Mets owners may not have to pay any money in Madoff settlement

The owners of the New York Mets agreed to a $162 million settlement of claims by the liquidator of Bernard Madoff’s firm that won’t require them to pay any money for at least four years, if ever.

U.S. District Judge Jed Rakoff announced the settlement today before the parties were to have begun selecting a jury for a trial over whether the Mets owners acted in bad faith when they withdrew money from Madoff’s Ponzi scheme. Under the settlement, Fred Wilpon, Saul Katz and related parties owe the Madoff estate $162 million, which will may be totally or partially offset by their own claims for $178 million in losses.

As part of the agreement, Picard dropped his allegation that the Mets owners blinded themselves to Madoff’s Ponzi scheme because it benefitted their businesses.

“We were not willfully blind,” Wilpon said after a hearing in Manhattan. “This settlement bears that out.”

Wilpon said he will fly to Florida, where the Mets are holding spring training, with the goal of bringing the team “back to the prominence that our fans deserve.” The Mets have three wins and 11 losses through Sunday in spring training games this year, last in the Grapefruit League.

The settlement was reached March 16, with the assistance of former New York Governor Mario Cuomo, who acted as mediator in the dispute. Rakoff must approve the deal for it to take effect.

Sword of Damocles

“Both sides helped their respective causes,” said Cuomo, who played minor-league baseball for the Pittsburgh Pirates organization. Picard recovered money for Madoff victims while avoiding “a long, bitter expensive trial,” he said. The Mets owners were able to remove “the sword of Damocles” hanging over their heads and return to their business.

Cuomo said the settlement may remove some of the impetus behind bills that have been introduced in Congress to limit the power of trustees in cases like Madoff’s fraud.

When asked if there was animosity between the parties in the negotiations, Cuomo smiled, saying “When we’re confronted by it, we ignore it.”

The negotiations began gaining momentum beginning early last week, according to lawyer David Sheehan, who represents Picard. The parties finalized the deal on Friday night, March 16, he said.

“The settlement is for the benefit of all the customers,” Sheehan said.

Six Years

The settlement amount is equal to all of the profits withdrawn by Katz and Wilpon and a group of related individuals, family trusts and entities in the six years before Madoff’s December 2008 arrest, Picard said in a statement. Rakoff had ruled that Picard could only claim two years of profits, as much as $83 million.

The main question for the trial was to have been whether the owners acted in bad faith when they withdrew money from Bernard L. Madoff Investment Securities, the brokerage Madoff used to run his swindle.

In the settlement, the Mets owners assign to Picard their $178 million in claims against the Madoff estate. Katz and Wilpon provided personal guarantees of $29 million in case Picard is unable to collect the full $162 million agreed in the settlement.

The amount Picard collects on the claims assigned to him by the Wilpon group will be determined by the total amount Picard collects on behalf of Madoff’s customers. Under the agreement, they only don’t have to dip into their own pockets for at least four years. Katz and Wilpon agreed to personally guarantee $29 million of any shortfall.

Trial Opposed

The Mets owners had opposed a jury trial and tried unsuccessfully to get the remaining claims brought by Picard dismissed after Rakoff cut them back to $386 million from $1 billion.

Picard’s lawyers had said they were confident a jury would find the Major League Baseball club’s owners deliberately ignored the fraud because it benefited their businesses, ranging from the team to real estate.

The Ponzi scheme cost investors an estimated $20 billion in principal, according to Picard.

Madoff, 73, pleaded guilty in 2009 to orchestrating what prosecutors called the biggest Ponzi scheme in history. He’s serving a 150-year sentence in federal prison in North Carolina. Picard and his law firm, Baker & Hostetler LLP, have charged about $273 million in fees for liquidating the Madoff firm since it collapsed in December 2008.

The first official word of the settlement came from Rakoff, who had scheduled jury selection for today.

“It’s a lovely day for a trial,” Rakoff said after taking the bench this morning. “But the parties have something else in mind.”

The case is Picard v. Katz, 11-cv-03605, U.S. District Court, Southern District of New York (Manhattan).