2/14/09

Times: NYU Lawsuit says felon Victor Teicher advised Ezra Merkin - Criminal Charges Loom

The depositions and filings in the NYU lawsuit against J. Ezra Merkin may serve as the perfect road map for Andrew Cuomo's drive to indict Merkin in a criminal enterprise.

According to the legal papers, "NYU's Memo Opposing Merkin Motion to Dismiss," posted by the DealBook blog of the Times, NYU alleges (1) that Mr. Merkin was advised in his investment business by a convicted felon Victor Teicher who (2) expressed doubt to Merkin regarding the legitimacy of  Madoff's operations.

The legal papers make some interesting reading.

To cut to the chase, the NYU argument demolishes Merkin by accusing him of the offense of "deliberate ignorance" which, based on the Jeffrey Skilling case, is a crime that rises above the strict criminal standard of reasonable doubt.

The principle asserts that a scoundrel who says, "Don't tell me, I don't want to know" is criminally guilty of "willful blindness."

That's the main landmark on the NYU road map laid out for their civil suit.

It could serve as a big part of the reasoning for Andrew Cuomo's looming criminal indictment of Ezra Merkin. Cuomo can add to that the factual deposition of Victor Teicher that damns Merkin on at least the two counts we noted above.

The bottom line - as we see it - these NYU filings and the Times' article put the pressure on Attorney General Cuomo to bring charges against Merkin real soon.
Imprisoned Felon Was Adviser to Madoff Investor
By LESLIE WAYNE and ZACHERY KOUWE

One of the top advisers to the money manager J. Ezra Merkin, who invested $2 billion of his clients’ money with Bernard L. Madoff, is a convicted felon who worked for Mr. Merkin while still in federal prison, according to recently filed court documents.

The adviser, Victor Teicher, who had been convicted of federal securities fraud and was barred from the securities industry, advised Mr. Merkin on the management of his Ariel Fund Ltd. through phone calls made to Mr. Merkin’s Park Avenue office from a New Jersey prison.

Information about Mr. Teicher’s relationship with Mr. Merkin was contained in court papers filed by New York University, one of several institutions now suing Mr. Merkin. The university lost $24 million from its investment in the Ariel Fund, which turned over $300 million of its assets to Mr. Madoff, without disclosing the arrangement to Ariel investors. Ariel Fund Ltd. is not related to Ariel Investments of Chicago.

There was, however, one piece of Mr. Teicher’s investment advice that Mr. Merkin did not follow: Mr. Teicher warned Mr. Merkin that Mr. Madoff’s trading results were impossible to achieve.

Mr. Madoff is accused of running a $50 billion Ponzi scheme.

In a memorandum filed in New York Supreme Court this week, the university said that none of the Ariel fund prospectuses disclosed that “Victor Teicher, a convicted felon, and his staff were the persons actively managing the majority of the Ariel assets, and that hundreds of millions of dollars of Ariel’s funds had also been delivered for management to Madoff — even though Teicher had warned Merkin than Madoff’s returns were not possible.”

Mr. Teicher began advising Mr. Merkin’s Ariel fund in 1993 after Mr. Teicher had been convicted of several counts of securities fraud, including using insider information in trading puts and calls. Mr. Teicher, according to the filing, advised Mr. Merkin until 2001, during which time New York University increased its Ariel investment.

Since his 1990 conviction, Mr. Teicher has made two recent attempts to return to the securities industry, both denied by the Securities and Exchange Commission. After his conviction, Mr. Teicher was barred by the S.E.C. from association with any broker dealer, investment adviser, investment company or municipal securities dealer.

Mr. Teicher’s work as an investment adviser for Mr. Merkin’s Ariel Fund apparently was not disclosed to the S.E.C. when he attempted to re-enter the business. In 2007, Mr. Teicher proposed setting up a firm called Ithaca Partners, which had been limited to managing the assets of his immediate family.

In his request to the S.E.C., Mr. Teicher said that he had “scrupulously complied with the securities laws and has been an upstanding citizen in all respects.”

That motion was denied in November 2007. Last October, Mr. Teicher again appealed to the S.E.C. to be allowed to work as a portfolio manager for a New York firm, Cedarview Capital Management. That motion was also denied on the ground that it would be difficult to supervise him.

In the court documents, there was no information about any financial arrangement between Mr. Merkin and Mr. Teicher.

Mr. Teicher’s lawyer in recent petitions to the S.E.C. is Andrew J. Levander, who is also representing Mr. Merkin.
NYU's Memo Opposing Merkin Motion to Dismiss

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