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December 16, 2008 1:08 PM

More Lawyers Set to Feast on Madoff Meltdown

Posted by Brian Baxter

CORRECTION: The sixth paragraph below in our original post incorrectly identified Schulte Roth as representing GMAC's Ezra Merkin. The firm represents Merkin's fund, Ascot Partners, with Merkin being advised by Dechert's Andrew Levander.

For litigators, the ripples emanating from the sudden collapse of Bernard L. Madoff Investment Securities (BMIS) could be gifts that keep on giving well into the new year.

As more banks find themselves caught up in the Madoff meltdown and BMIS begins to take steps toward a quick liquidation, more lawyers are getting anguished calls from potential clients.

First and foremost among those lawyers are the ones at Schulte Roth & Zabel. Known for its powerhouse investment management practice, the firm, unsurprisingly, has already been tapped to examine Madoff's quasi-hedge fund/alleged Ponzi scheme.

Name partner William Zabel is a director of the Manhattan-based JEHT Foundation (Justice, Equality, Human Dignity, and Tolerance), a criminal justice reform-minded nonprofit that announced on Monday that it would close next month because of losses brought about by BMIS's demise.

Zabel, a noted human and civil rights activist, told Bloomberg that JEHT was one of the most "progressive foundation's around" and that while "there are so many sad stories out there, [JEHT's closing] is one of the worst."

Zabel's firm has also been retained by Ascot Partners, the hedge fund of GMAC chairman J. Ezra Merkin, who reportedly told his investors that nearly all of the funds $1.8 billion in assets were invested with Madoff. Many of those same investors claim that Merkin, who charged an annual fee for his investment services, never disclosed such an arrangement when soliciting their investments. (Merkin himself is being represented by Dechert's Andrew Levander.)

"Certainly, a lot of [Merkin's] investors have good reason to be upset," said Susman Godfrey partner Harry Susman to The New York Times. "People who went through Merkin, they had to pay for the privilege of being stolen from."

The Times reports that Susman flew to New York on Monday to meet with a group of investors that retained him on the matter. (The Houston Chronicle had a story about some of those potential clients on Monday.)

In an e-mail to The Am Law Daily on Tuesday, the noted litigation firm announced that it was launching a financial fraud task force to investigate claims arising from the collapse of BMIS.

"Not all of the Madoff claims are the same," said Harry Susman in the e-mailed statement. "Some will be direct claims where the liability will be easy to prove but collection will be a real issue. Some will be indirect claims against a third party who entrusted their money to Madoff."

Others are also lawyering up. Rye Investment Management, a hedge fund subsidiary of Rye, N.Y.-based Tremont Group Holdings, a division of Springfield, Mass.-based Massachusetts Mutual Life Insurance, has reportedly retained Skadden, Arps, Slate, Meagher & Flom to investigate possible Madoff-related claims.

We've also heard through our colleague Andrew Longstreth at The Am Law Litigation Daily that Boies, Schiller & Flexner's Stuart Singer was representing several clients with funds caught up in the Madoff meltdown.

Reached by phone in his Fort Lauderdale office, Singer confirmed that he's "representing a number of individuals and groups" in South Florida, New York, and "possibly elsewhere."

Singer says he can't get into the details of his representation until he files suit, which he expects could happen later this week. Judging by a biography of Singer on Boies's Web site, it's figures he'd be in demand by aggrieved Madoff investors.

According to that bio, Singer represented The Vons Companies, an Arcadia, Calif.-based supermarket chain, in a successful resolution of RICO claims brought in connection with a Ponzi scheme operated by a North Miami Beach-based company called Premium Sales.

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As an investor with 90% of my assets with Madoff, I am interested in joining a class action suit with a strong legal firm.

Stuart Singer is one of the most brilliant lawyers practicing today. Good choice.

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