Where are They Now? Ezra Merkin, Madoff Recruiter

[Saluki]

In my copy of Security Analysis (6th edition), there are a lot of chapters by people who are well-known in the value investment community, like Seth Klarman, Howard Marks, Bruce Berkowitz and Tom Russo.  However, I noticed a name that didn't ring a bell, Ezra Merkin. 

 

He made 1-1.5% fee by channeling his investors to Madoff.  He agreed to payback over $450mm to investors.

 https://www.artnews.com/art-news/news/merkin-sells-310m-art-collection-amid-fallout-from-madoff-fraud-1162/

 

He was definitely a better salesperson than an investor because when he was running his fund, he had trouble generating alpha so he had a person trading for him who was convicted of insider trading (this is a story line in the Billions TV show).  Victor Teicher wasn't trading for Merkin while he was on parole or subject to home confinement. He was literally trading for Merkin from behind bars.  And when he saw the results for Madoff's fund, Teicher warned Merkin to not invest with Madoff because it was a fraud.  But Merkin sent billions of his client money there anyway. 

 

He seems to still be around has money to invest: 

https://www.citybiz.co/article/297146/ezra-merkin-hedge-fund-manager-scarred-by-madoff-scandal-buys-into-orgenesis/

 

I don't know what the lesson is from this, other than this industry is full of shady people who live in nice houses and buy expensive things.  I'm surprised that his reputation was good enough that he got to write a chapter in the previous edition of the bible of value investing.  Didn't the other smart people figure out there was "no there there"?  

 

I think this would make a better TV show than the Madoff Netflix movie.  

[Gregmal]

Welcome to Wall Street. You have crooks everywhere who make a lot of money and acquire lots of expensive things, and then point to having expensive things and making more money than other people are reasons why you should believe theyre successful. 

[Saluki]

23 minutes ago, Gregmal said:

Welcome to Wall Street. You have crooks everywhere who make a lot of money and acquire lots of expensive things, and then point to having expensive things and making more money than other people are reasons why you should believe theyre successful. 

 

The funny thing is that Madoff had a legitimate business that would have made him wealthy enough, even for NY.  And he got into the ponzi stuff. The ego is never satisfied. 

 

Similar story with super lawyer Marc Dreier.  He had a 250 person law firm, where he was the only equity partner. The only reason this story isn't well known is that he was arrested about a week before Madoff.  

 

https://en.wikipedia.org/wiki/Marc_Dreier

But this is a wild story too.  At one point he made fake business cards and pretended to be someone from the Ontario Teacher's Pension Plan and tried to scam some investors into giving him money. And another time he claimed to be selling promissory notes for a real estate billionaire, and had a meeting in the client's office with someone he hired who pretended to be an executive from the billionaire's firm, to answer questions for the investor. 

 

It's fascinating because if you are a partner at a top law firm and have 8 associates under you, you will be very rich. I worked at a firm where their was only one equity partner and 60 attorneys. He's one of the world's largest art collectors.  I can't even imagine how having 250 lawyers under you and keeping all the money could go horribly wrong and you end up behind bars. 

[Spekulatius]

Crooks are everywhere. Just to name a very public example, read up how Vivek Ramaswamy made his billion.

 

 

I think some people lie and commit fraud, because they can't help it. It's not about the money for them.

Edited August 31, 2023 by Spekulatius

[ValueArb]

On 8/31/2023 at 8:37 AM, Spekulatius said:

Crooks are everywhere. Just to name a very public example, read up how Vivek Ramaswamy made his billion.

 

 

I think some people lie and commit fraud, because they can't help it. It's not about the money for them.

 

I think the worst part about Vivek isn't his shameless sucking up to people in power and his lack of any real principles, its that I lost money on his stupid company.

[Guest]

What's wrong with Ramaswamy? 

[ValueArb]

15 hours ago, stahleyp said:

What's wrong with Ramaswamy? 

 

Among many other reasons, he wants to appease Putin.

 

"Ramaswamy wants to cede territory taken by Russia in eastern Ukraine in return for Moscow exiting its military alliance with China. He would also block Ukraine’s candidacy to the Western security alliance NATO and end U.S. sanctions on Russia."

 

These are positions I'd expect from an irrational pacifist leftie, not a republican candidate. Putin has broken every agreement he's ever signed or been obligated to (including 1991 Minsk agreement where Ukraine gave up nuclear weapons in return for security assurances from Russia ), which is why no one who genuinely wants peace would ever agree to end the war at current borders. Putin would just use it as a respite to rebuild his forces, continue FSB efforts to subvert Ukrainian democracy and corrupt Ukranian politicians and civil servants (and assassinate those who couldn't be corrupted) before dropping a killing military blow on Kyiv in 5-10 years.

 

Even worse he thinks a China-Russia alliance is a huge strategic risk, even though Russia isn't even a top 20 GDP anymore, and that he somehow believes China is going to coordinate with Russia instead of taking advantage of its weakness. And worst of all his solution is to, yes, trust Putin to sign an agreement with us!

 

https://thehill.com/policy/defense/4179994-ramaswamy-isolates-himself-on-ukraine-with-proposed-putin-pact/