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Friday
Jul082011

Mets Owners File Additional Brief in Bid to Dismiss Madoff Trustee's Lawsuit

In a filing July 7, lawyers for New York Mets team president Saul Katz and other team executives submitted additional briefing in support of their previous motion to dismiss Irving Picard's lawsuit. Picard, the court-appointed trustee liquidating Bernard L. Madoff Investment Securities LLC, filed suit in January seeking hundreds of millions of dollars from the Mets owners and team executives, alleging that as sophisticated investors, they had to know that the consistent returns achieved by Madoff could not have been legitimate.  

Unique from the typical clawback lawsuit - which now total over 1,000 - Picard sought not only money withdrawn in excess of invested principal - termed "false profits" - but also the return of 'fraudulent transfers' withdrawn from Madoff into accounts owned or controlled by the executives.  Picard asserted that such an approach was appropriate in light of "certain indicia of fraud by the Sterling Partners.".  Not surprisingly, the Mets executives fired back, lambasting Picard and his team for their overzealous pursuit and pointing to the subsequent financial damage suffered by the Mets organization after the Madoff fraud was exposed.

In their motion to dismiss and subsequent reply in support, the Mets executives seek to refute the many facts alleged by Picard in support of his contention that the defendants knew or should have known of the illegality of Madoff's operation.  Calling Picard's motion without a "factual or legal foundation," the defendants specifically sought to refute several of the allegations, arguing that (1) the Sterling Partners never shopped for Ponzi Scheme Insurance, and (2) Mets executive David Katz was not concerned that Madoff's scheme was a Ponzi scheme.

The issue is now fully briefed, and a hearing will likely be scheduled in the near-future.  However, any hearing will be held in a New York federal court, rather than Bankruptcy Court, after a ruling that the legal issues raised were more suitable to be heard in federal court.  This is seen as an advantage for the Mets defendants, as the Southern District of New York is highly experienced in dealing with such issues.