The owners of the New York Mets went on the legal offensive late Sunday, filing court papers that accused the trustee in the Bernard Madoff fraud case of making a host of false allegations, and unveiling their legal strategy to combat the trustee's effort to claw back more than $1 billion in profits and investments from the Ponzi scheme.
"After months of damaging leaks, false accusations and withholding of evidence, we can finally legally respond to the work of fiction created by the trustee," Fred Wilpon and Saul Katz said in a joint statement. "Let us be very clear: We did not know that Madoff was engaged in a fraud. There were no red flags and we received no warnings."
In more than 100 pages of legal papers filed in Manhattan federal bankruptcy court, the Wilpon family and their partners at Sterling Equities said that under the law they can't be compelled to return the money because they weren't aware of the fraud.
The Wilpons are insisting that their investment with Madoff created a debt that the convicted swindler owed them despite the fact Madoff was running a massive Ponzi scheme. As a result, wrinkles in federal securities and New York State law shield them from the kind of massive claw backs trustee Irving Picard is attempting, said the Wilpons.
"A customer has no way of knowing what his broker is actually doing. As a matter of law, none of these transfers may be avoided as a fraudulent conveyance because each was a payment that discharged a debt to a creditor," said the Sterling legal memo.
The trustee's lawsuit against the Wilpons is being mediated before former Gov. Mario Cuomo.
Picard sued the Wilpons, Katz, their families and partners in December, seeking more than $300 million in profits taken from Madoff. On Friday, Picard beefed up his complaint to go after $700 million in investments made with Madoff over the years.
Picard alleges that the Wilpons and their partners knew or should have known that Madoff was running a fraud and that they ignored red flags and warnings.
In their legal papers, the Wilpons said there weren't any warnings and that they and others at Sterling Equities were "nonprofessional investors" who entrusted their money with Madoff and relied on his expertise.
Picard's lawyer, David Sheehan, said the Wilpons were wrong on the facts and the law.