The Bernie Madoff scandal is starting to resemble the gang that couldn’t shoot straight. One of his chief recruiters and enablers was Ezra Merkin, scion of a leading Manhattan Orthodox family (his father founded Fifth Avenue Synagogue). Merkin was a board member of Yeshiva University, which unwisely and unethically invested $110 million (8% of its endowment) with Merkin and lost its shirt. Merkin not only took a management fee from an organization on whose board he served as a volunteer and to whom he owed a special fiduciary responsibility; he turned around and gave the money to Madoff to invest without informing YU that he was doing so.
Things turn even stranger as the N.Y. Times revealed yesterday that Merkin allowed a convicted felon to mange one of his funds WHILE HE WAS IN FEDERAL PRISON. Not to mention that the felon was barred from involvement with the securities industry as part of his sentence:
But what is truly and hilariously stunning about all this is that Merkin asked the felon, Victor Teicher, whether he should invest with Madoff. After reviewing the performance of Madoff’s funds, Teicher, the convicted fraudster, told Merkin no one could earn the returns that Madoff was claiming. In other words, a con artist advised a fellow con artist not to invest with yet a third con artist. After all, it takes a con to know a con, right? But Merkin ignored Teicher’s advice, which was probably he only piece of advice from the felon that he SHOULD HAVE heeded. This reveals more about Teicher’s criminal background.
I don’t get it. These guys aren’t stupid. Merkin’s taking calls from Teicher while he’s serving time in the federal pen. He knows Teicher is barred from doing business in the securities industry. So why would he endanger his reputation, his business, his career, his livelihood in such a way? Did he believe the rules didn’t apply to him? That he wouldn’t get caught? Did he somehow rationalize that he wasn’t doing anything wrong?
Teicher too is hard to follow. He files twice with the SEC to re-engage with the securities industry and is twice rejected. In his applications, he swears on a stack of Bibles that he’s upheld his sentencing provisions religiously. All the while he’s violating them behind the SEC’s back. Does he think he won’t get caught even though he’s been caught once before? Or does someone like this who finds all sorts of rationalizations for breaking the rules, never accept that the rules apply to him as well?
I realize it’s a cliche to talk about flaming ego in this type of case, but these guys seem to think that they’re god and the rest of us are rubes. They believe that they’re doing their clients a favor in allowing them into their charmed world and sharing their expertise with them.
Teicher is apparently a serious collector of African tribal art. Given his rather slipshod attention to ethical details and the glut of plundered art gaining media attention these days, one wonders whether Teicher’s collection was acquired professionally and transparently.
In this interview in a magazine called Tribal Art, the interviewer asks whether he displays his art work in his office. The answer is illuminating in light of the current plight facing Teicher and his cronies Merkin and Madoff:
No. My office is the place I go to make money. The nature of my business is that I can lose some money over an extended period of time. Sometimes the losses are a function of the business and sometimes they are a function of making mistakes. When I’m losing money, looking at an expensive art object which undoubtedly is worth less than what I paid for it seems like another mistake; I don’t need that.
My hunch is that Teicher is going to want to sell off his collection to pay his legal bills and in order not to be reminded of the fortune he lost with his good buddies. Why the feds haven’t announced any investigation of Teicher’s violation of his sentencing terms is beyond me.
The whole Madoff mess has enveloped the Jewish world in grief. That one of our own could have fleeced so many fellow Jews and Jewish charities as well. For those of us who lacked the connections and capital to gain access to the world of the Teichers, Merkins and Madoffs, we are all scratching our heads and not quite enjoying the schadenfreude, or downfall of others, as we otherwise might since so many innocents have suffered as well.
i’m not scratching my head. i’m mad as hell at the ganovim who have been stealing our money. i want to throw every last one of them in jail and then throw away the keys. looks to me like you want to say that…..
Here is an extract from a similar article on the Wall Street Journal website:
http://online.wsj.com/article/BT-CO-20090215-702850.html?mod=
“Charles A. Stillman, a lawyer for Teicher, said Sunday that Teicher wasn’t actively managing the fund’s assets, but acting more in an advisory role. After he was convicted, the U.S. Securities and Exchange Commission sought to bar Teicher from associating with any registered or unregistered investment advisers.
Teicher was permitted to continue advising unregistered investment advisers, such as Merkin, until a final, unappealable court ruling on the SEC’s bar request under an agreement with the SEC, Stillman said.
When the U.S. Supreme Court ruled in favor of the SEC in 2000, Teicher immediately stopped advising Merkin, Stillman said.”
In response to the New York Times article of February 14, 2009, my attorneys have sent the following to the New York Times:
“We are counsel to Victor Teicher, who is referenced in a misleading and false way in a February 14, 2009 article about Ezra Merkin’s lawsuit with NYU. We write to demand an immediate retraction of statements in that article which suggest directly or indirectly that Mr. Teicher acted in violation of a bar by the Securities and Exchange Commission when he provided services to certain of Mr. Merkin’s funds in certain periods in the 1990’s into the beginning of 2000.
Those statements are false because Mr. Teicher was permitted, pursuant to an express agreement with the SEC, to be associated with unregistered investment advisors such as Mr. Merkin, until a final, unappealable order was issued by the Courts that the SEC had jurisdiction over unregistered investment advisors. After that final ruling was issued in the beginning of 2000, Mr. Teicher observed his agreement with the SEC to the letter and promptly stopped working for Mr. Merkin’s funds. Your statement that he continued to be associated with those funds until 2001 is also false.
Having falsely suggested that Mr. Teicher’s association with Mr. Merkin’s funds was illegal, your article goes on to suggest that Mr. Teicher’s 2007 and 2008 applications to modify his industry bar falsely claimed that he had complied with the securities laws and did not disclose his supposed illegal association with Mr. Merkin’s funds. All of those false statements are libelous per se, and must be immediately and prominently retracted.
We note that had your reporters followed proper journalistic practices and attempted to contact Mr. Teicher or his representative prior to publication of this article, they would have learned the true facts. The failure to seek comment or clarification from Mr. Teicher is inexcusable and Mr. Teicher will pursue all available remedies.”
Victor Teicher
I comment on this blog entry here.
I did not put the text in this blog’s comment section because Richard probably would not agree with my analysis, and I see no reason for him to be attacked simply because I wrote something in response to one of his articles.