(Reuters) -- Money manager Ezra Merkin has agreed to pay $410 million to settle a lawsuit brought by the New York attorney general that accused him of steering client money to Ponzi schemer Bernard Madoff, a person familiar with the settlement said on Sunday.
Justice Richard Lowe of New York state court signed off on the settlement on Friday, the person said, and it is expected to be announced on Monday. The person asked not to be identified because of not being authorized to talk about the matter.
Under the agreement, Merkin will pay $405 million to compensate investors over three years, the person said. The other $5 million will go to the state.
Attorney Andrew Levander, who represents Merkin, did not immediately respond to an email seeking comment on Sunday.
Jennifer Givner, a spokeswoman for Attorney General Eric Schneiderman, could not be reached for comment.
The settlement does not resolve a separate case brought against Merkin by Irving Picard, the trustee seeking money for all of Madoff's victims. Picard is trying to claw back $500 million that Merkin and his funds withdrew from accounts with Madoff.
Amanda Remus, a spokeswoman for Picard, did not respond to an email seeking comment on the status of any settlement talks with Merkin over Picard's suit.
The New York lawsuit, brought in 2009 by Andrew Cuomo, the attorney general at the time, said Merkin recklessly fed money from investors in his funds into Madoff's Ponzi scheme, while claiming he actively managed their money.
Merkin held himself out as an investing guru and collected more than $470 million in management and other fees while he was really a master marketer, the lawsuit said.
The lawsuit accused Merkin of self-dealing, reckless conduct and gross negligence. It sought restitution and damages and to stop Merkin from serving on any nonprofit organization or as an investment manager.
Merkin had some $2.4 billion invested with Madoff, according to the lawsuit.
Merkin, a graduate of Columbia College and Harvard Law School, was a trustee, along with Madoff, of Yeshiva University. The university lost $110 million to Madoff.
Charities and other nonprofits are among those whose funds went to Madoff through Merkin without their knowledge.
Merkin resigned as nonexecutive chairman of GMAC LLC, the financing arm of General Motors, after the Madoff scandal. GMAC is now Ally Financial.
Madoff pleaded guilty in March 2009 to perpetrating the largest Ponzi scheme in U.S. history and is serving a 150-year prison sentence.
As of May 18, Picard has recovered or entered into agreements to recover more than $9 billion, over half the $17.3 billion in principal estimated lost by Madoff firm customers who filed claims, according to the trustee's website.
The New York case is New York v. Merkin New York state Supreme Court, No. 450879/2009.
The trustee case is Irving H. Picard v J. Ezra Merkin, et al, U.S. Bankruptcy Court for the Southern District of New York, No. 08-01789.
(Reporting by Karen Freifeld; Editing by Kenneth Barry)