Barring an unlikely 11th-hour settlement, Irving Picard, the trustee for the victims of Madoff Securities, will finally step into the batter’s box against Mets ownership in Manhattan federal court on Monday. This promises to be more exciting than the action we’ll see at Citi Field in 2012.
The onus will certainly be on Picard to show that the Mets aided and abetted Madoff at worst, or at least had ample reason to suspect he was running a fraudulent operation. Judge Jed Rakoff, who has been presiding over the Picard-Mets battle from the start, has made no secret that he feels Picard is overreaching. However, Rakoff has already ruled that the Mets are liable for $83 million in Madoff payments they received in the past and is allowing a nine-member jury to decide if they have to pony up another $300 million.
The Mets have claimed from the get-go that they were victims of the rogue Far Rockaway financier. They will point to the fact that the Securities and Exchange Commission failed to find fraud with respect to Madoff Securities during its operation — so why should they be held to a higher standard?
While Fred Wilpon and his son, Jeff, have long been the faces of the Mets corporate side, the man whose testimony will be most crucial is Fred’s brother-in-law, team President Saul Katz, who is a certified public accountant. Picard, a very well-respected tax attorney, will certainly ask Katz why he allowed the Mets to invest with Madoff when the company did not hire a major accounting firm, such as Ernst & Young or Deloitte, to verify its financial records even though it handled hundreds of millions of dollars. Madoff used a two-man CPA firm in Rockland County to serve as its “independent” auditor. Clearly that should have raised a red flag for Katz.
Expect Picard to grill Katz about reports that the Mets changed what could have been a $6 million lump-sum payout to outfielder Bobby Bonilla in 2000 into a 25-year annuity that gives an 8 percent return. When the deal is done, Bobby Bo will gross $30 million.
What does that have to do with Madoff? The Mets believed that good old Bernie would be able to provide them with at least a 10 percent return on the funds they gave him so they would be profiting on “the float” (the 2 percent difference between what they were guaranteeing Bonilla and the return from Madoff).
Obviously this was not very sound thinking. Expect Picard to make it sound as if the team’s executives acted with the arrogance of insiders who knew they would be taken care of before anyone else.
You can also be sure Picard will grill Mets execs about rumors they were trying to obtain fraud insurance in 2007 just before news of Madoff’s Ponzi scheme became public.
Picard must believe that the Occupy Wall Street movement will help his case with the jury. I’m sure he’ll talk about the Wilpons as “one percenters” who thought they could play by different rules and get away with it.