Madoff Trustee Irving Picard Seeks More Than $300M From Mets Owners

The trustee for victims in the Bernie Madoff-led Ponzi scheme is seeking to recover more than $300M from Mets Owners Fred Wilpon, Jeff Wilpon, Saul Katz and their firm Sterling Equities, according to court documents unsealed Friday in N.Y. In the extensive, 365-page clawback lawsuit, trustee Irving Picard is seeking $295.47M in what he claims as "fictitious profits," $14.2M in "transfers of principal," and $12M in "fraudulent transfers of payments." Settlement talks between the Mets owners and their lawyers and Picard broke down last week after an angry back-and-forth volley in various media outlets between the two camps. "There are thousands of victims in Madoff's massive Ponzi scheme. But Saul Katz is not one of them. Neither is Fred Wilpon. And neither are the rest of the partners at Sterling Equities," the lawsuit reads. "The Sterling partners, their family members, trusts and Sterling-related entities made so much easy money from Madoff for so long that despite the many objective indicia of fraud before them, the Sterling partners chose to simply look the other way. … The Sterling partners were simply in too deep -- having substantially supported their businesses with Madoff money -- to do anything but ignore the gathering clouds." The suit alleges that "the Mets alone had 16 accounts (with Madoff) from which Sterling withdrew over $90 million in fictitious profits," with that money used to help fund the club's day-to-day operations. The Picard lawsuit was originally filed under seal in early December (Eric Fisher, SportsBusiness Journal). Picard alleges the "estimated returns from the Mets-related accounts were consistently built into the Mets' cash flow projections and budget analyses" (NEWSDAY, 2/5).

IGNORING THE WARNING SIGNS: Picard claims that the Chief Investment Officer for Sterling Stamos, a hedge fund independent of Madoff in which Fred Wilpon and Katz invested, said that he "repeatedly warned the men and their families" about Madoff. Picard also alleges that Merrill Lynch, which "acquired 50 percent of Sterling Stamos in 2007, had a prohibition on investing with Mr. Madoff and told Mr. Katz that Mr. Madoff’s operations would not meet its standards." But Picard indicated that Wilpon and Katz "kept investing with Mr. Madoff, in what the lawsuit calls a 'cycle of dependency.'" The lawsuit claims that in '02, when Wilpon and Katz "assumed full ownership of the Mets, they offered Mr. Madoff a piece of the club," which he declined (N.Y. TIMES, 2/5).

THEIR SIDE OF THE STORY: Sterling Equities officials fired back Friday with a strongly worded statement of their own, insisting once again they had no knowledge of Madoff's ongoing fraud and accusing Picard of attempting to "strong-arm" a settlement and trash their reputations and business interests. "This is a flagrant abuse of the Trustee's authority and we will not succumb to his pressure," the statement from Fred Wilpon and Katz read in part. "The conclusions in the complaint are not supported by the facts. While they may make for good headlines, they are abusive, unfair and untrue. We categorically reject them. We should not be made victims twice over -- the first time by Madoff, and again by the Trustee's actions. … The Trustee also alleges that we were blinded to Madoff's crimes because our businesses 'depended' on the returns. That is complete nonsense." Lawyers for Sterling Equities additionally said that the Madoff accounts included only those that succeeded and omitted those that lost money. Attorneys for the Wilpons and Katz said, "The Sterling partners had over $500 million in Madoff accounts at the time of his failure -- some put in only days before -- and all of it lost. … Contrary to what the Trustee asserts, the returns on the Sterling-related brokerage accounts were not 'staggering,' 'easy money,' or ‘too good to be true.’ The $300 million in profit alleged in the complaint, even if accurate, would not be 'staggering' or 'extraordinary' when viewed in the context of principal invested over the past 25 years" (Fisher). The statement continued, "Why should we 'have known' when the (Security Exchange Commission) and other government agencies that had oversight responsibilities did not know?" (MLB.com, 2/4).