Mort Zuckerman Needs to Take Some Responsibility for His Madoff Losses

Mort Zuckerman, whose charity lost $30 million in the Madoff fiasco, needs to grow up and learn to be a big boy. In his interview with Maria Bartiromo in Business Week, Zuckerman manages to blame everyone but himself for the loss, and conveys the clear impression that he thinks he doesn’t bear a scintilla of responsibility for blowing all that dough. “I'm not really involved in the financial world or fund management world,” he moans. “The whole thing is astounding to me.”

Oh, Mort, I’m sure it is. New flash: if you’ve been entrusted with $30 million of somebody else’s money, you’re involved in the financial world, whether you know it or not.

Zuckerman apparently gave the $30 million Ezra Merkin, who ran Ascot Partners, who then turned around and gave it all to Bernie Madoff. You know what happened next.

In retrospect, Merkin blew it—and Zuckerman blew it, too. But does it occur to him to take some responsibility for his actions? Nope. Instead, he’s calling his lawyer. “What can you do, sue him?” Bartiromo asks. Zuckerman’s answer: “Of course.”

It’s a little late for that, don’t you think? Zuckerman clearly did nothing in the way of due diligence on the front end, when he should have. And now he’s suffering the consequences. Mort, I hope (but don’t expect) that if you do sue, that a judge throws your case out immediately and requires you to pay court costs.

I haven’t seen the document, but, according to Merkin’s lawyer, “The Offering Memorandum for Ascot expressly named Madoff Securities as a prime broker for the fund in several places and accurately describes Ascot’s trading strategy.”

So Zuckerman knew Madoff was involved. If he had spent any time at all looking into Madoff’s background, he’d have found no shortage of skeptics about the returns Madoff generated. He would have seen the conflict inherent in a broker-dealer-owned fund using its parent as prime broker. And he would have known about the one-room accounting firm. Would it all have been enough for him to put his money elsewhere? Who knows? But Zuckerman’s being disingenuous to argue now that the fraud was a bolt from the blue.

Please, Mr. Zuckerman, you have no one to blame but yourself. You didn’t have to do a lot of due diligence to see the warning signs. And if you don’t think due diligence is your responsibility, you’ll get what you deserve.

But the corporate titan wants us to believe he’s a babe in the woods. “To my astonishment, the fund manager put the entire amount into Mr. Madoff’s hands. I had no idea,” he says. Well, maybe next time you’ll ask a few more questions.

There’s no end to his griping.

There are dozens and dozens of people who…thought they were investing in a multiple and diverse group of funds. If you were going to invest all this money in another fund, it seems to me you should have told everybody that you were doing this . . .

Or—and I know that this sounds radical—the investors themselves might have asked where their money was being invested. Notably, for all his whining, nowhere does Zuckerman accuse Merkin of lying to him.

Then Zuckerman has the gall to claim he did his work,

You do a certain amount of due diligence, you think you have the ability to rely on somebody based on his general community reputation, and you find out you can't. It’s not that I didn’t check [Merkin] out, but. . .

Mr. Zuckerman, this is very simple. You put your assets with Merkin. Merkin invested virtually his entire fund with Bernard Madoff. From what I know, he didn’t lie about what he was doing. Madoff turned out to be an elaborate fraud. I’m sorry, but you lose. Accept responsibility for your actions: start acting like a grown-up and stop whining!

Comments

[John Polomny:]

This reminds me of the Will Rogers quote "It's almost worth the Great Depression to learn how little our big men know." I guess big shot intellectuals like Mort Zuckerman never learned what I was taught by my Dad at 6 years old. If sounds to good to be true it probably is to good to be true. They didn't call Bernie Madoff the "Jewish T-Bill" for nothing. My dad also had an expression for guys like Zuckerman "what a putz."

2008 Dec 24 03:27 AM

[Rhett:]

Zuckerman will still get his charitable tax deduction on the $30m, won't he?

That suggests another con scheme: Make a tax-deductible charitable contribution to a charity-front that launders the money back to the donating party or his co-conspirator.

2008 Dec 24 09:00 AM

[pokernut:]

I saw the interview with Zuckerman on tv a few days after the Madoff scandal broke. It was a sickening display of arrogance.

2008 Dec 24 12:04 PM

[headlocal:]

DiligentQualified Investor101 is right on target.
The link is at
ascotpartnerslp.com/co...
and everything is exactly as cited.

Perhaps Tom Brown is more prescient than others, given that he didn't bother to even read the link,
ascotpartnerslp.com/
which looks like Ascot's site but isn't, and the NT Times summary, in
www.nytimes.com/2008/1...
both of which lead one to a conclusion that Mr. Zuckerman was acting in good faith and was scammed, rather than stupid.

As long as Tom Brown is ranting about ... "You didn’t have to do a lot of due diligence to see the warning signs. And if you don’t think due diligence is your responsibility, you’ll get what you deserve."...one might expect Tom Brown would show some due diligence himself.

Since his S-A profile says " In 2000, he formed Second Curve Capital, a $550-million-in-assets hedge fund that invests exclusively in financial-services stocks. Brown's original fund, Second Curve Partners, has generated a 20% yearly return, net of fees, since its May 2000 start."...and we now know how thoroughly he "researches" stuff, I'd be more interested in how good his own Second-Curve research is.

On the other hand, DiligentQualifiedInves... did not prove that Tom Brown relied on statements by Mr. Merkins' attorney. But since Merkins, not Zuckerman, is the one taking custody of the money and acting as the fiduciary, it will fall to sterner judges than Brown to determine Merkins' culpability, and the early word is that despite John Polumny's cheap shot at Mort Z, it's Merkin who emerges as the schmuck in this little Yiddish community tragedy.

This just in...NYU suing Merkin too. More to come, I'm sure.

Any snot-dripping comments about NYU, Mr. Brown?


On Dec 24 03:53 AM DiligentQualifiedInves... wrote:

> Mr. Brown, who admits to not reading the prospectus, takes unfair
> aim at Mort Zuckerman by relying on self-serving fabrications apparently
> communicated by Mr. Merkin's attorney. The October 2006 offering
> memorandum of Ascot Partners, L.P. makes only two references (in
> 60 dense, circumlocutious pages) to Mr. Madoff's firm:
>
> 1. "Clearing, settlement and custodial services will be provided
> by one or more unaffiliated brokerage firms. Morgan Stanley &
> Co., Inc. and Bernard L. Madoff Investment Securities, LLC (the "Prime
> Brokers") currently serve as the principal prime brokers and custodians
> for the Partnership." (pages 8-9)
> 2. "Morgan Stanley & Co., Inc. and Bernard L. Madoff Investment
> Securities, LLC (the "Prime Brokers") currently serve as the principal
> prime brokers and custodians for the Partnership, and clear (generally
> on the basis of payment against delivery) the Partnership's securities
> transactions that are effected through other brokerage firms. The
> Partnership is not committed to continue its relationship with the
> Prime Brokers for any minimum period and the
> General Partner may select other or additional brokers to act as
> prime brokers for the Partnership." (page 28)
>
> It would be unreasonable to expect a well informed, qualified investor
> to conclude from the offering memorandum that Mr. Merkin passed all
> investor funds to Mr. Madoff for management and custody. I would
> counsel Mr. Brown in the future to perform at least a cursory examination
> of the facts before making sweeping, potentially defamatory allegations
> against a well-meaning philanthropist and apparent victim.

2008 Dec 26 05:08 AM

[JacobRabino...:]

Wow. Talk about cheap shots from the peanut gallery!

Like a grade-school celebrity, Brown puffs out his big-boy chest, turns around to see who is looking, and then hocks a big loogie at the back of Mort Zuckerman's head.

Brown's Mommy is likely the only one who is impressed with him. I know I'm not.

2008 Dec 26 08:39 AM