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As we reported earlier today, New York Law School has filed an investor lawsuit against J. Ezra Merkin, one of his funds and its auditor over investments made through Bernard L. Madoff Investment Securities LLC, whose founder has been charged in a massive Ponzi scheme.
Filed in US District Court in Manhattan, the suit alleges recklessness, gross negligence and breach of fiduciary duties by Merkin; the fund, Ascot Partners; and its auditor, BDO Seidman LLP.
New York Law School, through its endowment entity, invested $3 million in Ascot in 2006 and the investment is now worthless, according to the lawsuit.
The complaint is seeking class action status for persons and entities who invested in Ascot between 2002 and 2008. It was filed on the law school’s behalf by law firm Abbey Spanier Rod & Abrams LLP.
The complaint alleges Merkin abdicated his responsibilities and duties as Ascot’s general partner and manager in entrusting substantially all of its assets – $1.8 billion – to the Madoff firm, and that Seidman failed to recognize “red flags” at the Madoff firm.
BDO Seidman insists that its audits of Ascot Partners “conformed to all professional standards,” and they intend to “vigorously defend ourselves against these unfounded allegations.” BDO Seidman says it “is not and has never been” the auditor for the Madoff firm.
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“Mr. Merkin and his family are personally among the largest victims of the massive fraud confessed by Bernard Madoff,” said Andrew J. Levander, a lawyer for Merkin. “Like the other victims and the entire financial community, Mr. Merkin is shocked by these events. He intends to defend the lawsuit vigorously while seeking redress for himself and his investors from whoever perpetrated this fraud.”
Since Bernard Madoff’s arrest last week, dozens of investors, charities and companies have emerged as victims, including the foundation of Nobel laureate Elie Wiesel and a charity of Academy Award-winning director Steven Spielberg.
Via CNN Money.
