Mets Owners Suffer Setback In Madoff Suit; Court Ruling May Require Payment Of $300M
A ruling issued yesterday by the Court of Appeals for the Second Circuit could require Mets Owners Fred Wilpon and Saul Katz to "turn over at least $300 million" to Bernie Madoff trustee Irving Picard, according to Sandomir & Belson of the N.Y. TIMES. The decision marks a "major financial setback for the owners who, faced with an unprofitable baseball operation, have already been forced to sell a portion of the team just to stop the bleeding of money." The three-judge panel unanimously held that Picard's "central formula for deciding how to recoup and redistribute the money that had moved through Madoff's vast Ponzi scheme was appropriate." Picard "had decided that investors who had taken more money out of their accounts with Madoff than they had put in had to return their 'net winnings.'" The Second Circuit's ruling can be appealed to the U.S. Supreme Court, but lawyers for Wilpon and Katz "declined to comment" on their next course of action. Wilpon and Katz "may well argue that the $300 million figure should be reduced because they had many accounts over the years that wound up 'net losers.'" But even settling "a portion of the claim may require the owners to sell off additional assets." Sandomir & Belson note the ruling "underscores how much the owners have at stake in a hearing set for Friday" in U.S. District Court for the Southern District of New York. The Mets owners and Picard "will square off in front of Judge Jed S. Rakoff over, among other things, the legitimacy of Picard's demand for $700 million, a claim he says results from Wilpon's and Katz's willful blindness to evidence that Madoff might have been a fraud." Yesterday's decision "applies to the broad swath of Madoff investors and did not mention Wilpon and Katz." But Sandomir & Belson note the opinion appeared to allude to the owners when it said, "It is not contended on this appeal that any victim knew or should have known that the investment and customer statements were fictitious." The Mets expect to "lose as much as $70 million this season and have not received the $200 million they need" from prospective investor David Einhorn (N.Y. TIMES, 8/17). On Long Island, Anthony DeStefano notes the Mets owners and Picard are engaged in mediation before former New York Governor Mario Cuomo, who said the Second Circuit's decision and some district court rulings "have not changed the parties' interest in pursuing a settlement" (NEWSDAY, 8/17).