Trustee in Madoff case to appeal ruling

Irving Picard, the trustee liquidating Bernard Madoff's former Irving Picard, the trustee liquidating Bernard Madoff's former investment firm. Photo Credit: Getty Images, 2010

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The trustee in the Bernard Madoff case will appeal a ruling by a federal judge that severely limited what could be recovered in a $1 billion lawsuit against the owners of the Mets.

David Sheehan, counsel to trustee Irving Picard, told Manhattan federal Judge Jed Rakoff in court Wednesday that he would be asking the judge to recommend, or certify, that an appeals court review some crucial legal issues in Rakoff's decision Tuesday.

At the same time, Sheehan told Rakoff that uncertainty about the full impact of the ruling would delay payments the trustee had hoped to begin making Friday from a $3 billion pool of recovered money to some eligible investors in Madoff's $17 billion Ponzi scheme.

Rakoff ruled that under federal bankruptcy law, Picard could only recover about $83 million in profits Fred Wilpon, Saul Katz and their associates at Sterling Equities received from Madoff over two years if he could prove actual fraud.

He said, however, that Picard could potentially recover about $301 million in original investment principal from the same time period only if he proved "an absence of good faith" on the part of the Wilpons and that they exhibited "willful blindness" to Madoff's fraud.

Picard had sued for the $1 billion amount, alleging that the Wilpons and partners ignored red flags about Madoff's Ponzi scheme, which the Mets owners have vigorously denied.

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According to a person familiar with the team's plans, the judge's ruling won't affect the Mets' attempts to raise $200 million by bringing in minority partners. The Mets have been seeking investors since January, partly because of their exposure in the trustee's suit.

Lawyers for Picard and the Wilpons were in court yesterday to go over pretrial scheduling in the case. Because of his own court schedule, Rakoff changed the trial date from March 5 to March 19.

Sheehan said the possible appellate issues arising from Rakoff's decision to throw out nine of 11 counts in Picard's complaint could further complicate and delay the case.

Outside court, Sheehan told reporters that Rakoff's decision limiting Picard's ability to recover profits and principal to only a two-year investment period before Madoff's arrest in December 2008, had implications for many other of the trustee's cases.

He said the ruling could impact and limit which investors Picard considers are entitled to recover cash.

Former Gov. Mario Cuomo, who is trying to mediate the dispute between Picard and the Wilpons, said yesterday he thought Rakoff's ruling had clarified some issues and could help the effort to broker a settlement.

"It will enable you to think about your positions in a new light. I think the numbers have changed, but there are other dimensions that you have to deal with . . . other complexities," said Cuomo in an interview.

Cuomo said it is better for both Picard and the Wilpons to work out a compromise through mediation. "I think most lawyers would say that they think it's almost always better to make a deal than to have a trial," Cuomo said.

"It's expensive, you can't tell what's going to happen, you can't tell who the jurors are going to be," he said. "Or, we can cut it short and make a deal. I can make suggestions, but it's up to them."

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Attorney Jerome Reisman of Garden City, who represents some Madoff victims, said the case "now cries out for a settlement . . . I think it puts them [the Wilpons] in a better posture to settle the case."

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With Steven Marcus

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