GMAC Ex-Chairman Subpoenaed

By AMIR EFRATI and CHAD BRAY

The New York Attorney General's office has requested documents and testimony from J. Ezra Merkin as part of an inquiry into whether nonprofit organizations were defrauded by three of his investment funds that were partially or completely invested with money manager Bernard Madoff.

Associated Press

Ehud Olmert, center, stands between former Israeli Prime Minister Ariel Sharon, left, and Ezra Merkin, managing partner of Gabriel Capital Group, in 2006 as the sale of Israel's Leumi Bank to the investment firm is completed.

The probe by Andrew Cuomo's office is focused on nonprofits on which Mr. Merkin was a board member, according to a person familiar with the matter. Mr. Cuomo's office is examining, among other things, what disclosures Mr. Merkin made to the nonprofit investors about his funds, how much he earned in fees, and what percentage of the groups' investments were placed with Mr. Madoff's firm. Mr. Madoff last month confessed to running a Ponzi scheme that cost investors more than $50 billion.

"Mr. Merkin will fully cooperate with any investigation by the New York Attorney General's office," said Andrew Levander, a lawyer for Mr. Merkin, who last week resigned as chairman of GMAC. Mr. Levander previously said Mr. Merkin and his family were among the largest victims of Mr. Madoff's alleged fraud.

The subpoenas to Mr. Merkin and his funds, which were sent on Wednesday, ask for responses within one week for the documents; testimony may take place later, said a person familiar with the matter.

Mr. Cuomo's office also subpoenaed information from 15 nonprofits and has been interviewing representatives of nonprofits who suffered losses. The nonprofits that invested with Mr. Merkin may have lost more than $100 million, said a person familiar with the matter.

Many nonprofits and individuals invested in so-called feeder funds, including Mr. Merkin's, that put client money with Mr. Madoff. Mr. Merkin hasn't been charged with any wrongdoing and no evidence has surfaced that he knew about fraud being committed by Mr. Madoff.

There is no indication that Mr. Cuomo's probe will interfere with federal authorities investigating Mr. Madoff. Those authorities, including the U.S. attorney's office in Manhattan, are focusing on whether other individuals helped Mr. Madoff carry out the alleged fraud scheme and on recovering assets for burned investors.

The attorney general's office is seeking information from Mr. Merkin and his Gabriel Capital Corp., Ariel Fund Ltd. and Ascot Partners LP. Mr. Merkin invested "substantially all" of Ascot's $1.8 billion to Mr. Madoff. He took a 1.5% fee for managing the fund. Roughly a quarter of the assets in Mr. Merkin's Ariel Fund Ltd. and Gabriel Capital LP also were invested with Mr. Madoff.

Mr. Merkin and his funds are facing lawsuits from investors, including New York University. Several Ascot clients say they had no idea that Mr. Merkin had most of the fund's money invested with Mr. Madoff.

Mr. Merkin served on the boards of several New York-based nonprofits, which were subpoenaed by Mr. Cuomo. Those include Yeshiva University's Rabbi Isaac Elchanan Theological Seminary; the Caroline and Joseph S. Gruss Life Monument Funds; and the Sar Academy, a yeshiva in Riverdale.

The Gruss Life Monument Funds declined to comment. Yeshiva University and Sar didn't return a request for comment.

Write to Amir Efrati at amir.efrati@wsj.com and Chad Bray at chad.bray@dowjones.com