Mets owners head to trial over $386 million Madoff lawsuit

A matter of sophistication

March 5 (Bloomberg) -- The New York Mets owners must go to trial over a $386 million lawsuit by the Bernard Madoff brokerage trustee who alleged that they ignored the fraud because it benefited their businesses.

U.S. District Judge Jed Rakoff refused today to dismiss the suit as baseball team owners Fred Wilpon and Saul Katz had asked. Rakoff ruled that Madoff trustee Irving Picard can claim as much as $83.3 million without a trial. To get the rest of the $386 million, he must prove to a jury that the Mets owners and other defendants were “willfully blind” to the fraud.

Rakoff last year threw out most Picard’s $1 billion lawsuit against the owners, saying Picard could pursue only $386 million at a trial set to start March 19 in Manhattan federal court. To get most of the money, Rakoff said Picard must prove the defendants, including Wilpon and Kats, were willfully blind to Madoff’s crimes, which Picard has said cost investors about $20 billion in principal.

Wilpon and Katz contend they should be allowed to keep the $386 million. Picard isn’t entitled to a trial because he hasn’t proved what Rakoff said he was supposed to, Karen Wagner, a lawyer for the Mets owners, has said.

“There is no evidence that any defendant believed Madoff was a fraud and deliberately ignored it” as Picard alleged, Wagner told Rakoff last month. Wilpon and Katz were “completely open” about their Madoff investments, showing them to their banks and using them as collateral for loans, she told Rakoff. “They wouldn’t have done that if they’d thought there was anything to hide.”

Sophisticated

David Sheehan, a lawyer for Picard, responded that the defendants were sophisticated investors and he believed a jury would see willful blindness.

Sheehan asked Rakoff to let Picard claim $83 million before the trial, leaving a jury to decide the rest of the suit. The amount represents fictitious profit got from the Ponzi scheme in the two years before the con man’s 2008 arrest.

The Mets owners, after losing money in the Ponzi scheme, have cut the team’s basic payroll to about $90 million this season, from $140 million. They also have sold seven minority ownership shares in the team, Wilpon said last month. His target is to sell a total of 10, $20 million shares, each representing about 4 percent of the franchise.

Madoff, 73, pleaded guilty in 2009 to orchestrating what prosecutors called the biggest Ponzi scheme in history. He is serving a 150-year sentence in a federal prison in North Carolina. Picard and his law firm, Baker & Hostetler LLP, have charged about $273 million in fees for liquidating the Madoff firm since it collapsed in December 2008.

The case is Picard v. Katz, 11-cv-03605, U.S. District Court, Southern District of New York (Manhattan).

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