The New York attorney general has added another name to the list of people charged in connection with Bernie Madoff’s Ponzi scheme. Money manager J. Ezra Merkin was charged today. Merkin says he was stunned to learn of Madoff’s scheme, and Merkin’s attorney has called the state’s lawsuit “hasty and ill-conceived.”

Merkin’s role

Merkin is accused of playing the role of a “feeder” in Madoff’s scheme, directing cash advances and funds meant for other causes into Madoff’s accounts. New York’s lawsuit says Merkin funneled more than $2.4 billion to Madoff.

“Merkin duped individual investors, non-profits, and charities into believing he was responsibly managing their investments, when in actuality he was dumping them into history’s largest Ponzi scheme,” New York Attorney General Andrew Cuomo said.

Merkin’s profits

Cuomo says Merkin pulled in $470 million in payments for money management and incentive fees from Madoff. The State of New York isn’t the first entity to file a lawsuit against Merkin for his alleged role in the scheme. New York University and the publisher of the New York Daily News, Mort Zuckerman, have already filed suits against Merkin.

Merkin’s history

Merkin is a well-known philanthropist in New York. He used to be chairman of GMAC Financial Services, the financing arm of General Motors Corp.  Merkin operated two funds, Gabriel Capital and Ariel Fund, that acted as “feeder” funds for Madoff.

Merkin’s knowledge

Merkin and his attorney, Andrew Levander, maintain that Merkin knew nothing about Madoff’s scheme. Levander says he will vigorously defend his client, and that Merkin had performed “extensive due diligence” on Madoff.

Cuomo’s lawsuit says Merkin ignored numerous red flags, and Merkin was aware that investment professionals were suspicious regarding Madoff’s activities.

Madoff’s fate

Bernie Madoff was convicted in March of running a Ponzi scheme that swindled billions from his customers. Madoff, 70, will be sentenced June 16. He will likely spend the rest of his life in jail. He could receive a sentence of up to 150 years.

Merrill Lynch executive seeks bonus for failing his company

Merrill Lynch CEO John Thain is currently seeking a bonus for 2008 in the amount of around $10 million.  This is after Merrill Lynch and Co. barely avoided bankruptcy and company failure by selling their company to Bank of America to avoid slipping away.  Merrill Lynch took a nosedive over the fiscal year in the wake of the collapse of the mortgage market, losing billions in the process.  The Merrill Lynch executive staff determined that the best course of action was to sell the company’s shares to Bank of America to avoid closing their doors.  According to a recent article in the Wall Street Journal¸ Thain’s reasoning and justification for the bonus is that his actions, or selling the company, was the best option that they had on the table to avoid even more unpleasant alternatives since they weren’t getting government payday loans, and therefore because the company did not go bankrupt, he therefore deserves a healthy bonus to his already ample income as CEO for his prevention of the company going into insolvency, even though it is doubtful that at this point he needs extra money.
New York Attorney General Andrew Cuomo has termed his request as “nothing less than shocking.”  The board of directors appears to be in agreement with him, and is resisting the request for the bonus.  A bonus for an executive should be when the company turns a large profit, creates more jobs and revenue, instead of just merely not going bankrupt.  It seems that his pay should be docked, and not augmented.  Perhaps the employees of Merrill Lynch should get a bonus for putting up with such arrogant behavior from their management team.  The amount of executive compensation in Wall Street and other large companies has become an item of much media scrutiny of late, as many executives continue to receive large bonuses every year in addition to ample salaries regardless of how well their companies do or not.  It seems odd that people be rewarded for failure rather than for success, since the rest of us, including lower level Merrill Lynch employees, would be punished or stripped of our employment for failing to produce

The only way a person can be rewarded for failure

It seems as though the executive class of Wall Street are the only people who can get rewarded for not doing their jobs.  If we, us normal folks, were to miss a mortgage payment, we would get hit with penalties, interest, and fees.  If we don’t do what we are supposed to do for our employers, we would get disciplined, and if it happened enough times, terminated for noncompliance.  If we fall short in our financial obligations, we take extra measures to make up for a temporary shortage, like getting payday loans to cover if we have a sudden expense.  These Wall Street wizards look for extra cash for shorting their shareholders and employees.