CORPORATE CRIME REPORTER
Merkin Probe, Cuomo Hits Non-Profits with Subpoenas
23 Corporate Crime Reporter 4, January 25, 2009
New York Attorney General Andrew Cuomo has launched an investigation of Ezra Merkin and his role in steering tens of millions of dollars from major non-profits into Bernard Madoff’s ponzi scheme.
But the big non-profits – including Yeshiva University, Bard College, New York University, and New York Law School – are freaking out.
Because they are being hit by a flurry of subpoenas from Cuomo’s office seeking financial documents and meeting records.
And these non-profits see themselves as the victims – losing hundreds of millions of dollars to the Madoff scheme.
So, why the subpoenas?
That’s just how Cuomo does business.
He could send letter requests to the universities.
With a follow up phone call.
But Cuomo’s calling card is the subpoena.
Sally Blinken is a partner at Venable in New York.
Blinken spent seven years at the New York Attorney General’s Charities Bureau investigating non-profits.
“The Attorney General’s office often will use what is called a letter request,” Blinken said. “That’s simply a request asking for the non-profits voluntary cooperation – could you provide the following documents? It’s informal. But Cuomo’s office tends to use subpoenas more readily than letter requests. It’s a more official way of retrieving documents. People pay attention to a subpoena.”
“The investigation specifically seems to be targeting Ezra Merkin, who sat on various non-profit boards,” Blinken said. “At Yeshiva University, he sat on the board with Madoff as well.” Yeshiva reportedly lost more than $100 million to the Madoff scheme.”
“Cuomo will look to recoup any losses, and stand with the charities who bought into the Madoff fund, such as NYU. The charities have been subpoenaed, rather than asked voluntarily to cooperate in the investigation. Cuomo may be looking at other possible intermediary targets, like Merkin and to see who these charities used to invest these assets. And he will look at the process in place to make such investments. What is their investment policy? Do they have an investment committee? Who is on that committee? Are conflicts required to be disclosed for investment advisers who are sitting on those committees and investing those assets on behalf the charity? Were those conflicts disclosed? Were those on the investment committee reaping commissions for making those investments?”
“The message Cuomo is sending is – this is a good time to re-evaluate your process and make sure you live up to what we consider to be best practices, a time to re-evaluate your diversification spread, re-evaluate your conflict of interest policy. Is there proper disclosure? Is there a proper vote by disinterested board members?”
a complete transcript of the Interview with Sally Blinken, see 23 Corporate
Crime Reporter 4(13), January 26, 2009, print edition
1209 National Press Bldg.
Washington, D.C. 20045