GMAC's Merkin quits under Madoff cloud
NEW YORK (Reuters) - Ezra Merkin, one of the most prominent hedge fund managers embroiled in Bernard Madoff's alleged fraud scheme, will resign as chairman of GMAC LLC so the finance company will be eligible to receive U.S. taxpayer funds.
Merkin, who founded Ascot Partners LLP, was twice sued last month for losing about $2 billion invested with Madoff, the longtime Wall Street executive accused of running a $50 billion Ponzi scheme.
GMAC -- the General Motors Corp GM.N affiliate that recently won bank holding status, and received a $6 billion government infusion intended to ensure its survival -- said on Friday Merkin's resignation is effective immediately.
Merkin's resignation was one of the changes GMAC had to make to qualify for the money.
Merkin had become a lightning rod for criticism at GMAC, which last month conducted a $21.2 billion debt swap designed to bolster its capital.
Merkin was sued in U.S. District Court in Manhattan for his management of Ascot Partners LLP, which lost an estimated $1.8 billion with Madoff.
In a separate suit, New York University said it lost $24 million after Merkin entrusted investments with Madoff, who was arrested in December.
Among the highest-profile charities hit in the fraud scheme was a trust owned by billionaire real estate investor and media magnate Mortimer Zuckerman, which lost $30 million after investing with Ascot, according to media reports.
In a statement on Friday, Merkin said: "I am pleased that GMAC has successfully completed its conversion to a bank holding company and look forward to GMAC's accomplishing its goals."
GMAC said its revamped board will have seven members and be reconstituted no later than March 24. Merkin will be replaced as chairman by Lenard Tessler, managing director of private equity at Cerberus Capital Management LP CBS.UL.
Cerberus Chief Financial Officer Jeffrey Lomasky will fill the vacant seat, GMAC said.
The board "will consist of the GMAC chief executive officer, one representative from FIM Holdings LLC, two directors appointed by a trust to be formed by U.S. Department of the Treasury, and three independent directors elected by the aforementioned directors," it said in a statement.
It said GM and FIM Holdings LLC are each entitled to have one nonvoting observer on the board, as long as they hold common interests in the company.
GMAC's largest investors include Cerberus and GM. GMAC is the main lender to GM customers.
(Reporting by Jonathan Spicer; editing by Richard Chang, Leslie Gevirtz)
