Amended Lawsuit Raises More Questions

An article by posted on March 18, 2011

A huge body blow. That’s the best way to describe the impact of the amended lawsuit filed today by Irving Picard against Sterling.

In addition to the approximately $300 million in fictitious profits received by the Sterling Defendants cited in the original complaint, the amended complaint states that the Trustee seeks more than $700 million in alleged fraudulent transfers of principal received by the Sterling Defendants, bringing the total recoveries sought by the Trustee from the Sterling Defendants to more than $1 billion.

The additional alleged fraudulent transfers of principal occurred during the six years prior to the December 2008 commencement of the BLMIS liquidation proceeding and include preferential transfers received by the Sterling Defendants within the 90-day period prior to the filing date.

“The amended complaint sheds more light on the deep dependency of the Sterling business organization on the continuation of the Madoff fraud and certain knowledge of indicia of fraud by the Sterling partners,” said David J. Sheehan, counsel to the Trustee.

That’s just a part of it. Here is the full press release from trustee Irving Picard where you can review all of the changes in the amended lawsuit filed in U.S. Bankruptcy Court on Friday afternoon.

Joe emailed me this and when I read it, I almost screamed for the Wilpons to get out of the baseball business. He’s not fooling anyone and I’m wondering if he realizes just how much trouble he is in. To be fair, here is a statement from Wilpon issued immediately after. All two sentences of it.

“The amended complaint is the latest chapter in the work of fiction created by the Trustee. We will pursue a vigorous legal defense that will set the record straight and vindicate us.”

I wonder if he realizes that Bernie Madoff is in jail for the rest of his life. No kidding Fred, he really is. A vigorous legal defense will take years, settle Fred, settle.

Certain legal departments around the City are working very hard on this case, and even Mario Cuomo has been summoned to mediate the situation without much success or progress to report.

Earlier today, the Wall Street Journal reported that executives at Time Warner Cable and Comcast would not allow the owners of the New York Mets to sell part of their stake in the jointly owned SNY network, nor would they give investors in the Mets any financial information about the cable network, virtually eliminating the possibility of SNY being included in any sale. Wow. Maybe this little tidbit included in the amended lawsuit had something to do with their position:

The amended complaint also provides additional substantiation of the inter-dependent relationship between Sterling and BLMIS as well as certain Sterling partners’ knowledge of Madoff’s dishonesty in his investment advisory business. For instance, the amended complaint details a multi-million-dollar interest- and cost-free bridge loan from Madoff to Sterling in connection with its purchase of the broadcast rights for the New York Mets from Cablevision. This transaction was documented by a single letter agreement that falsely described the loan as an “investment” by Ruth Madoff in the company that would later become the SNY network.

The way Picard worded it suggests that he has a copy of this letter among his mountain of other evidentiary paper trails. Yikes.

With the regular season closing in, the Mets have to start issuing paychecks to their players on April 15 and pay their stadium bondholders $22 million in June, the first of two semiannual payments. Moody’s Investors Service downgraded those bonds to junk status last year, and last month the ratings agency cited Picard’s lawsuit as a reason for changing its outlook on the bonds from stable to negative.

As the Mets prepare for the new season, their owners continue to solicit interest from potential bidders. Stepping back from Wilpon’s initial comments, the team’s adviser on the sale, Steve Greenberg, said the Mets would consider selling more than 25 percent as long as the owners retain control. About a dozen investment groups have applied to M.L.B. for permission to see the team’s financial records. Baseball is expected to start approving the groups in the next week.

But many sports investment bankers say bidders are almost certain to want more than a simple minority stake in the club, particularly if the Mets’ finances are in distress, as some bidders suspect. That could lead to protracted negotiations and delay any financial boost the team hopes to get from the sale.

The noose is getting tighter.

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