Judge raises questions over Madoff witness

A Manhattan federal judge Thursday questioned attorneys for the New York Mets owners and the trustee handling the Bernard Madoff bankruptcy about a witness who testified her warnings about Madoff were ignored.

In a three-hour hearing, Judge Jed Rakoff asked attorneys about the deposition given last year by financial expert Noreen Harrington, who at one time worked as a financial executive for Sterling Stamos, an investment firm co-founded by Fred Wilpon and Saul Katz’s Sterling Equities business. Harrington is currently a member of the board of trustees of Adelphi University.

In a deposition, Harrington stated that Katz was angered when she said in a 2004 meeting that Madoff's investment returns seemed too good to be true and might represent fictional numbers or the stock market practice of "front running," an illegal trading strategy.

Rakoff had called the hearing to give attorneys for the Sterling group and trustee Irving Picard one final chance to convince him that he should grant either side summary judgment in a nearly $400 million lawsuit by Picard against the Mets owners. Thursday, Rakoff said he would rule by March 5. A trial date is currently set for March 19.

In the courtroom was former Gov. Mario Cuomo, whose attempt to mediate the case has so far been stalled by the hard-fought litigation.

Picard is seeking the immediate return of $83 million in investment earnings and more than $300 million in original investments, claiming the Wilpons, Katz and their partners were "willfully blind" to Madoff's giant fraud that lost investors more than $18 billion when his scheme collapsed in December 2008. The Wilpons and partners contend they didn't know Madoff was running a Ponzi scheme and wouldn't have invested if they had.

While Rakoff didn't tip his hand on how he would rule on the summary judgment issues, he raised the possibility through questioning of the attorneys, particularly trustee counsel David Sheehan, that Harrington's testimony might signal to a jury willful blindness by the Sterling defendants to Madoff's fraud. Rakoff particularly asked about Harrington's claim that Katz became very angry with her when she raised questions about illegalities in Madoff's business.

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"Why would he get angry with that?" Rakoff asked Katz's lawyer Karen Wagner.

In response, Wagner said that Katz had no recollection in his deposition of the meeting Harrington talked about.

Wagner explained that Harrington quit around August 2004 shortly after the angry meeting with Katz and didn't follow up on her request for a meeting with Madoff, something Rakoff agreed could benefit the Sterling group at trial. Sheehan answered that Harrington quit after she learned that Sterling Stamos had already decided to invest in what turned out to be a Madoff feeder fund.

In other action, Rakoff decided to strike three experts from the list of trial witnesses, two for the trustee and one for the Wilpons. Rakoff thought the expert testimony might prove to be too confusing for the jury.