12/31/08

Business Week: Publicly Crucified J. Ezra Merkin Will Leave GMAC and Yeshiva University May Sue Him

Business Week sends clear signals that J. Ezra Merkin is out of his GMAC job. The story cites an industry maven, who used a poorly chosen metaphor to describe his predicament, "You can't be chairman of a finance company when you have been publicly crucified for not doing due diligence." Regardless of the choice of words, we think that characterization seriously understates the predicament that Merkin is in.

BW also suggests based on a "source close to Yeshiva University's board of trustees" that Yeshiva University may sue Merkin, following the lead of NYU.
GMAC Chairman Merkin: On the Way Out
A board shakeup by GMAC's new biggest shareholder, the Treasury Dept., is likely to dislodge Merkin from the top spot, as well as several other board members
By David Welch

GMAC Financial Services (GKM) Chairman J. Ezra Merkin, whose ties to disgraced financier Bernard Madoff have led to several lawsuits, is expected to leave the finance company in a board shakeup that will nearly cut in half the number of directors.

Now that the federal government has stepped in with a $6 billion bailout package, the Treasury Dept. will become GMAC's biggest shareholder. As a result, the government will have a big hand in restructuring the GMAC board.

A Clean Sweep
That means there will be a clean sweep that will likely push out Merkin, along with most of the executives who were appointed to the board by owners General Motors (GM) and Cerberus Capital Management, say sources involved with the changeover. Day-to-day management, however, may stay in place.

GMAC's 12-member board of directors, of which Merkin is chairman, is expected to be clipped to seven directors. Cerberus has four executives on the current board, but will get only one voting director on the new board, says a source with direct knowledge of the new setup. GM will go from having four voting executives on the board to just one, nonvoting executive. It likely will be GM President and Chief Operating Officer Frederick A. "Fritz" Henderson or GM Treasurer Walter Borst, sources say.

Merkin is unlikely to remain under the new board structure. One source says that even before Merkin's links to Madoff's fraud case became public, he had decided that he was not going to stay after the Treasury Dept. took a bigger hand in GMAC.

NYU Sues Merkin
Earlier this week, Merkin was sued by New York University for feeding funds from the college to Madoff's investment firm, which is accused of defrauding investors. NYU also accused Merkin of concealing Madoff's fraudulent practices from the university. One source close to Yeshiva University's board of trustees says the college could sue Merkin as well. As a university trustee and chairman of its investment committee, Merkin steered funds to Madoff. An attorney for Merkin did not return several calls.

Even if the government didn't order up a new board for GMAC, "Merkin would have left anyway," says Maryann N. Keller, an independent auto industry analyst who sits on the board of Dollar/Thrifty Rental Cars (DTG). "You can t be chairman of a finance company when you have been publicly crucified for not doing due diligence." ...more

1 comment:

mnuez said...

Yeshiva University can sue him but i think he deserves a medal.

In many ways our economy is not a zero sum game but in many other ways it is. One such example is the inflation caused by an increase in wealth among a small segment of the population. A few people experience an increase in expendable cash and thus are able to outbid their rivals for limited commodities. Prices are driven up and the masses now have a lower quality of living on account of the fact that they can no longer afford particular items that they used to be able to enjoy.

That was the effect of the housing boom and of the market boom. To a degree then, people who were making millions in the markets were enemies of some 90% of the country's population. Their success when to everyone else's acute detriment. These folk may have been working toward their "enlightened self interests" but, Rand bimkomah munach, a rising tide does not always lift all ships.

The faux wealth of the stock market was a BAD thing and thank God it's gone. Madoff's collapse is good, the fellow who committed suicide was a man who made his living helping the wealthy at the expense of the poor and Merkin is just a useful scapegoat for the greed that his clients channeled through him. I hardly care about his well-deserved woes (despite the fact that our society considered the essence of his occupation a noble one) but I do care about the fact that tarring him removes too much of the tar that ought be stuck to his scheming, thieving masters.

Anyhow Tzvee, sorry to go all Marxist on you here but you've been on the subject for a while and I thought I'd share a thought on it (with the full knowledge that this view is considered well beyond the pale of any rational and/or moral discussion in this country and particularly among the neo-Republican frum, thus providing any non-European readers the cheap thrill of shooting fish in a barrel as one might be tempted to dismiss a teepa min hayam of one side of an argument by assuming that all that I have to say on the subject can be, and has been, fit into a blog comment).

Happy New Years and Sof Chanuka Sameach. By the way. I was in Teaneck recently for the first time, nice place. Good people.

Cheers,

mnuez