GMAC chair Merkin resigns

Ezra Merkin, the chairman of GMAC Financial who is personally embroiled in the Bernard Madoff scandal, resigned his position today as part of an overall change of GMAC’s board of directors.

As part of its conversion to a bank holding company, GMAC has to change its board no later than 24 March, 2009. The US Treasury approved GMAC’s application to become a bank holding company in December, which means the company can apply for funds under the Treasury’s Troubled Asset Relief Program.

Merkin will be replaced on an interim basis by Lenard Tessler, managing director and co-head of private equity at Cerberus. Another vacant seat on the board will be filled by Jeffrey Lomasky, Cerberus’ chief financial officer. The New York-based firm did not return a call for comment.

The company will get a new seven-member board that will include two directors appointed by the US Treasury, one representative from FIM Holdings and three independent directors.

Merkin is linked to the Madoff scandal through his role as managing partner in Gabriel Capital Group. Gabriel controls Ascot Partners, which aggregated some $1.8 billion of investor capital and fed this into the alleged fraudulent investment scheme.

New York Law School, an investor in the Ascot fund, is suing Merkin claiming “bad faith breach of fiduciary duty”. Cerberus declined to comment for the article.

Merkin headed GMAC’s board at a time when the company lost $7.9 billion in five quarters. The company’s chief executive officer, Al de Molina, will retain a seat on the new board.

GMAC may have been saved from collapsed by its successful campaign to become a bank holding company, which required the company to convince its bondholders to exchange billions of dollars in bonds to meet regulatory capital requirements of $30 billion.

Cerberus led a consortium that purchased 51 percent of GMAC in 2006 for $14 billion, with $6 billion coming from Cerberus’ own funds. The mortgage and auto lender, formerly the financing wing of General Motors, has been severely hit by the global credit crisis.