NY Mets Seek Conclusion to Madoff Lawsuit

July 8, 2011

Owners of the New York Mets baseball team asked a federal judge to dismiss the US$1bn lawsuit against them by the trustee seeking money for victims of Bernard Madoff’s Ponzi scheme.

Fred Wilpon, Saul Katz and others at Sterling Equities said the trustee Irving Picard cannot show they knew they were enabling Madoff to commit fraud at Bernard L. Madoff Investment Securities LLC, where they were customers, or acted in bad faith.

These defendants also rejected Picard’s allegations that they were repeatedly warned by members of their inner circle, including principals at the hedge fund Sterling Stamos, that Madoff’s firm was a “scam,” “too good to be true” or a “black box,” or that they should not invest with Madoff.

The Sterling defendants “were betrayed by a friend and realized an aggregate loss of over half a billion dollars” on December 11, 2008, the day Madoff’s fraud became known, a filing in Manhattan federal court shows. “There were no warnings.”

A spokeswoman for Picard did not immediately return a request for a comment. U.S. District Judge Jed Rakoff has scheduled an August 19 hearing in the case.

Picard has accused the Mets owners of seeking to enrich themselves by investing with Madoff despite a slew of red flags about his possible crimes, going so far as to ask whether they needed a “one of a kind” insurance policy for themselves.

The case, which is being mediated by former New York Governor Mario Cuomo, seeks to recover US$300m of “fictitious profits” and US$700m of principal.

It is among the most contentious of Picard’s roughly 1,050 lawsuits. These seek more than US$103bn, including US$58.8bn from Bank Medici AG, UniCredit SpA and others; US$19.9bn from JPMorgan Chase & Co; and US$9bn from HSBC Holdings Plc and some feeder funds.

In May, the Mets owners entered talks to sell part of the team to hedge fund manager David Einhorn, hoping to cover some debt and projected operating losses.

Madoff, 73, is serving a 150-year prison term.