NEW YORK - The New York Mets’ owners suffered dual setbacks Monday when a federal judge ruled that they must pay millions of dollars to the victims of Bernard L. Madoff’s fraud and go to trial on the gravest accusation against them: that they blinded themselves to evidence that Madoff might have been up to no good during their many years of profitable investing with him.
Jed S. Rakoff, a federal district court judge in Manhattan, said that in the coming weeks he would determine exactly how much the team’s owners will have to promptly turn over to the bankruptcy trustee representing Madoff’s many victims. The figure could be as high as $83 million.
But a greater, perhaps more perilous problem for the team’s owners, Fred Wilpon and Saul Katz, was that Rakoff cleared the path for a jury to sit in judgment of the competing claims at the heart of the lawsuit:
Were the men, who invested some $1.6 billion with Madoff over two decades, innocent victims of a man they considered a friend and a financial whiz? Or where they sophisticated investors who, in myriad ways over many years, were shown evidence that Madoff’s returns were too good to be true, alarms they chose to ignore or discount because they and their businesses had grown too dependent on their Madoff profits?
That trial will begin March 19 in federal court in Manhattan, and it could see Wilpon and Katz testify under oath about the inner workings of their considerable real estate, sports, and financial empire.
Whatever its outcome, the trial seems certain to create a couple of weeks of unpleasant headlines for the Mets just as the club struggles to field a credible team for the 2012 season.
The Mets, having lost $120 million the past two years, made the biggest one-season payroll reduction in baseball history last fall. They signed no big-money players for the second straight off-season, saw their revenue at Citi Field shrink further in 2011 and have key players coming back from injuries or nursing new ones.
The lawsuit, filed in late 2010 by Irving H. Picard, the court-appointed trustee, originally sought $1 billion from Wilpon, Katz and their dozens of codefendants, who include relatives like Wilpon’s son, Jeff; executives who work for Sterling Equities, the holding company that owns the Mets; and the team itself.
The Mets, soon after the lawsuit became public, quickly put a portion of the team up for sale. More than a year after that announcement, the team is still trying to raise the $200 million it is seeking for a 40 percent chunk of the team.
Meanwhile, the team’s debts have only expanded, with a $25 million loan from Major League Baseball in late 2010 and a $40 million bridge loan last fall from Bank of America needed to keep the club operating while it sought investors. Wilpon and Katz’s greatest hope for relief was that Rakoff, who had earlier reduced the size of the lawsuit, would declare there was not enough evidence against them to go to trial. Instead, they now face a possible jury verdict of more than $300 million.
For Picard, the decision was a welcome development after a series of disappointments. Rakoff, against the wishes of Picard, had seized the case from Bankruptcy Court, asserting that the lawsuit raised complex questions of securities law best heard in federal district court. Rakoff also sharply limited the time frame that the trustee could use to recover money from Wilpon and Katz.