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Suit vs. Mets owners exceeds $1 billion

Written By: Nancy Jonston

Date: 3/19/2011 8:14:21 AM

The trustee looking to recover funds from victims of Bernard Madoff's Ponzi scheme officially wants more than $1 billion from New York Mets owners. In an amended lawsuit filed Friday in U.S. Bankruptcy Court for the Southern District of New York, trustee Irving Picard now officially seeks more than $700 million in "alleged fraudulent transfers of principal." That's in addition to $300 million in alleged fictitious profits, which is defined as money withdrawn over principal. The amended suit seeks to further demonstrate the close relationship between Madoff and Mets principal owner Fred Wilpon; Mets chief operating officer Jeff Wilpon, Fred Wilpon's son; team president Saul Katz, Fred Wilpon's brother-in-law; and their company, Sterling Equities. Picard filed court papers Friday saying the cozy relationship between the Mets and the Madoff family was demonstrated with a 2004 bridge loan for $54 million that the family provided the team's owners. Picard said they were net winners with their Madoff investments as they received favored status among thousands of investors in a private investment fund that Madoff managed. The court-appointed trustee said they ignored warnings that Madoff's high returns might not be real. "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," David J. Sheehan, counsel to the trustee and a partner at Baker & Hostetler LLP, said in a statement. The lawsuit seeks to recover $140 million in principal and $133 million in fictitious profits that it said Sterling partners and their family members withdrew from 196 accounts kept with Madoff in the six years before the fraud was revealed. It also seeks $15 million in fictitious profits and nearly $54 million in principal withdrawn in the same period from 44 accounts in the names of various trusts created by Sterling partners. The biggest chunk sought by Picard was $153 million in fictitious profits and $537 million in principal that he maintained was withdrawn from 65 accounts held by Madoff in the name of certain entities that were owned, form, funded, operated and controlled by Sterling Partners, the lawsuit said. Fred Wilpon and Katz continued to deny the allegations and assert their innocence. "The amended complaint is the latest chapter in the work of fiction created by the Trustee," Fred Wilpon and Katz said in a statement. "We will pursue a vigorous legal defense that will set the record straight and vindicate us." The amended suit alleges Madoff gave Sterling an interest- and cost-free, $54 million "bridge" loan -- "falsely described" as an investment -- to help fund the reacquisition of broadcast rights of Mets games from Cablevision in order to secure the key programming for the launch of television network SportsNet New York. David Cohen, general counsel for the Mets, called the new allegations "more nonsense from the trustee." He said the $54 million, representing funds the Sterling partners had invested with Madoff, was never used. He said the money was returned after one day because the funds necessary to complete the deal were received from Sterling's lenders by the buyout deadline. In a release that accompanied his new filing, Picard said information about the bridge loan was included to provide additional substantiation of the interdependent relationship between Sterling and Madoff's investment advisory business. The trustee said the bridge loan was documented by a single letter agreement that falsely described the loan as an "investment" by Madoff's wife, Ruth, in the company that would later become the SNY network. Madoff is serving a 150-year prison sentence after pleading guilty to federal fraud charges. He was arrested in December 2008 after revealing his fraud to his sons, who notified the FBI. Authorities say he took in about $20 billion from investors over more than two decades, failing to invest the money even as he sent them fraudulent statements indicating their money had more than tripled in value. The Wilpons have also said they are victims in the Ponzi scheme. When the Madoff scandal first broke, they maintained that it wouldn't affect the operation of the Mets. However, since then the team has faced some financial difficulties, even before the lawsuit came out. Fernando A. Bohorquez Jr., counsel to the trustee, said Friday that those problems began soon after news of the affair broke. "Perhaps the most telling evidence of Sterling's dependency on Madoff is the fact that post-revelation of Madoff's fraud, the Sterling partners were forced to negotiate with at least seven lender banks, including Bank of America, JPMorgan Chase, Citibank, HSBC, M&T, Wachovia, and Bank of New York ... to restructure more than a half-billion dollars in collective debt -- not just the millions of dollars of debt secured by the [Madoff] accounts," Bohorquez Jr. said. The team acknowledged receiving a loan from Major League Baseball, reportedly $25 million, in November to cover operating expenses. In January, the Mets announced they were looking to sell a non-controlling interest in the team of 20 to 25 percent to raise several hundred million dollars because of "uncertainty" regarding the lawsuit. That percentage has since been amended upward, but Wilpon has insisted his family would remain in control of the team. In February, Moody's Investors Service lowered its outlook on the company that operates the ballpark used by the Mets because of the litigation from the Madoff trustee. The ratings firm cut the outlook on Queens Ballpark Co. LLC to "Negative," but maintained its "Ba1" rating on the company's bonds

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