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02/04/11 2:25 PM EST
Wilpon, Katz respond to unsealed lawsuit
By Barry M. Bloom / MLB.com
A judge in a New York federal bankruptcy court unsealed documents in a lawsuit against Mets owners Fred Wilpon and Saul Katz on Friday that alleges the pair earned $300 million from a Ponzi scheme engineered by defamed broker Bernard Madoff.
The release of the documents brought a swift rebuttal from Wilpon, Katz and their attorneys, who called the trustee's lawsuit against Sterling Equities "an outrageous 'strong arm' effort to try to force a settlement by threatening to ruin our reputations and businesses which we have built for over 50 years."
Settlement negotiations with the trustee, Irving Picard, ended on Thursday, at which time the defendants asked the judge to unseal the documents. Picard is seeking clawbacks of up to $1 billion, which reflects the possible profit and the amount of money invested with Madoff over 25 years, and he alleges that the Mets owners knew or should have known about the scam. Wilpon said last week that he would entertain offers to sell a minority share of up to 25 percent in the Mets to raise money because of the lawsuit.
Wilpon, Katz and Wilpon's son, Jeff, the Mets' chief operating officer, met with Commissioner Bud Selig in New York on Tuesday to discuss the state of the franchise and the pending litigation.
"The plain truth is that not one of the Sterling partners ever knew or suspected that Madoff ran a Ponzi scheme," Wilpon and Katz said in a joint statement. "Because the trustee has no evidence to support his claims even after a year-and-a-half review of over 700,000 pages of documents and many, many hours of depositions, he has created a claim that we 'knew or should have known' that Madoff was a fraud.
"Why should we 'have known' when the [Security Exchange Commission] and other government agencies that had oversight responsibilities did not know?"
The attorneys for Sterling Equities -- Robert B. Fiske Jr., Karen E. Wagner and David L. Caplan -- agreed, saying in the statement that the partners "had over $500 million in their Madoff accounts at the time of his failure -- some put in only days before -- and all of it lost."
"Anyone who knows Fred Wilpon and Saul Katz knows that they would not have dealt for one minute with someone they thought might be engaged in fraud," the lawyers said. "Moreover, as a matter of elementary common sense, no rational person who thinks his broker might be a fraud would leave such a substantial sum with him.
"Contrary to what the trustee asserts, the returns on the Sterling-related brokerage accounts were not 'staggering,' 'easy money,' or 'too good to be true.' The $300 million of profit alleged in the complaint, even if accurate, would not be 'staggering' or extraordinary when viewed in the context of the amount of principal invested over the past 25 years."
Madoff was arrested in late 2008 and subsequently sentenced to 150 years in prison for running a $50 billion pyramid scheme in which he used recent investments to pay back the principal and interest of earlier investments.
Wilpon and Nelson Doubleday purchased the Mets for $21.1 million on Jan. 24, 1980. Wilpon bought out Doubleday in August 2002, at which time Katz, his brother-in-law, became the team's president. In 1972, Katz and Wilpon became co-founders of Sterling Equities, a Long Island real estate company that owns the Mets, funded the building of $800 million Citi Field, owns the Brooklyn Cyclones and developed MCU Park, where the Class A team plays near the Coney Island boardwalk.
Wilpon's and Katz's relationship with Madoff at times extended beyond business into a more social nature, but they categorically said on Friday that they were just as stunned as anyone when Madoff was arrested.
"We thought that Madoff was a friend for 25 years," they said. "That is why his betrayal was so painful. Each of the Sterling partners and their families invested with Madoff in good faith right up to the day his crime was exposed. We were as shocked as the rest of the world when the money in our accounts vanished along with the billions he swindled from thousands of other innocent people."
The lawsuit alleges, though, that Wilpon and Katz ignored numerous warnings that the high yield on their investments were "too good to be true." Plus, because a financial institution like Merrill Lynch wouldn't invest with Madoff, the Sterling Equity partners should have known that those operations were fraudulent.
"In fact, many people invest with managers using such proprietary strategies, which are entirely lawful," the attorneys said. "That Merrill Lynch decided not to means nothing."
Furthermore, the lawsuit alleges that the Sterling Equity partners used the profits from their investments with Madoff to establish personal fortunes, create dozens of family trusts and financially fuel their array of businesses, from the Mets to real estate to the creation of the SportsNet New York cable network.
Wilpon and Katz countered on Friday that nothing could be further from the truth.
"In summary, we are proud of what we have built and achieved as a family," they said. "We have worked very hard for our entire lives, always with character and integrity. We will not sit still while the trustee or anyone else makes these outrageous and irresponsible allegations. People who know us know the truth about who we are and what our life's work represents."