Last night the New York Mets lost their third straight on the diamond, dropping them to 25 games back of rival Philadelphia. This afternoon their ignominious season comes to a merciful end; it will be the third straight season they’ve failed to win half of their games and the fifth straight in which they’ve missed the playoffs. Nevertheless, the Mets higher-ups are no doubt rejoicing.
Why? Yesterday, Judge Jed Rakoff hit a three run homer for the Mets. Not quite a walk off grand slam, but close. Mets owners Fred Wilpon and Saul Katz, all-around nice guys, were facing a lawsuit filed by Madoff trustee Irving Picard. This suit alleges… a string of bad free agent signings. Okay, not really. Rather, the suit claimed they willfully ignored the fraudulent source of “dividends” coming from their investments with Bernie Madoff. Rakoff would have none of it and dismissed nine counts; with the remaining two claims, he imposed a standard of “actual fraud”, making it virtually impossible for Picard to prevail.
“The Bankruptcy Code precludes the Trustee from bringing any action to recover from any of Madoff’s customers any of the monies paid by Madoff Securities to those customers except in the case of actual fraud," concluded Judge Rakoff.
Rakoff decided to allow the case to proceed on the two remaining counts of actual fraud. But instead of being on the hook for almost $300 million, the ruling limits Wilpon and Katz’s potential exposure to $83 million. That’s a $200 million plus decision. And that remaining "exposure"? That’s potential exposure. They haven’t paid a nickel yet and likely will not. The fraud claims will be nearly impossible to establish absent an insider. Picard must prove Wilpon and Katz had knowledge of the fraudulent activity, and decided to capitalize on the Ponzi scheme at the expense of other investors. Good luck. Judge Rakoff has already called Picard’s evidence “less than convincing in this regard.” After all, Wilpon invested with Madoff because their sons played baseball together, and because he heard of the lucrative returns Madoff promised and, for all appearances, achieved…
They may not be popping champagne in the Mets’ clubhouse this afternoon, another non-playoff season (five in a row??), but they almost certainly are in the owner’s box.
Assisted by David Martin