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