At high noon on Monday January 12th 2009, a Federal magistrate will announce his decision about whether fraudster Bernie Madoff will remain free on bail confined to his penthouse apartment on Manhattan's Upper East Side. The magistrate might instead agree with Federal prosecutors who have argued in briefs filed last week that Bernie Madoff is a "danger to society" and hence he should be remanded until his trial where he almost assuredly will be convicted of at least one criminal act and then probably imprisoned for the remainder of his life.

Remand is an unusual order in most white-criminal cases. However, a fraud of approximately $50 billion and the mailing of "sentimental heirlooms" (in some cases worth more than a million dollars in a single mailing) in violation of court order are also highly unusual. Toomre Capital Markets LLC ("TCM") suspects that public pressure to see "crook" Madoff imprisoned and Madoff's reported decision to cease cooperating with investigators and prosecutors will lead the magistrate to order Bernie Madoff off to jail.

As Bernie Madoff contemplates his possible last few hours of freedom, one of his enablers (and feed fund managers), Ezra Merkin, apparently faces fresh lawsuits seeking as much as $100 million that investors claim he squandered (certainly without their knowledge nor possibly their consent) on Madoff's $50 billion Ponzi scheme. According to The Guardian in the article Hedge Fund Billionaire Sued For Investing in Madoff Scheme written by James Doran, Mr. Merkin, 55, was forced to close his $1.5 billion Gabriel Capital hedge fund in December 2008 after disclosing massive losses from investing in Madoff's business.

As TCM wrote in the post Update on Bernie Madoff Scandal and Feeder Funds last week, Mr. Merkin has already been sued by both New York Law School and New York University ("NYU"). NYU claims its investment was placed with Madoff without permission. "Until 12 December 2008, we had no knowledge that NYU's funds were instead being managed by Bernard Madoff," said an affidavit from NYU filed in New York state supreme court.

According to the above Guardian story,

In the next week to 10 days, a further swath of lawsuits from investors who lost between $80m and $100m investing with Madoff are set to be filed by Jake Zamansky, a well-known New York securities lawyer. Zamansky said the lawsuits would name Merkin personally as most of his clients trusted him to invest their cash wisely, not merely to hand the money over to his friend Bernie Madoff.

"Most of these people I am representing had never heard the name Bernie Madoff until the fraud was exposed," Zamansky said. "They thought they were investing with Ezra Merkin. The least they expected him to do was to look under the hood of the vehicles he invested their money in. He clearly did not do that." Zamansky said he had about 10 clients, each of whom lost "north of $10m" investing with either Merkin or Madoff.

No doubt Mr. Merkin and the other managers of feeder funds to Bernie Madoff's Ponzi scheme will be busy for a long time defending themselves. Mr. Merkin is represented by Andrew Levander, a leading securities lawyer with whom Lars Toomre worked closely more than fifteen years ago. Lawyers like Mr. Levander are very good and among the best in the legal profession. Consequently, such individuals are also very expensive and will have considerable billings as various aggrieved investors in the Madoff fraud seek "deep pockets" from whom they can attempt to recover some of their losses. One does wonder whether such legal proceedings will produce much, especially with legal bills on behalf of so many parties amounting to so much. After all of the various legal bills have been paid, how much will be left to be split among the various aggrieved parties?