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Mets’ Madoff tab down to $30M

The New York Mets may have to pay just $30 million following a court ruling against them, a…

The New York Mets may have to pay just $30 million following a court ruling against them, a fraction of the $386 million sought by the trustee representing victims of Bernard Madoff's Ponzi scheme from the team and related defendants.

Saul Katz, Fred Wilpon and other defendants must give up as much as $83 million in fictitious profits from Mr. Madoff's Ponzi scheme, and face a trial over whether they acted in bad faith, a decision that could cost them $303 million more, U.S. District Judge Jed Rakoff ruled.

Last year, the judge threw out most of a $1 billion lawsuit against the owners brought by Irving Picard, the trustee liquidating Mr. Madoff's investment firm, saying that Mr. Picard could pursue only $386 million at trial.

The two main entities that own and operate the baseball team are liable for no more than $30 million of the $83 million, though Mr. Katz and Mr. Wilpon personally might owe as much as another $11 million, according to court documents. The fraud cost investors an estimated $20 billion in principal, Mr. Picard said.

“The court remains skeptical that the trustee can ultimately rebut the defendants' showing of good faith, let alone impute bad faith to all the defendants,” Mr. 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 willfully blinded themselves to Madoff's Ponzi scheme.”

Mr. Picard must prove to a jury that the Mets owners and other defendants were “willfully blind” to Mr. Madoff's Ponzi scheme to recover the $303 million. The trial is set to start March 19 in Manhattan.

Mr. Rakoff said that he will decide separately how much of the $83 million must be given up and by whom. The sum represents fictitious profits from the Ponzi scheme in the two years before the con man's 2008 arrest.

Mr. Picard alleges that the money was stolen from other investors who lost money in the fraud.

The defendants include partnerships, trusts and related entities of Mr. Katz, Mr. Wilpon or their relatives. Sterling Mets LP, the partnership most closely identified with the team, is liable for as much as $1.7 million in fictitious profits from the two years before Mr. Madoff's arrest, according to Mr. Picard's filing.

“I'm sure the Wilpons would have liked to win today and had the suit thrown out, but when you look at the numbers thrown around, this wasn't a billion-dollar suit, so it could have been much worse,” said Robert Boland, chairman of the sports management program at New York University's Robert Preston Tisch Center for Hospitality, Tourism and Sports Management. “The problem is that the trial comes as the Wilpons take hits on their personal finances, nest egg and franchise simultaneously.”

The Mets owners, after losing $500 million 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 stakes in the team, Mr. Wilpon said last month.

His target is to sell a total of 10 shares valued at $20 million, each representing about 4% of the franchise.

A BLIND EYE?

In his suit, Mr. Picard tried to show that the Mets owners blinded themselves to Mr. Madoff's fraud because it benefited their businesses, ranging from the team to real estate. Mr. Katz and Mr. Wilpon countered by saying that they trusted their money manager, who they said had a solid reputation.

Both sides presented conclusions disguised as facts that might not be admissible at trial, Mr. Rakoff said.

“Conclusions are no substitute for facts, and too much of what the parties characterized as bombshells proved to be nothing but bombast,” he said in the ruling.

If Mr. Picard doesn't present evidence of willful blindness at trial, the Mets owners could ask Mr. Rakoff again to dismiss the remaining suit.

“We are preparing for trial,” the Mets owners said in an e-mailed statement. “We look forward to demonstrating that we were not willfully blind to the Madoff fraud.”

Mr. Rakoff ruled just hours before the Mets played the Washington Nationals in Port St. Lucie, Fla., in their first spring training game before the regular season starts next month.