15
2012
Judge Deals A Jarring Blow To Mets Defense
An article by Hojo's Mojo
On Wednesday, the Mets owners were dealt a jarring blow to their defense when Judge Jed S. Rakoff ruled that Fred Wilpon and Saul Katz must prove that they were not “willfully blind” to Madoff’s scheme.
The burden of proof will not be on Irving Picard, but instead it’s on the Mets owners who have to convince a jury that they acted in good faith.
The ruling comes eight days after Rakoff allowed the case to proceed to trial.
Earlier this month, Rakoff had already ruled that the Wilpons will owe Picard up to $83 million for fictitious profits earned, with another $303 million in principal at stake during the trial which is set to begin with jury selection on Monday.
Once a jury is chosen, both sides will be allowed to present a 45-minute opening argument. Judge Rakoff has said that the trial will last 10 business days.
Strap yourselves in, this ride could get a little bumpy.
About the Author: Rob Johnson
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NL East Standings
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|---|---|---|---|---|
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| Phillies | 34 | 37 | .479 | 8.5 |
| Mets | 25 | 40 | .385 | 14.5 |
| Marlins | 22 | 47 | .319 | 19.5 |
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Wow! That is not good news for the Wilpons. How the hell are they supposed to prove they were not turning a blind eye? The burden of proof should belong to Picard in my opinion.
I agree. Legally, they are innocent until proven guilty. This ruling is saying that the Wilpons are guilty, but will have a chance to prove their innocence.
From what I’m reading on Rubin’s blog, this is standard in bankruptcy court:
‘Bankruptcy attorney Chuck Tatelbaum of Hinshaw & Culbertson said Rakoff is using the standard from bankruptcy court, where the case originated, that the defendants in a clawback lawsuit bear the burden of proof.’
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I only know what others have written and reported on but if this is standard, wonder why it took until just 5 days before the start of the trial for all parties to be clear on this?
Gotta love the court system in this country.
it’s obscene that it has even dragged on this long, wasting an incredible amount of time and money.
But, in the wording was the term picard had to rebut, so it pretty much sounds the same. The defense will say “we weren’t financial people, the SEC said he was fine, lot’s of insiders invested with him, and we were duped”.
then picard will have to produce some evidence to the contrary. And if he has that, it really doesn’t matter who goes first!
And then Picard will come back with something like ‘the SEC isn’t on trial here, you are’, or some such rhetoric.
Being the cynic that I am, there isn’t a doubt in my mind Madoff had some of those SEC officers in his pocket. How they could have missed this for that many years is almost unbelievable.
and the Wilpons will come back with:
If the government with all it’s power of subpena couldn’t find out what he was up to how the hell could we?
Remember this is going to a Jury!
They don’t know the technicalities of Law they only will judge based on if they believe the Wilpons knew or not!
It’s really just a he said she said trial!
I agree about a jury trial. It’s all going to come down to trying to sway these jury types who don’t know the laws, as you said.
Don’t know the Law and I bet the only investment knowledge they have is how to run their 401K!
They are going to be so confused by Picard who will have to get highly technical on the aspects of investing and analysis involved in figring out a ponzi scheme and when it all goes over their heads the Wilpons will win!
In fact the ruling that made the Wilpons cough up the undisputed 83 Mil actally helped them because now that 83 Mil is not part of this case! They could even supress the mentioning of it as prejudicial and an attempt to sway the jury with information that is irrelevant!
I’ve seen reports that Picard’s firm has been paid over $400 million so far – he gets paid by the hour, not a percentage of what’s recovered. It is in his best interest to drag it out as long as he can. I think it is crazy that the courts are basically enabling Picard’s golden goose.
I have to think this ruling is a built-in appeal. Yes, the requirement for “proof of good will” exists in bankruptcy court, but they are not in bankruptcy court – you can’t pick from column A and column B.
Think of a wrongful death civil suit vs. a criminal murder trial; in civil court it is the “preponderance of evidence”, in criminal court it is “beyond a reasonable doubt”. A judge in criminal court can not decide that he is will use the “preponderance of evidence” criteria.
Also, the goal of the bankruptcy is to collect outstanding debt – not make a profit. Picard has lawsuits that are greater than the amount lost.
[Not a legal expert but] I believe the judge has made a huge legal blunder. I believe even with this criteria the Wilpons will win, but I believe it is a guaranteed appeal if they loose.
This is total BS. I thought this was already rule on back in November. Back then the proof was put on the plaintiff, now a week before the trial it’s changed? How is that fair and how exactly do you convince that you weren’t aware of something?
Prove to me, you did not know what was going on… Plain and simple…
Except not. It is compeltely contradictory to the rules of logic and the foundations of our justice system.
” Picard’s attorneys say Koufax, Morgenthau and others do not know if Wilpon and Katz were “willfully blind” to Madoff’s fraud.” (FROM DAILY NEWS.)
So Koufax and Morgenthau do not know but Picard does.?
So much for the theory that everything is getting better for the Wilpons. All of a sudden the bar got set a lot higher. One has to wonder about the competence of the Wilpons’ legal staff. But then, it’s the Wilpons and why would we expect comepetence anywhere they are involved? If this goes the wrong way for them, and there is a real likelihood of that, then you would think a sale of the Mets is inevitable. How would they able able to patch together the financials if they have to cough up over $300 M?
I don’t care what the verdict is, I just want it to be over so the team can move forward.
If they only pay the $83mil (which is what the law says they have to pay), fine…pay it, keep the team, whatever..
If they have to pay more…whatever, then force the sale of the team, or at least many more shares…
I know may hate Wilpon, I know he’s made mistakes, but he does want to win…People can’t assume that a new owner would be better…there are plenty of crappy owners across the league and across sports in general. I mean, do we want the Dolans to buy the Mets? I know many want Cuban here, but does anyone really believe that Uncle Bud will let him into the league?
No matter what happens, the Mets are stuck in limbo until we have a better idea of what the future is.
And all they have to say is they looked into it but when the SEC cleared Madoff they dismissed the unproven suspicions!
Really.
I mean c’mon. The SEC OK’s Maddoff but the investors “should have known?”
Give me a break.
Basically all Picard really has is some woman who will testify she had reservations (no proof) about how he was making those gains.
If he goes so far to say well being investors they should have known it was a scam based on the returns then it comes back on cross well if it was so obvious why did your clients keep their money in it?
Why didn’t they get out?
When it comes right down to the nuts and bolts of this case, all Picard is really doing is accusing the Wilpons of is being smarter than his clients!
Cause they did what his clients did only were quicker on the withdrawal!
Unless he has some proof they were the frontmen for the scam I don’t really see how he can make the case they should have known something his own clients didn’t know!
I really have no idea how anyone can claim that the Wilpons should have known but Madoff’s sons, (who, if I am not mistaken were the damn complaince officers) were in the clear.
it has been a money grab all along. Picard thought he had some patsies lined up, but it didn’t work out that way, but once he started he was going til the end.
based on everything so far (written about it, even the judges rulings) the only logical outcome should have been to settle this a long time ago for the 83mill. Put, Picard seems to be a bad combination of egotistical, vindictive, and getting paid by the hour!
If I’m not mistaken, there are at least one – maybe two? – class action suits against Picard for his practices involving these clawback cases for the victims. The class action suits represent these victims.
That kind of tells you all you need to know on this.
i beleve those cases though are about his not getting a lot from some other firms who settled for a song and dance and a mere pitance of what they took out.
The Issue here is he is playing hardball with the Wilpons because they are the most press reliant people and he thought they would settle just to stay out of the press…
What he didn’t realize is that the Wilpons have been fighting bad press for most of their lives so this was nothing they haven’t dealt with before!
They didn’t really care about the press regarding this case and probably still don’t!
Ah….I see. Thanks, didn’t know the nature of those class action suits.
Heck, Madoff’s sons were the ones who turned him in.
Guilt and shame over that and what their father did led one to commit suicide.
All Picard has is the statement on one adviser who had suspicions about how he was out performing the Market!
And he may have one other firm who was trying to get Wilpon’s business adding to that!
If the SEC with all their oversight coldn’t figure it out how the hell could an Investor know what was going on?
The SEC gave him a pass, he was the Chairman of the Board of Directors and on the Board of Governors of the NASD, he was a non-executive chairman of the NASDAQ, the WSJ even wrote has a genius he was…this guy was around for 40 years, why would anyone think he was not legit?
What gets over looked is the amount of bribes…errr contributions to the Democratic Senatorial Campaign Committee among others like Charles E. Schumer got from Madoff…I will give them credit for “returning” some of the money to the victims. Although, maybe if they didn’t get large amounts of money they wouldn’t have the SEC give them a joke of an investigation.
This is the problem with our system right now…and why I can give some support to the “Occupy Wall St.” protesters (even though a lot of them are kinda nuts and missing the point). When the crooks at Wall St. can bribe the people who are supposed to be protecting the people, how can we win? Then it only hurts legit investors and people trying to make a decent living.
What’s worse is, we know that the Republicans are going to be “Pro-Wall St.”, which is fine…we need people investing and we need investors the freedom to make money and protect there rights. But the Democrats are supposed to be “protecting” the little people and making sure that Corporations and Wall St. don’t run wild and get rich while we get screwed in the end. Sadly, both parties only care about making money and getting reelected while keeping us distracted with issues that never get “solved” nor really have an effect on our quality of life.
Sorry, I’ll digress…this is about baseball, not about how corrupt and dysfunctional our government is.
How do you piece together a Ponzi scheme. You can’t. In a Ponzi scam some suckers win, some lose, and some suckers break even (according to the gambler song by Kenny Rogers breaking even is about the best you can hope for). Anyway does anyone think the Wilpons and their partners woke up one day and said “let’s invest in a Ponzi scheme with Bernie.” Of course not. Their investment decisions were based on thier advisors and recommended by their board. If the judge rules for or against the Wilpons it wil be nothing more than a guess, pure and simple. For justice the judge should say “get out of my court, no one can figure this out-Madoff’s victims invested voluntarily, some won, some lost and some got back what they put in. That’s life-goodbye!
Well the first step to piecing together a ponzi scheme is to actually have a vested interest in exposing it! LOL
When your in it the last thing you want to know is it is a ponzi scheme becase your benefitting from it!
On that much Picard is correct! I’m sure the Wilpons didn’t WANT to investigate any further than they had to but prove that in court if you really can!
The suspicions were all based on Madoffs reported returns compared to the Market’s average performance.
While the rest of the contry was losing in the stock market or making little gain, Madoff was claiming huge gains that even in a very up and active market are hard to sustain!
It is possible to do that but you have to be either a friggin genius or be acting on insider trading info to beat the market that much….
Should they have known it was a scam? Probably! But then again so should the people who are suing the Wilpons for not knowing!
If it was so obvious then why didn’t they know as well?
“While the rest of the contry was losing in the stock market or making little gain, Madoff was claiming huge gains that even in a very up and active market are hard to sustain!”
That’s a little inaccurate…Madoff was returning very good and consistent returns, but his returns weren’t anything outrageous compared to the rest of the market. With a little bit of hard work and luck, anyone could beat the returns that Madoff gave.
The difference is Madoff took away the hard work and luck and delivered very consistent returns that were “sure things” to an exclusive club of high dollar investors.
The issue was the return never really changed…
Down Market 16%, Up Market 16%,
The returns did not seem to change even during the reccession!
Those consistent returns were explained away by a specialized program that consistently made several trades a day…it was run the same way day traders try to make money…Bernie was just supposed to be smart enough to come up with the winning formula that kept him ahead of the game.
The WSJ did a nice piece about how smart Madoff was by coming up with the system.
Sadly, Bernie admitted that the SEC could have easily caught him in 2003 expect they didn’t even do the basics the expose a ponzie scheme.
It was like the SEC walked in…
SEC: Hey Bernie, we hear you might be running a ponzie scheme. is that true?
Bernie: Umm…no…
SEC: Are yoouuu sure you’re not running a ponzie scheme?
Bernie: Umm, Yea…ahh I mean…no…no ponzie scheme here.
SEC: Hey, What’s the big note book full of numbers with “My Ponzie Scheme” written on the cover?
Bernie: Umm, it’s not a ponzie scheme, I can promise you that. You don’t what to see it do you?
SEC; No that’s OK. You have no reason to lie. I think we’re done here. I don’t see anything wrong with what you’re doing.
Bernie: Well thank you for stopping by, Who do i give my bribe… errr political… contribution too?
SEC: I’ll make sure my boss gets it…
What has me curious regarding the SEC was that it appears that they must not have been satisfied with the findings of their earlier investigations to have still pursued going after Madoff time in and time out instead of simply closing it.. That could be the Piccard case too, that even though the SEC could not prove anything, they had enough suspicion as to not suspend their investigations.
Not a lawyer but could exploiting this be feasible in helping Piccard sway the jury in his favor?
They have to investigate any claims that come in regardless of past findings.
So short answer no!
And Picard would be an idiot to point to the SEC since it’s the one fact he would like not to see mentioned at all!
They found no problem in all thier investigations! So if they didn’t find anything wrong why should the Wilpon’s be suspicious or know something a government oversight committe couldn’t find?
Metsi,
Not a lawyer or investor but is it that the SEC only investigated Madoff eight times due only to claims filed throughout the years? Isn’t it also the job of the SEC to be an overseer and begin investigations when it sees fit without the private sector requesting it first?
http://articles.businessinsider.com/2009-01-05/wall_street/29982281_1_harry-markopolos-madoff-fraud-ponzi-scheme
Here’s hoping they owe the full $383 million plus court costs and a crazy amount of jack for their legal team!!
Agreed!
Have absolutely no sympathy for the Wilpons – not after they built a park that shunned the average Met fan and geared it toward those with more money to burn. One of many insults, the ultimate is having to see a play on a scoreboard because I couldn’t see it from my seat behind third base in the upper promenade. I couldn’t even see any of the retired numbers sans the one for Shea – that’s how bad it was. Oh, but if I decided not to sit in the less expensive seats and instead paid $100 or more for a ticket, I could then have the privilege of seeing it for myself.
So, you really want to be the New York Royals? Because that is what would happen. Even if the Wilpons decided to sell the day after the trial, it would take a good 2 years for the process to complete.
And then, you have to hope they sell it to another crazy old rich guy, which ain’t that likely. It will be some investment group, or if things really go wrong, a corporation. Which means they won’t be willing to spend. The Mets will just be some marketing tool. A World Series will mean nothing to them if they have to cut big checks.
Donal,
In all honesty, what do you think we already have now?
Joe
We have a crazy old rich guy who temporarily is not spending. A crazy old rich guy who, when not under attack from an ambulance chaser, had no problem cutting big checks to acquire free agents and retain our own home grown talent.
Have the Wilpons screwed up? Yes. But that is from over reaching, not penny pinching. What will things look like if the Wilpons get through this without being crushed? We’ll have our crazy old rich guy back and hopefully, he’ll have learned to listen to his baseball people. That can only be a good thing.
Agreed, nothing could have been further than the truth than those idiots who called the Wilpons Coupons. They out spent everyone in the NL and bankrupt the team in the process.
Hi Donal,
It’s not so simple. The overall financial problems of Sterling Equities is not going away for a long time, even if the Wilpons win the civil suit.
A bust in the real-estate market, a complete loss of a half billion dollars, no longer getting the counted on returns on what they now understand to be fradulant investments, having to begin paying off debts for the construction of Citi Field, dwindling revenue from attendance and concessions plus items we are not even aware of does not paint a rosy picture.
And it doesn’t matter if they overspent in the past; the present and future is designed with penny pinching in mind. The Wilpon-owned Mets are already talking about $50-60 million payrolls past 2015. “The Mets had “big losses” in 2011, irrespective of Bernie Madoff. Perhaps as much as $70 million. Those are Sandy’s words.
As the attached article shows, their financial problems are so bad that with the trial beginning Monday and the jury acquits them on Tuesday, they will still be hanging on for their financial lives on Wednesday. And also note that the financial professionals in that article state that the measures taken so far might help them get through 2012 only.
http://espn.go.com/new-york/mlb/story/_/id/7495352/new-york-mets-financial-calamity-threatens-engulf-mets
Is that a Mets issue or a Wilpon issue though? The Wilpons weren’t going to pump 75M into the Mets payroll even IF the trial had never happened. They payroll went down to match revenue and most likely will increase again when payroll allows it to. If they win the suit could you see some reinvestment of their own capital to try to push them over the hump? Sure. But to expect them to chip in half of the teams salary is just plain foolish. The Mets have to hope that the product on the field increases enough to warrant an uptick. So guys like Duda and Davis need to do well and Harvey, Wheeler and Familia need to get ready.
TRS,
Wilpon issues are Met issues. They are the owners. They are the ones who know if they (through their parent company Sterling Equities) can afford to hang onto it, no matter what the short-term fallout might be. If Sterling does well, so does the Mets. If Sterling doesn’t do well but the Mets do, then it’s still OK. But if Sterling doesn’t do well and neither do the Mets as a holding, that means trouble – big time.
So if the Mets can break even, they will not be a burden on Sterling Equities (even though that won’t rule out the Sterling situation being so bad that the selling of the team becomes necessary just the same). But in order to break even on it’s own, the question arises as to what kind of operation will it be and what kind of team could it field – a New York Pirates? I don’t see how they can count on revenue playing in a ballpark with limited seating capacity requiring tickets to be so expensive. Even the Yankees aren’t selling out much anymore.
It’s not the average fan not coming that is bankrupting the Mets, it’s the large corporation seating that they are afraid of. If they start putting a decent product on the field and the youth does well then some normal fans will start to show up. However, how do you get those cooperate seats filled?
TRS,
I didn’t realize how much my not going to Citi Field was. If you check my facebook page, you’ll see that I’ve got something of a large corporation.
Business men invest when there is a good likelyhood of getting a return on their investment. Right now that’s not the case with the Mets.
Certainly some of the questions regarding our team will come back positive but which one’s?
Defense and offense at catcher depending on who’s playing, Ike’s health, defense at 2B, offense at SS, defense at 3B, offense in LF, offense in CF, defense in RF, the rotation, bench and bullpen and AAA/AA depth. That’s an awful lot to need to address in one off season and the chances of getting it right even if there was a top flight free agent not very good.
Investing another 25-75 M isn’t likely to pick up more than a couple extra wins and that’s not enough to drive the turnstiles.
When businesses want to invest by spending or reducing profit margins it’s because the potential exists to make up for and surpass what is being spent or being given away.
That’s not the case for the Mets right now and won’t be until we get this roster sorted out with some longer term solutions capable of being plus players offensively and defensively, not just one or the other.
Maintaining a big market payroll has never been a problem for Fred. We have been blessed to not have Lorinda de Roulet type ownership the last 25 years but that has always been as much about “good business” as it has been about good baseball.
Bringing in the free agent de jour on average once a year for 15 years and occasionally the big name acquired in a trade like Vaughn, Alomar, Leiter, Delgado, Santana, Putz and generating enthusiasm and favorable publicity at ticket selling time is just good business. Frequently the FA only takes half of his first years AAV and the Mets are raking in the cash from ticket sales for 2 months before they have to write out the first check. It’s almost like getting a loan.
Then the season goes down the toilet and the next thing you know we’ve turned a #1 draft choice into a salary dump, gotten nothing going forward and start the process all over again at next years ticket selling time.
If as an owner you were totally committed to winning and had the opportunity to draft the best possible talent and pay anywhere from 500,00 – 1 M more per pick to get 1st round talent in the 4th, 5th or 6th rounds wouldn’t you do it? Wouldn’t you seek to make up for all the #1 and #2 picks you gave away just in order to GET competitive? Would you just expect that the perfect fit FA’s are available every single off season and they all want to come to NY and will all play like All Stars to their last year on the contract? Or would you seek to follow that short lived success with something that had a better chance of being in place for 6-10 years?
I don’t get the Wilpon’s. They have spent on the MLB payroll what one would expect a NY team to spend and they’ve spent on the draft less than everyone else in MLB and been stingy in the IFA arena as well.
Instead of spending 3-5 M on average per year in the draft if they had been looking for the best all around talent and spent 10 M every year that’s at most 70 M more per decade, about the cost of 4 years of Jason Bay. True it won’t start generating income for 3-5 years if ever but it will certainly help when opportunities like Piazza and Santana come around in as early as 1 year and can fill one of these never ending “holes” for 10 years or more giving you a chance to fix other one’s as you start to narrow them down.
The extra 7-10 M a year spread around between 10-20 higher, more all around talents every year would have to have provided lots of trade bait, competition and depth as well as some long term All Stars.
Wilpon’s were grand spenders when their was the chance of a good buck in it for them but they cheaped out in the very areas where it would have done them (and us) the most good and it would have cost them pennies on the dollar.
About the additional cost of what Oliver Perez cost every other year and would have ultimately done away with the need to sign a Weathers, Cedeno, Wagner, Perez, Alou, Castillo. Bay or had to bring in so many guys like Jacobs, GMJ, Cora, Ayala, Catalonotto, ect and so forth.
Grand spenders when the camera’s on but pretty stingy when it’s away.