Facing potentially disastrous new claims by the court-appointed trustee in the Bernard Madoff case, the owners of the New York Mets fired back yesterday, alleging that Irving Picard ignored evidence that exonerates them.
Picard alleges that Fred Wilpon and Saul Katz, longtime investors with Madoff and longtime friends of the now-imprisoned Ponzi schemer, knew or should have known about Madoff's $65 billion fraud. But Wilpon and Katz say in their first official response to the complaint against them that they were unaware of Madoff's fraud, at least in part because, despite their hundreds of millions of dollars in assets, they were relatively unsophisticated investors.
"After months of leaks, false accusations and withholding of evidence, we can finally legally respond to the work of fiction created by the trustee," Wilpon and Katz said. "Let us be very clear: We did not know that Madoff was engaged in a fraud. There were no red flags."
The filing, in U.S. Bankruptcy Court in Manhattan, takes issue with several of the things cited by Picard as red flags.
While Picard cited e-mails and testimony from Wilpon's and Katz's business partners at hedge fund Sterling Stamos Capital Management, noting that the two had invested with Madoff "notwithstanding our concerns" and "against our recommendations." But Wilpon and Katz argue that Sterling Stamos "never suggested" that Madoff was a fraud. Indeed, they cite testimony from Peter Stamos, who told Katz that Madoff was "perhaps one of the best hedge fund managers in modern times."
The defendants also dispute Picard's assertion that Ivy Asset Management had warned them about Madoff, noting that Ivy itself is "being sued by its investors and the New York attorney general for concealing its Madoff 'concerns.'"
Picard on Friday filed an amended complaint against the Mets owners, more than tripling the amount he is seeking from them. While the original lawsuit, filed last year, demanded about $300 million in false profits, the new one seeks more than $1 billion, including more than $200 million from the Wilpons' charitable organization. The owners' losses in the Madoff fraud and the uncertainty created by Picard's lawsuit have forced Wilpon and Katz to seek a minority owner for the Mets to keep the debt-ridden team afloat.
"The Katz-Wilpon defendants are wrong on the facts and the law," David Sheehan, Picard's top lawyer, said. "The trustee will prevail."