J. Ezra Merkin has resigned his post as board chairman of GMAC after losing some $2.4 billion in Bernard Madoff’s Ponzi scheme.
Merkin, who has not been implicated in the scheme, invested $1.8 billion others had invested in his own Ascot Partners hedge fund with Madoff, losing it all, as well as other money.
From the WSJ:
In a news release issued Friday, GMAC said the new board will be announced by March 24. The only resignation it announced was Mr. Merkin’s. His investments with Mr. Madoff had become a distraction for the company, according to people familiar with the situation.
"I am pleased that GMAC has successfully completed its conversion to a bank holding company and look forward to GMAC’s accomplishing its goals," Mr. Merkin said in the release, which also expressed the GMAC board’s appreciation for Mr. Merkin’s service.
The Journal followed up Merkin’s resignation with a story on Saturday: Where Ezra Merkin Lost His Way.
The gist of the story is that Merkin was badly fooled by Madoff and perhaps lazy, making money off commissions by doing very little.
But there is this interesting tidbit about Merkin’s philanthropy — he charged fees for his own services even to the organizations with which he was involved:
Mr. Merkin also charged full freight as a philanthropist.
The UJA/Federation of New York had put $10.5 million of its endowment in Mr. Merkin’s Ariel fund before he joined the UJA investment committee in 1999. After the committee waived a conflict-of-interest rule, the money stayed in Ariel (earning fees for Mr. Merkin) until 2005, when UJA revisited the rule and sold the fund.
As chairman of the investment committee at Yeshiva University, Mr. Merkin put about $15 million of the school’s endowment into Ascot. He thus captured a 1.5% annual fee for himself, even though Yeshiva could have given its money directly to Bernie Madoff — who was later treasurer of the university’s board — for nothing. Although Mr. Merkin was also a donor to Yeshiva, the arrangement strikes many as highly unusual.
"What was in his mind to charge that fee?" asks a financier familiar with the Yeshiva investment. "How in the world could he justify that?"