Madoff trustee challenges settlement

The court-appointed trustee handling the Bernard Madoff bankruptcy has filed a suit against the New York state attorney general for reaching a separate settlement with an investor linked to the fraud. Irving Picard, the trustee, challenged the $410 million settlement with investor Ezra Merkin on grounds that the state attorney general Eric Schniederman lacked the authority to cut the deal. Madoff is serving a 150 year prison sentence for perpetrating the largest financial fraud in US history, a massive Ponzi scheme that lost an estimated $17 billion dollars placed with his investment company. Picard was designated by a federal judge as a trustee charged with recovering as much of the missing money as possible and redistributing it to victims of the fraud. In the suit he filed Wednesday, Picard argued that in light of his own federal mandate, New York state lacked the authority to strike a separate deal with Merkin. The settlement reached in June would resolve charges that Merkin invested billions of dollars of his clients' money with Madoff without their knowledge. Merkin ran four funds that managed more than $2 billion on behalf of hundreds of investors, including charitable organizations, who lost an estimated $1.2 billion as a result of the fraud. Under the terms of settlement, Merkin would pay $405 million to compensate clients of the fund over a three year period, plus another $5 million to cover court costs. Investors would recover only 40 percent of their losses.