Hedge fund manager J. Ezra Merkin asked a U.S. federal judge to dismiss an investor class-action lawsuit accusing him of recklessly funneling millions of dollars to the now-imprisoned Ponzi schemer Bernard Madoff.
In a filing late Monday in Manhattan federal court, Merkin said the plaintiffs, who invested in his funds, cannot show that he and his Gabriel Capital Corp investment advisory affiliate "knew about, much less participated in, the Madoff fraud."
Rejecting the contention that he should have performed better due diligence, Merkin said he had no motive to commit fraud, and himself lost more than $100 million with Madoff.
"Prior to December 11, 2008, Madoff had been a well-respected money manager and broker dealer," Merkin's lawyers said, referring to the date Madoff was arrested.
Nothing in the complaint "gives rise to any inference, let alone the requisite strong inference, that the defendants acted with a fraudulent intent," the lawyers added.
Madoff once had control over substantially all assets in Merkin's Ascot fund and smaller amounts of his Gabriel and Ariel funds.
In April 2009, New York Attorney General Andrew Cuomo sued Merkin, accusing him of steering $2.4 billion of investor money to Madoff without their knowledge.
The investors in the class-action lawsuit are seeking compensatory and punitive damages, among other remedies. Lead plaintiffs include New York Law School, individual investor Scott Berrie and the Nephrology Associates PC Pension Plan.
Karin Fisch, a lawyer for the law school and Berrie, declined to comment. Gregory Nespole, a lawyer for the pension plan, did not immediately return calls seeking a comment. Neil Steiner, a lawyer for Merkin, declined to comment.
BDO USA LLP and affiliates, which audited the Merkin funds, on Friday also asked for dismissal of the lawsuit.
Investors and regulators have targeted Merkin since Madoff was arrested over his estimated $65 billion Ponzi scheme.
Mort Zuckerman, the real estate investor and publisher of the Daily News in New York, also sued Merkin for about $40 million of Madoff-related losses.
Madoff, 72, pleaded guilty to running the Ponzi scheme in March 2009. He is serving a 150-year sentence in a North Carolina federal prison.
The case is In re: J. Ezra Merkin and BDO Seidman Securities Litigation, U.S. District Court, Southern District of New York, No. 08-10922. (Reporting by Jonathan Stempel; editing by John Wallace and Maureen Bavdek)


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