Madoff Trustee Seeks to Pursue $386 Million Lawsuit Against Mets Owners
By Linda Sandler – Feb 10, 2012 9:56 AM ET
The liquidator of Bernard Madoff’s firm said he is entitled to pursue a $386 million lawsuit against the New York Mets owners because they chose to be “willfully blind” to the fraud to maintain an income stream that was essential to their business plans.
U.S. District Judge Jed Rakoff last year threw out most of trustee Irving Picard’s $1 billion in claims against the Mets owners, leaving him to seek about $386 million. The judge said Picard must prove the defendants, including Sterling Equities Inc. partners Fred Wilpon and Saul Katz, were willfully blind to Madoff’s crimes if he wants to recoup more than $83 million of that amount.
Wilpon and Katz had a motive to ignore signs that Madoff was running a Ponzi scheme, Picard argued in a filing yesterday in U.S. District Court in Manhattan. The Mets owners were so hooked on money from Madoff that they used it in place of disability insurance for the team’s players, and for their deferred compensation plans, Picard said. By 2001, they were reading articles that questioned Madoff’s methods and had received “personal warnings” about the money manager, he said.
“The Mets relied on Madoff’s returns as a predictable source of income for a business — professional baseball — with an otherwise unpredictable revenue stream,” Picard said in yesterday’s filing.
The Mets owners countered in a court filing yesterday that they should be able to keep $83 million in fictitious profits taken from Madoff’s Ponzi scheme in the two years before his 2008 arrest because the money was owed by the registered brokerage to its clients.
Wilpon and Katz have said they trusted their broker and never suspected him of any fraud, let alone a Ponzi scheme. Picard’s suit should be thrown out because he cannot prove his case, only make allegations, they said in a previous request to Rakoff to dismiss the case.
The Mets owners, after losing money in the Ponzi scheme and an income stream from Madoff, have said they are trying to sell stakes in the Major League Baseball team. Picard’s claims remain a threat to their finances.
Picard, a partner at law firm Baker & Hostetler LLP in New York, originally demanded $300 million in profit and $700 million in principal from Wilpon, Katz and a group of family members and related entities, saying they turned a blind eye to Madoff’s Ponzi scheme.
In September, Rakoff dismissed all or part of nine of 11 claims in Picard’s suit against Wilpon and Katz. He has set a March trial for the rest of the claims. Rakoff last month refused to allow Picard to appeal his decision.
Madoff, 73, pleaded guilty in 2009 to orchestrating what prosecutors called the biggest Ponzi scheme in history. He is serving a 150-year sentence in a federal prison in North Carolina.
The case is Picard v. Katz, 11-cv-03605, U.S. District Court, Southern District of New York (Manhattan).
To contact the reporter on this story: Linda Sandler in New York at email@example.com