Mets owners, Madoff lawyers square off
Bernie Madoff trustee Irving Picard is seeking $83 million in fictitious profits from the owners of the New York Mets. Credit: Getty Images
Lawyers for the owners of the New York Mets and the trustee in the Bernard Madoff case square off Thursday afternoon in a closely watched $400 million lawsuit over investments in the Ponzi scheme.
The hearing before Manhattan federal District Judge Jed Rakoff is expected to last at least two hours as trustee Irving Picard and attorneys for the Mets try for the last time to persuade him to end the case in their favor and avoid a March 19 trial. Also on the agenda are challenges to each side's list of expert witnesses.
The Madoff scam, coupled with ongoing losses, played a role in the sale of seven $20 million shares in the team announced Wednesday.
Even a partial victory for Picard, who in December 2010 sued the Wilpon family and partners like Saul Katz for up to $1 billion, could force the team owners to raise even more money. But a win for the Wilpons could further weaken Picard's case, which Rakoff has already whittled down substantially.
As trustee, Picard was appointed by the Madoff bankruptcy court to recover as much money for victims as possible. He's so far recouped nearly $9 billion.
"If the trustee prevails in his argument, it is a lot of money that will come back in the [Madoff] estate and be distributed to victims," said Jerome Reisman, a Garden City securities lawyer who represents some Madoff investors.
For the Katz-Wilpon group, the case could end their control of the Mets or put them in the clear, Reisman said.
Picard's lawyers are asking Rakoff to immediately award the trustee a judgment for $83 million, the amount of Madoff profits which Picard maintains the Wilpon family and its Sterling Equities partners received. That cash was essentially money stolen from other investors, Picard has said.
Picard also wants back more than $300 million in original investments made by the Wilpon group because, the trustee contends, the partners either knew of the scam or were blinded by their dependence on Madoff's annual profits to see warning signs that he was a fraud.
To derail Picard, lawyers for the Wilpons have been digging into the woodwork to prove their clients are immune from the trustee's clawback attempt. The $83 million they received, the Wilpons argue, actually represents a "debt" Madoff owed them by virtue of their investments. Perhaps more important, the Wilpons charge that they didn't ignore warning signs about Madoff and wouldn't have knowingly invested in a Ponzi scheme. As regular investors, they weren't obligated to probe into Madoff's operation, said the Wilpons.
But in recently unsealed court filings, Picard said a series of loan agreements the Wilpon group had with banks imposed a duty "to investigate possible fraud associated" with the Madoff accounts. The Mets owners had all sorts of warnings about Madoff, Picard claims, including the suspicions of investment adviser and whistle-blower Noreen Harrington, currently on the board of trustees of Adelphi University, who quit over a decision by the Sterling group to invest with a Madoff feeder fund.
Former Gov. Mario Cuomo has been trying to mediate a settlement in the case. In a telephone interview Tuesday, Cuomo indicated both sides have been too preoccupied with the looming courtroom battle to do any meaningful negotiations.
"We are waiting," Cuomo said about the outcome of Thursday's hearing.
