The New York Times just published the definitive Bernie Madoff piece so far, Madoff Scheme Kept Rippling Outward, Across Borders. Reading about Madoff, I can’t help but think about this conversation attributed to J. P. Morgan:
Untermyer: “Is not commercial credit based primarily upon money or property?”
Morgan: “No sir. The first thing is character.”
Untermyer: “Before money or property?”
Morgan: “Before money or property or anything else. Money cannot buy it…because a man I do not trust could not get money from me on all the bonds in Christendom.”
That sir, was the problem of course. And this sort of behavior:
It was one of an unknown number of deals that prominent financial figures set up in recent years and marketed to investors, who thought they were tapping into the acumen of some Wall Street titan, like Mr. Merkin.
As it turned out, their money wound up in the same place — in Bernie Madoff’s hands.
These conduits began to steer billions of dollars into the Madoff operation. They operated below the financial radar until Mr. Madoff’s scheme collapsed, when investors suddenly got letters from the sponsoring titan disclosing that all or most of their money was probably gone.
Ascot itself attracted $1.8 billion in investments, almost all of which was entrusted to Mr. Madoff. New York Law School put $3 million into Ascot two years ago, and has now initiated a lawsuit in federal court that accuses Mr. Merkin of abdicating his duties to the partnership.
Mortimer Zuckerman, the billionaire owner of The Daily News, rebuked Ascot in a televised interview, saying he had been misled about what Mr. Merkin had done with some $30 million from Mr. Zuckerman’s charitable foundation.
Behind a wall of lawyers, Mr. Merkin did not take calls this week. In the “Dear Limited Partner” letter he sent on Dec. 11, he noted that he, too, was one of Mr. Madoff’s victims and suffered big losses alongside his investors. He has taken steps to wind down his Ascot, Gabriel and Ariel funds.
Still, some of his clients are stunned, and angry, to learn what Mr. Merkin did with their millions, while collecting an annual management fee of 1.5 percent of the assets for his services.
Greedy retards.
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