Madoff trustee: Mets had $500M debt crisis

The New York Mets owners were thrown into a debt crisis after the collapse of Bernard Madoff's Ponzi scheme and had to restructure $500 million in loans from banks worried about being paid back, the trustee for Madoff's victims said Friday.

Trustee Irving Picard's amended complaint filed in bankruptcy court Friday ratcheted up present-day financial pressures on the team's owners. It now seeks more than $1 billion from Fred Wilpon, Saul Katz and their Sterling Equities company, and adds new allegations regarding their dealings with the convicted fraud mastermind.

"The amended complaint shed more light on the deep dependency of the Sterling business organization on the continuation of the Madoff fraud," said David Sheehan, counsel to Picard, in a statement. The trustee has claimed that Wilpon and Katz willfully ignored red flags about Madoff.

Former Gov. Mario Cuomo has been trying to mediate a settlement between the trustee and the Mets owners, who have put a minority share in the team up for sale to help cover potential legal liabilities.

In a statement, Wilpon and Katz vowed to fight Picard.

"The amended complaint is the latest chapter in the work of fiction created by the Trustee. We will pursue a vigorous legal defense that will set the record straight and vindicate us," said Wilpon and Katz.

Picard portrayed a Sterling business empire reeling from a liquidity crisis after the Madoff scheme went bust in late 2008, making investments made with him worthless. The Sterling empire's Madoff accounts had "served as collateral" for "numerous loan agreements," his complaint said.

That forced a scramble to restructure more than $500 million in debt with such major New York banks as Bank of America, JP Morgan Chase and Citibank.

Picard said Sterling and the banks tried to do so in a way that gave the lenders priority over thousands of people who lost money with Madoff and are waiting to be compensated.

The banks "knew that a Madoff-related judgment could be far in excess of $100 million and protected themselves with conditional guarantees," the complaint said.

Picard's complaint adds a new allegation that Madoff made a $54 million interest-free loan to Sterling in May 2004. At the time, the Mets owners were unsure whether they would obtain bank financing in time for a deal buying back the Mets' broadcast rights from Cablevision so they could launch their own SNY network.

The loan was then falsely documented by Sterling as an investment from Madoff's wife, Ruth, in the company that would become SNY, the trustee charged. Cablevision, which owns Newsday, wasn't accused of any wrongdoing in the complaint. A Cablevision spokeswoman, Kimberly Kerns, declined to comment.

While Picard's original complaint filed in December sought around $300 million and alluded to greater sums, the new court document definitively spells out that the trustee is going after $700 million more in principal originally invested with Madoff by not only the Wilpons and their families but also the Mets, business partners and various trusts.