NEW YORK (Reuters) - Finance company GMAC LLC said on Friday Chairman Ezra Merkin, the hedge fund founder stung in accused fraudster Bernard Madoff's alleged scheme, will resign as part of changes to the board needed for it to be eligible to receive government funds.
Merkin, who founded Ascot Partners LLP, was twice sued last month for losing a total of about $2 billion invested with Madoff, the longtime Wall Street executive accused of running a $50 billion securities fraud.
GMAC -- the General Motors Corp
"I am pleased that GMAC has successfully completed its conversion to a bank holding company and look forward to GMAC's accomplishing its goals," Merkin said in a brief statement.
Last month, Merkin was sued in U.S. District Court in Manhattan for his management of Ascot, 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. See: [ID:nN24510086]
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
GMAC, which also recently conducted a $21.2 billion debt swap designed to bolster its capital, said the vacant seat on the board will be filled by Cerberus Chief Financial Officer Jeffrey Lomasky.
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)
