkin and his funds were
victims of the purported Madoff fraud.
Madoff, a once-respected Wall Street trader and investment
manager, was arrested and charged in December after authorities
said he confessed to a $50 billion global fraud. He is the only
person charged in criminal and civil cases.
NYU, the largest private U.S. university and among many
institutions and individual investors seeking to recover losses
in the Madoff scandal, said in its December lawsuit that it
lost $24 million when funds run by Merkin invested money with
Madoff without its consent.
"He engaged in deliberate ignorance in order to line his
pocket; that's what he did wrong," NYU lawyer Beth Kaswan told
Justice Richard Lowe in court on Tuesday.
Besides Ariel, the lawsuit also names Merkin and another
fund, Gabriel Capital Corp, as defendants. In January, Merkin
resigned as chairman of GMAC LLC so the finance company would
be eligible to receive U.S. taxpayer funds.
"The essence of this case is bare displeasure," Merkin's
lawyer Andrew Levander said in court. "I understand that they
are upset, but that doesn't mean they have a cause of action."
The judge did not immediately rule on the funds' motions to
dismiss the lawsuit or whether or not to continue his earlier
order restraining Ariel Fund activities.
"I will render a decision as soon as I can," Lowe said,
without giving a specific date.
Lowe was also told by the NYU lawyer that one of Merkin's
advisers was a convicted felon who had worked for Merkin while
in prison. The adviser, Victor Teicher, also told Merkin that
Madoff's returns "smelled" and "were not possible."
Merkin has also been sued in U.S. District Court in
Manhattan for his management of Ascot Partners LLP, a fund he
founded that lost an estimated $1.8 billion with Madoff.
The case is New York University v. Ariel Fund Ltd
603803/2008 in New York State Supreme Court (Manhattan)