According to Crain's, Yeshiva University now claims it did not lose Merkin's fictitious $95.5 million profits. It just lost $14.5 million that it gave him to invest.
Hooray. Isn't that great talmudically reasoned news? Next we will hear about how this episode is really a net gain for the school.
Yes, stay tuned to the ongoing soap opera, As the Yeshiva Spins.
But seriously folks, this announcement seriously mitigates the school's claims of damages. Why would the lawyers allow the PR department to undercut their claims before they have even made them? Yikes.
Yeshiva revises Madoff losses to just $14.5M
By Aaron Elstein
Yeshiva University sharply lowered its estimated loss from investing with Bernard Madoff, saying it now appears to have had just $14.5 million tied up with the disgraced financier instead of $110 million.
The university attributed the vast difference to “fictitious” numbers provided to it by Ezra Merkin, the former chairman of Yeshiva’s investment committee who served as middleman between the school and Mr. Madoff.
The university said in a prepared statement that it had $14.5 million invested with Mr. Madoff at the time of his arrest. The administration had thought that figure had grown to $110 million, thanks to Mr. Madoff’s investing acumen. However, “it now appears that any ‘profits’ above the $14.5 million were fictitious,” said Yeshiva’s vice president for business affairs and chief financial offer, J. Michael Gower.
While the university faces a much less severe loss than previously estimated, it still doesn't possess the $110 million administrators were counting on. The university will likely have to restate its $1.2 billion endowment, a person familiar with the matter said.
Two weeks ago, Moody’s Investors Service warned that it might cut Yeshiva’s credit rating. The ratings agency also raised concerns about governance at Yeshiva, where Mr. Madoff served as treasurer of the board of trustees and chairman of its business school until his alleged $50 billion Ponzi scheme came to light earlier this month.
Moody’s analyst Kimberly Tuby couldn’t be reached for comment on whether the new loss estimate would change her firm’s assessment of Yeshiva’s financial health.
The fact that Yeshiva’s losses appear to be much less severe than initially feared raises the possibility that other customers of Mr. Madoff are in the same situation. Conversely, investors who thought they had big investment gains may find those profits never really existed.
In the meantime, Mr. Merkin faces a date in court next week with another unhappy client, New York University, which says it lost $24 million investing in Mr. Madoff’s funds via Mr. Merkin and is seeking a temporary restraining order. A hearing is scheduled Tuesday afternoon in New York State Supreme Court.