The New York Mets owners have to give up as much as $83 million in illegal profits from Bernard Madoff’s Ponzi scheme and face a trial over another $303 million of their own money to determine if they acted in bad faith, a judge ruled.
The Mets have been slashing payroll and selling $20 million minority stakes, each representing about 4 percent ownership of the team, including a stake to hedge fund executive Steven A. Cohen of SAC Capital Advisors.
Mr. Picard has said he has recovered $9.1 billion for Mr. Madoff’s victims, although much remains tied up in litigation.
Mr. Madoff, 73, pleaded guilty in 2009 to orchestrating what prosecutors have called a $64.8 billion Ponzi scheme. He is serving a 150-year sentence in a North Carolina federal prison.
“The court remains skeptical that the trustee can ultimately rebut the defendants’ showing of good faith, let along impute bad faith to all the defendants,” Rakoff said in his ruling in U.S. District Court in Manhattan. “The principal issue remaining for trial is whether the defendants acted in good faith when they invested in Madoff securities in the two years prior to bankruptcy or whether, by contrast, they wilfully blinded themselves to Madoff’s Ponzi scheme.”
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 Katz, were willfully blind to Madoff’s crimes, which Picard has said cost investors about $20 billion in principal.
David Sheehan, a lawyer for Picard, responded that the defendants were sophisticated investors and he believed a jury would see willful blindness.
Rakoff agreed 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 (1155L), have charged about $273 million in fees for liquidating the Madoff firm since it collapsed in December 2008.