Brothers-in-law Fred Wilpon and Saul Katz, co-owners of the New York Mets, were given some relief in what had the potential to be a $1 billion lawsuit. Currently, nine of the eleven counts in the complaint of Irving Picard, the court-appointed trustee of assets seized from Bernie Madoff, have been dismissed. The two men, along with several others connected to the team’s ownership group, Sterling Equities, were brought before the court on allegations of fraudulently earning money via involvement in a Ponzi scheme with the notorious Madoff.
All counts relating to constructive fraud have been dismissed, however, Picard still stands to gain up to $383 million. A paramount allegation that still remains to be litigated is whether or not Wilpon and Katz earned nearly $300 million in fictitious profits by investing in a Ponzi scheme that they knew to be fraudulent. According to U.S. District Judge Jed Rakoff, Picard can recover up to $83 million in fictitious profits and $300 in principal. The two require separate standards of proof. To recover fictitious profits, Picard will only need to show that defendants Wilpon and Katz did not provide any sort of value for the monies they received. This should not prove to be a difficult feat seeing as the defendants, if portrayed as intelligible investors, would have known their profits to be entirely unrealistic given their investments. Somewhat more of a challenge however, will be obtaining the proof necessary to succeed in recovering the principal. Rakoff noted that Picard must prove that defendants were “intentionally blind” to Madoff’s fraudulent and illegal actions. Thus, Picard will need to establish that Wilpon and Katz had substantial and informed suspicions of Madoff’s fraudulence and evidence of their states of mind.
With the New York Mets losing tens of millions of dollars each year, this lawsuit does not bold well for Wilpon and Katz’s hold on their ownership of the team.