The hard-fought legal battle between the owners of the New York Mets and the trustee in the Bernard Madoff case ended Thursday when a Manhattan federal judge signed off on a settlement that had been hammered out in March on the eve of trial.
Under the terms of the agreement approved by Judge Jed Rakoff, trustee Irving Picard agreed to drop his $303 million lawsuit against Fred Wilpon, Saul Katz and their partners in Sterling Equities in exchange for their paying back $162 million in profits received through Madoff's Ponzi scheme.
Picard also agreed to accept claims by the Sterling partners for $177 million in losses in the scam.
Rakoff said the settlement was "reasonable and adequate and fair," and in the best interests of Madoff victims who want money back through the bankruptcy proceeding.
The only regret, said Rakoff to laughter from the attorneys, was that the settlement prevented the appearance in court of former Dodgers pitcher and Hall of Famer Sandy Koufax, whom the Sterling investors planned to call as a witness.
Picard sued the Mets owners in late 2010 to recover up to $1 billion, alleging that the Wilpon family and its partners were willfully blind to Madoff's fraud. The Sterling partners denied knowing about Madoff's scheme and eventually got the lawsuit whittled down to $303 million.
Under the settlement, the Sterling partners will withdraw their appeal to the U.S. Supreme Court challenging Picard's method of calculating losses. That is expected to be filed Monday, said David Sheehan, counsel to Picard.
The Sterling partners have to first repay $162 million in fictitious profits, but can submit claims, which Picard now accepts as legitimate, for $177 million in Madoff losses. As Picard continues to recover funds in other settlements, the Mets owners will be credited with their share, reducing the debt.
Once Picard is able to pay 92 cents on the dollar on all claims, the Sterling partners' $162 million debt will be paid. But if there is any shortfall in repayments after three years, the partners have to pay the remainder over two years, with Fred Wilpon and Saul Katz guaranteeing up to $29 million.