Attorney General Andrew Cuomo’s lawsuit to recover $1.2 billion from a hedge fund operator for the losses his investors sustained when he handed over their money to convicted swindler Bernard L. Madoff may proceed to trial, Manhattan Supreme Court Justice Richard B. Lowe III has ruled. The judge rejected the contention of Ezra J. Merkin that the attorney general’s statutory and common law fraud claims against him were not viable because in 2006 Merkin stated in an offering memorandum that he “might delegate investment management duties to independent money managers” without first telling his investors.

That “cautionary language” could not cure Merkin’s representations that he would be “controlling and actively managing the funds,” Lowe concluded, because by the time of the 2006 offering statement Merkin was alleged to have already turned over management of one of his funds and substantial portions of two others to Madoff. “An offeror may not knowingly misrepresent historical facts and at the same time disclaim the misrepresented facts with cautionary language,” Lowe wrote.

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