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Boston Globe – A judge extended an order on Tuesday barring hedge fund founder Ezra Merkin from shutting down funds that had invested with accused swindler Bernard Madoff or withdrawing money from them.
New York State Supreme Court Justice Richard Lowe issued the extension in a lawsuit brought on December 23 by New York University, which says it lost $24 million when funds run by Merkin invested money with Madoff without its consent.
Another judge issued the initial order on December 24 to stop Merkin from liquidating Ariel Fund Ltd, named in the lawsuit by the university along with Merkin and his Gabriel Capital Corp.
New York (HedgeCo.Net) – New York University scored a victory yesterday, when they won a court order that sought an extension on a temporary ban that would halt J. Ezra Merkin from making any more transfers with the school’s funds. Merkin had millions of dollars of the University’s funds tied up in investments with Bernard Madoff.
Merkin, the man behind the Gabriel Capital LP fund and the Ariel Fund Ltd., is prohibited from withdrawing, transferring or liquidating assets, after a ruling from Supreme Court Justice Richard Lowe in a Manhattan courtroom yesterday.
According to the original complaint filed by NYU in late December, Merkin “was explicitly told” to stay away from Madoff related investments. Merkin then allegedly invested with Madoff regardless of the orders, losing an estimated $24 million of the University’s funds with the Ponzi-schemer.
"In the face of an extraordinary number of red flags, Merkin, for years, simply turned over a substantial portion of Ariel’s funds to Madoff for management,” NYU alleges.
The University, who had $94 billion total invested with Merkin, fears that it may lose the entirety of its investment.
“Mr. Merkin has always acted in good faith and did not deceive NYU or any other investors,” said Andrew Levander, Merkin’s lawyer.
Gabriel Capital, which manages about $1.5 billion but posted losses of 39 percent in 2008, was planning to liquidate amidst the aftermath of the Madoff debacle, along with Ariel, but must have permission from the courts to do so first.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
New York (HedgeCo.Net) – New York University is the latest victim in Bernard Madoff’s web of lies, claiming it lost $24 million in a fund of fund that invested with the infamous Ponzi schemer.
According to a complaint filed Christmas Eve in a Manhattan court, J. Esra Merkin invested NYU’s money with Madoff through two of his funds, Gabriel Capital LP and Ariel Fund Ltd., without telling investors and without performing proper due diligence.
Gabriel Capital, which manages approximately $1.5 billion, is planning to liquidate in light of the Madoff losses and because the fund posted losses this year of around 39 percent. A Manhattan judge has barred Merken from liquidated Ariel until a hearing set for January 6th. NYU said it had about $94 million invested in the Ariel Fund.
NYU spokesman John Beckham explained that Merkin “was explicitly told this was not a proper investment vehicle,” when he brought up Madoff. According to NYU however, Merkin had already invested the money with him.
Madoff was arrested on December 11th after an alleged confession to his sons in which he admitted that his firm was one “giant Ponzi scheme.” It is estimated that investors will lose a total of $50 billion, making this the largest Wall Street scam in history.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
Javno – Last week, New York University and Carnegie Mellon sent a new class of math whizzes out into a profession that is both blamed for the financial collapse and charged with preventing it happening again.
Many of these so-called quantitative analysts, or "quants," graduating from elite financial engineering courses will end up writing computer programs that handle an ever greater share of market trading.
Because some of their mathematical models failed to take into account factors that later turned out to be crucial, quants have been blamed for compounding risk and exacerbating the crash in financial markets.
But far from going into decline, those with financial engineering degrees are still in demand as hedge funds and banks seek ways to measure previously unforeseen risks and factor them into their models.
The profession’s reputation took a beating in August 2007, when some quant funds — which try to beat the market by crunching vast amounts of data at lightning speed — lost a third of their value in a matter of days.
Many blamed the math commandos for failing to factor in extreme events, in this case unprecedented numbers of home mortgage foreclosures.
NewsDay – Here’s something that might provide a bit of solace amid the plunging values in your retirement accounts: Warren Buffett is losing lots of money, too. So are Kirk Kerkorian, Carl Icahn and Sumner Redstone.
They are still plenty rich, but their losses — some on paper and others actually realized — illustrate how few have been spared in today’s punishing market when even big-name investors, corporate executives and hedge-fund titans are all watching their wealth evaporate.
The portfolio damage for some of these high-flyers has soared to billions of dollars in recent months. And they can’t just blame the market’s downdraft — some did themselves in with badly timed stock purchases or margin calls on shares bought with loans.
"It’s always hard to beat the market no matter who you are," said Robert Hansen, senior associate dean at Dartmouth’s Tuck School of Business. "But when the ocean waters get that rough, it is hard for any boat to avoid getting swamped."
Newsday – A federal judge has ordered a detailed physical and mental health evaluation for hedge-fund swindler Samuel Israel III before deciding whether he’s competent to plead guilty for skipping out on prison.
Judge Kenneth Karas accepted a joint recommendation from defense lawyer Barry Bohrer and prosecutor Sarah Krissoff to send Israel, 49, to a medical prison in Butner, N.C. He said the exam could take 90 days.
Israel, who appeared in court with a bandaged hand, is "on board" with the recommendation, Bohrer said.
He said Israel needs "a full medical and psychological evaluation." The judge said he hoped it would "get to the bottom of whatever it is that is ailing him."
Newsday – A federal probe of the $1.8-billion collapse of Bear Stearns hedge funds has spread to include the activities of a number of banks and other lenders, according to court records and legal sources.
Investigators are also reviewing various private financial memorandums prepared by Bear Stearns officials for possible fraud against wealthy investors, said the sources.
One of the banks that may have been defrauded in the case was Barclays Bank PLC, the British institution that last year filed a federal lawsuit against Bear Stearns & Co. Inc. over losses from the hedge fund, said one attorney familiar with the case.
Federal prosecutors in Brooklyn are overseeing the Bear Stearns case while other Wall Street probes are being carried out by federal officials in Manhattan, said attorney Andrew Entwistle, who is representing investors suing the parent Bear Stearns Companies Inc. and affiliates.
Newsday – A state appeals court has allowed New Jersey to move ahead with a plan to invest some state pension money into hedge funds.
The court ruled Friday, rejecting a challenge by the Communications Workers of America and the New Jersey Education Association, two of the largest and most powerful unions of public employees in the state.
The unions said hedge funds and other "alternative investments" were two risky and were ripe for political abuses.
New Jersey’s Treasury Department wants to put about $9 billion of the state’s $78 billion retirement accounts into the investments.
West Palm Beach (HedgeCo.net) - Harbinger Capital Management, an activist hedge fund, has accumulated a 4.9% stake in Cablevision Systems Corp, according to The Wall Street Journal.
In a regulatory filing, Harbinger said that it had bought 11.45 million of Cablevision’s Class A shares. Harbinger, now Cablevision’s fifth biggest shareholder, was not present at meetings with the company’s top executives and large investors this week, the Journal said, citing a person familiar with the meetings.
The move may have prompted CEO James Dolan to explore options. Cablevision shareholders rejected a $36.26-a-share buyout from the founding Dolan family last October. That bid was the family’s fourth attempt to take the company private.
The Dolan family owns 75% of the voting rights for Cablevision. It remains unclear what Harbinger intends to do with its holding. Harbinger isn’t currently planning a proxy fight with the company, said a person close to the company.
Cablevision last month acquired 97% of Newsday Media Group ("Newsday") through the formation of a new partnership with Tribune Company. For Cablevision, the completion of this transaction adds a complementary print and online media group with local content in the New York area.
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