Justice Richard B. Lowe, III, of the New York State Supreme Court in Manhattan, has granted the motions of Bart M. Schwartz, as Receiver for Gabriel Capital, L.P. and Ariel Fund Limited – two private investment funds formerly run by J. Ezra Merkin that are alleged to have secretly invested more than one-fourth of their assets with Bernard L. Madoff Investment Securities – to distribute a total of $226 million of cash investment proceeds to investors who suffered losses through the funds. Total interim distributions to investors in these entities thus far will now equal nearly $400 million, appearing to constitute the largest distributions to date by any Madoff-invested entities.
Payments will be sent to all investors in the funds, generally for delivery within the next 10 business days. This payment delivery schedule excludes Mr. Merkin and his affiliates, whose payments in respect of their investment holdings in the funds were withheld by the Receiver pending final resolution of claims against Mr. Merkin, including, among others, claims brought by the New York Attorney General, and directly by the Receiver.
Bart M. Schwartz was appointed as Receiver by Justice Lowe as a result of legal action by the New York Attorney General. Mr. Schwartz commented, “I am very pleased with Justice Lowe’s decision to allow us to make these further interim distributions of cash to injured investors. With regard to the Gabriel Capital, L.P. distributions in particular, decisions by the Court on complex, multi-jurisdictional legal issues were required. I am grateful that Justice Lowe, with the assistance of Court-appointed Special Master, Leslie Treff, was able to approve this interim relief for injured investors.”
Added Mr. Schwartz, “We will continue in our efforts to maximize overall returns to investors, including through prudent, value-preserving liquidation of the funds’ roughly $1 billion in combined estimated value of remaining assets, and through pursuing additional recoveries from culpable parties. In making these interim distributions to investors, we have made sure to maintain reserves sufficient to cover all of the funds’ operating needs going forward, as well as any reasonably foreseeable potential liabilities.”
Regarding prospects and timing for future interim distributions to investors, Mr. Schwartz said, “we are making good progress in our ongoing value realization efforts, and we expect to be in a position to seek approval of a further interim distribution of cash to each of the funds’ injured investors in the relatively near-term, most likely in the next 60 to 90 days.”
The case is The People of the State of New York v. J. Ezra Merkin, et al. (Index No. 450879/2009).