Legal News

The Clawback Conundrum: A Friday Morning Madoff Roundup

By Dan Slater

on the Bernie Madoff front. Here’s a Friday morning round-up:

• Tax havens and clawbacks: The WSJ reports that investigators believe Madoff had at least one and possibly multiple accounts located in offshore tax havens or locales with robust privacy laws. Madoff’s lawyer, Ike Sorkin, declined to comment.

  Meanwhile, investors who received redemptions from Madoff are still trying to determine whether they’ll be expected to return those funds. Particularly vulnerable are investors who received a payout within 90 days of the firm’s collapse, notes the WSJ. But Irving Picard, the trustee, could try to wrest from investors any fictitious profits they got as far back as six years before its liquidation, the limit for New York cases. Investors who became suspicious of Madoff’s investment-advisory business might have a tougher time defending themselves against clawbacks than those who had no idea, according to Greg Blue, a partner at Morgenstern & Blue LLC.

• Madoff, Merkin, Millstein . . . and the duty of loyalty? Bloomberg reported that Weil Gotshal partner Ira M. Millstein, a corporate-governance specialist for four decades, wrote a 2000 letter stating that Yeshiva University “followed procedures adequate to prevent either the appearance or the reality of a conflict of interest.” The opinion cleared the way for financier J. Ezra Merkin — a Yeshiva trustee who served on the investment committee — to continue to accept Yeshiva as an investor as long as Merkin’s role was disclosed. Millstein is a senior associate dean for corporate governance at Yale business school, as well as a visiting professor.

  Yeshiva invested in Merkin’s Ascot Partners, which channeled money to Madoff, who also served as a Yeshiva trustee at the time of Millstein’s letter.

  “Mr. Merkin fully complied with Yeshiva’s disclosure and other policies concerning its investment in the Ascot Fund,” Andrew Levander, Merkin’s lawyer at Dechert, told Bloomberg. in an e-mail today. Millstein, Madoff and a spokesman for Yeshiva all declined to comment to Bloomberg.

Full post as published by Law Blog - WSJ.com on January 02, 2009 (boomark / email).