J. Ezra Merkin, the fellow who funneled Bernie Madoff so much business, is apparently being sued by Andrew Cuomo. Muckety.com had a fascinating graph a while back showing just how central Merkin was to the web of Jewish charities that Madoff bilked, and now in addition to the individual suits, Cuomo apparently wants to call him to account for being, at the very least, a grossly irresponsible git.
Was Merkin in on the scam? Does it matter? He charged clients for due diligence he couldn't possibly have done--anyone who investigated the firm halfway seriously noticed that they hadn't heard of the auditor, whom fairly cursory inspection revealed to be working out of a mostly unused storefront in a strip mall.
It seems to me rather likely that J. Ezra was just doing what most of us do when it comes to investing in the market: figure it must be safe, because otherwise we'd have heard of it. I've never checked out the auditors of any of the firms in the indices I buy, because I figure that someone else has. Probably, J. Ezra thought the same thing about Bernie Madoff. Thus do frauds inflate to really amazing proportions.
But there remains the question of his exact moral culpability. The problem I have in sorting through the moral implications of this whole mess is that the people who are getting in trouble are mostly doing so because they did exactly the same stupid thing as the people who invested with them. Clearly, no one checked up on J. Ezra Merkin to see that he was actually doing the due diligence he claimed, or if they did, they shut their mouths and told no one else when they found out he wasn't. Why, then, should an investor be any angrier at him than they are at themselves? Because he was getting paid for it? So are you, when you collect the savings that you didn't plow into a Ponzi scheme. And a lot of the money that was lost belonged to charitable endowments which certainly had people who could have checked up on where their millions had gone.
None of this matters to the question of the lawsuits, exactly; clearly Merkin deserves to lose everything he has, and will. I just can't figure out exactly which circle of hell to assign him to.