J. Ezra Merkin, and What Passes for Gallantry
By Anthony Weiss
As we progress ever further into the hall of mirrors that is the Madoff case, the sights become ever more confusing, the stories more sordid and more fascinating. Nobody, apparently, is what he seems.
First there was Bernie, the genial, friendly and thoroughly decent Jewish uncle-type who turned out to be a thief so cold-blooded he would bankrupt his own sister. Then there was J. Ezra Merkin, the Orthodox scion renowned for his brilliance, financial savvy, and intimidating air of superiority, whose investing genius turned out to consist of using his connections and erudition to raise massive sums of money, which he then turned over to managers whose financial methods and moral bankruptcy he was apparently unable to grasp.
And now we are finding that more and more of the sheep may, in fact, have been wolves. The Wall Street Journal recently reported that federal investigators are now looking into the possibility that several of Madoff’s biggest victims may, in fact, have been in on the fraud. Yes, they include some big Jewish donors – Jeffry Picower, Stanley Chais, Carl Shapiro, and Noel Levine, as well as a few others. (We already reported that deceased Madoff pal Norman Levy may have been in on things, as well.) Chais was one of the conduits for Hollywood money that ended up as Madoff smoke, including that of Eric Roth, scribe of “Forrest Gump” and “Benjamin Button,” and a board member for the American Jewish Joint Distribution Committee. Shapiro, along with son-in-law Robert Jaffe (who is also being investigated) was one of the main routes to Madoff at the now-infamous Palm Beach Country Club. Levine was a major donor of photographs to the Israel Museum.
Meanwhile, Merkin, in what passes for gallantry amid this mess, announced that he would not accept the post of chairman at the Fifth Avenue Synagogue, where he has just finished up his term as president. He made the announcement at the meeting where he was scheduled to be installed, to reportedly warm applause. One might ask why he didn’t quietly step aside earlier in the process and thus save his shul from public embarrassment, but perhaps that’s nitpicking. Meanwhile, he has plenty else on his mind: New York Attorney General Andrew Cuomo is in the process of liquidating what is left of Merkin’s hedge funds.
People will be drawing moral lessons from this whole Madoff affair ad infinitum, and ad nauseum, for years. For now, we’ll stick with the most relevant: Money is just money. Having a lot of it doesn’t mean you’re a genius or a villain. Giving a lot of it away to charity doesn’t mean you’re a saint or a leader of the Jewish people — or even necessarily a mensch. It just means you’re rich.
April 6, 2009, 8:22pm
Merkin's Legal Woes
By Anthony Weiss
There are signs that with Bernard Madoff convicted and jailed for orchestrating an estimated $65 billion Ponzi scheme, the attention is now shifting to the so-called “feeder funds” that supplied Madoff with much of the cash to keep his schemes going. On April 1, the Massachusetts secretary of state sued the Fairfield Greenwich Group. And now, Modern Orthodox scion J. Ezra Merkin is in the crosshairs.
New York Attorney General Andrew Cuomo is suing Merkin for funneling funds to Bernard Madoff’s Ponzi scheme allegedly without proper due diligence or the knowledge of his investors. Merkin is also being sued by real estate magnate and publisher Mort Zuckerman, who claims to have lost $40 million with Madoff via Merkin. (Full disclosure: The Forward Association, which owns this newspaper, lost approximately $355,000 through an indirect investment in one of Merkin’s funds.)
The suits will turn the spotlight back onto Merkin, a son German immigrant Hermann Merkin — Hermann founded and funded a number of major New York institutions, including Merkin Hall near Lincoln Center and the Fifth Avenue Synagogue — and brother of Daphne Merkin, a prominent writer. J. Ezra Merkin was on the board of a number of major Modern Orthodox institutions that lost money in the Madoff debacle, including Yeshiva University and the Ramaz day school.
The ongoing legal battles — and the colossal legal fees sure to follow — don’t bode well for Merkin’s world-class collection of paintings by modernist master Mark Rothko.
February 23, 2009, 2:10pm
When Merkin Met Madoff
By Gabrielle Birkner and Anthony Weiss
New York Magazine’s Steve Fishman writes what is, perhaps, the best character study to date of both Bernard Madoff and the disgraced investor and Madoff enabler J. Ezra Merkin. The article, at times sympathetic, delves deep into the psyches of both men — pulling up new information about Madoff ‘s class resentment, and about what led Merkin to cast his lot with the alleged Ponzi schemer.
The answer to the latter question has a surprising lot to do with Merkin’s apparently tortured relationship with his own father, the late investor and philanthropist Hermann Merkin. Fishman writes:
Some viewed Bernie and Ezra as two sides of the same coin. One was down to earth, the other positively ethereal; one was hiding in plain sight, the other ostentatiously public. They needed each other. “Ezra was captivated by Madoff,” says one person who knows him, especially, perhaps, compared to his father. “Bernie Madoff must have seemed like a kind, haimish sort of guy compared to my father,” says [Ezra’s sister, the writer Daphne Merkin]. [Ezra] Merkin didn’t exactly think of Bernie as a peer. To him, Bernie was an auto mechanic, a blue-collar technician focused on what was under the hood. “I’m only interested in where the market is heading in the next fifteen minutes,” Bernie sometimes said. A man like that could bear down on the details so the Ezra Merkins of the world could concentrate on finer things. For Ezra, Madoff’s returns weren’t eye-popping … though his average of more than 12 percent a year was more than respectable. But the real selling point was Bernie’s consistency—barely a down month in more than a decade.
One of the many interesting revelations to come out of the article is that although Merkin was widely regarded as brilliant, he actually wasn’t much of a money manager; rather, he was a master salesman who wowed customers with his erudition rather than his financial acumen. In fact, Merkin’s whole hedge-fund business was built on funneling his investors’ money to successful fund managers, rather than investing himself.
That was certainly the case when it came to Yeshiva University’s endowment, which Merkin, as the chairman of the school’s investment committee, helped guide. He channeled large portions of the university’s funds to Madoff, via his own Ascot Partners hedge fund. Merkin would ultimately collect a total of $10 million in money management fees from YU. According to Fishman’s article:
Some now wonder about the propriety of the chairman of the investment committee’s taking fees for simply passing along money to Bernie — especially since Bernie was elected to Yeshiva’s board of trustees in 1996, when Hermann served as vice-chairman. Why not just give the money directly to Bernie and save Yeshiva the fee? To some, it seemed like Ezra was skimming profits, and from an institution he loved.
January 3, 2009, 6:42pm
L'Affaire Madoff and the 'Enabling Wives'
By Gabrielle Birkner
In the wake of L’Affaire Madoff, writer Daphne Merkin, the sister of investor J. Ezra Merkin — his Ascot Partners fund had invested most all of its $1.8 billion with Madoff — bemoans in The Daily Beast the general invisibility of women in the world of finance. Without naming names, she writes of the limited role of the “enabling wives who serve as silent business partners or facilitating daughters … serving as an advancing flotilla of social connections.” Discussing her own meager fiscal education, she writes:
“As a daughter, I was raised to know nothing about money. Whenever I tried to ask my father a question on the subject he would respond, “Nu, Daphne? Since when the interest in business?” and shoo me away. … My closest exposure to the world of men and money was at the Jewish charity dinners I would sometimes attend as my father’s escort when my mother didn’t feel like going. At these functions, the men who mattered would often sit on a raised dais while the women sat at round tables below, wearing competitive jewelry and trading off-the-Beltway news. …”
Madoff’s alleged Ponzi scheme also has Merkin reflecting on the world of Jewish immigrants detailed in Michael Gold’s book “Jews Without Money.”
“[The book] conjured up the ragamuffinish dark-eyed children scampering around the crowded streets of the Lower East Side, the women bent over sewing machines in sweat shops, the men peddling goods or fixing watches. … We are long past such concrete equations, long past the notion that goods and services can hold their own against the making of money off money, endless piles of paper, derivatives, credit default swaps, puts, off-shore accounts and funds of funds. Then again, the entrepreneurial imagination, which grew ever more epic and risk-taking across two decades of deregulation, has always been the primary capitalist trope. Still, does anyone — men, women, gurus, tycoons, Paulson, Perelman — really understand what goes into making billions of dollars, much less losing it all in one fell swoop?”
In addition, The Daily Beast features a delicious passage from Merkin’s novel 1986 novel “Enchantment.” The excerpted scene takes place at a Jewish charity gala that resembles those Merkin attended as a child.
Advertisements
Advertisements