Ezra Merkin steps down from Madoff-tainted funds

J. Ezra Merkin, a once-renowned money manager who turned out to be one of fraudster Bernie Madoff’s most important sources of cash, agreed to step down from running his investment funds under an agreement with the New York State Attorney General’s Office.

The move appears to mark the official end of Mr. Merkin’s career on Wall Street, where as recently as late last year he managed more than $7 billion for some of the city’s wealthiest families, universities and nonprofits. He also was chairman of auto lender GMAC and served on the boards of such institutions as Yeshiva University and Carnegie Hall.

But it all came apart almost overnight last December, when Mr. Madoff confessed to his long-running Ponzi scheme, into which Mr. Merkin funneled about $2.4 billion of his clients’ money.

Last month, Attorney General Andrew Cuomo filed fraud charges in a lawsuit that described Mr. Merkin as a “glorified mailbox” for Mr. Madoff. Under the agreement reached Tuesday, Mr. Merkin will no longer run his three investment funds—Gabriel, Ascot and Ariel. (Ariel is no relation to a similarly named mutual fund firm based in Chicago.)

Receivers have been appointed to run the three funds in his place. Mr. Merkin’s attorney, Andrew Levander, said his client “is working closely” with Mr. Cuomo’s office and is “available to consult” as the funds are wound down.

Mr. Merkin collected $470 million in fees over 15 years for what amounted to funneling client money to Mr. Madoff, according to Mr. Cuomo’s office.

In addition to the fraud charges from Mr. Cuomo’s office, Mr. Merkin has been sued by the trustee recovering assets on behalf of Mr. Madoff’s former clients. Several former clients have also sued, including New York University and New York Daily News owner Mort Zuckerman. His attorneys have repeatedly said Mr. Merkin was a victim of Mr. Madoff’s deceit.

While Mr. Merkin faces an intense legal onslaught, he also must cope with a thorny situation at the Fifth Avenue Synagogue, where he serves as president and where his father was a co-founder. According to The Jewish Week, Mr. Merkin is slated to become chairman on Wednesday.

Although the title is largely ceremonial in most congregations, the promotion has infuriated at least some members, with one calling it “the height of chutzpah” for Mr. Merkin to stick around.

Nobel Prize-winner Elie Wiesel is expected to be named an honorary chairman of the synagogue. Mr. Wiesel was virtually wiped out in the Madoff scam—and so was his famous foundation.