UPDATE 3-NY Mets owners hit with $300 mln Madoff lawsuit

Fri Feb 4, 2011 4:44pm EST

* $300 million fictitious profits alleged

* Mets owners said did not know Madoff was a fraud (Adds details from lawsuit, comments by lawyers for Wilpon and Katz)

By Jonathan Stempel and Ben Klayman

NEW YORK/DETROIT, Feb 4 (Reuters) - The owners of the New York Mets baseball team turned a blind eye to Bernard Madoff's Ponzi scheme and should give up roughly $300 million of fictitious profits tied to the now imprisoned swindler, a lawsuit charges.

In a sweeping 365-page complaint, Irving Picard, the court-appointed trustee recovering money for Madoff's victims, said the Mets' owners, including chairman Fred Wilpon, "consciously disregarded" years of red flags about Madoff, while enriching themselves with profits they did not deserve.

Picard said partners at Wilpon's company Sterling Equities had 483 accounts with Madoff's firm. He also said the Mets team had 16 Madoff accounts, from which it withdrew more than $90 million of bogus profits to fund day-to-day operations.

"The Sterling partners were simply in too deep -- having substantially supported their businesses with Madoff money -- to do anything but ignore the gathering clouds," according to the complaint, which was made public on Friday.

"Despite being on notice and having every resource at their disposal to investigate the litany of legitimate questions surrounding Madoff," it added, "the Sterling partners chose to do nothing."

Picard's lawsuit was made public one day after the trustee unveiled embarrassing accusations in his $6.4 billion lawsuit accusing JPMorgan Chase & Co (JPM.N), once Madoff's main banker, of being "thoroughly complicit" in Madoff's fraud so it could do more business with him and protect its investments.

The Mets litigation has cast its own cloud over the immediate future of the team, which has had two straight losing seasons despite having one of the highest payrolls in Major League Baseball. Attendance at its two-year-old ballpark Citi Field fell 19 percent last year.

Wilpon, a co-founder at Sterling, repeated that he may sell part of the Mets as a result of Picard's litigation. The Mets also own a majority of SportsNet New York, better known as SNY, which broadcasts their games, with Time Warner Cable Inc (TWC.N) and Comcast Corp (CMCSA.O) also owning stakes.

"OUTRAGEOUS STRONG-ARM EFFORT," WILPON SAYS

In a joint statement, Wilpon and his brother-in-law, Sterling co-founder Saul Katz, called Picard's lawsuit "an outrageous strong-arm effort" to coerce a settlement and ruin their reputations and businesses.

"Not one of the Sterling partners ever knew or suspected that Madoff ran a Ponzi scheme," they said. "We thought that Madoff was a friend for 25 years. That is why his betrayal was so painful. We should not be made victims twice over -- the first time by Madoff, and again by the trustee's actions."

Lawyers for Wilpon and Katz also said Picard ignored "numerous accounts that, in the trustee's parlance, were 'net losers,' which, according to our clients' analysis, total approximately $160 million."

A Major League Baseball spokesman declined to comment.

Madoff's estimated $65 billion Ponzi scheme was uncovered on Dec. 11, 2008. But Picard said the Mets defendants should have seen red flags much earlier.

His lawsuit pointed, for example, to a Sterling consultant who advised Katz around 2003 that Madoff's returns did not make sense, and that he "couldn't make Bernie's math work."

Madoff, now 72, pleaded guilty in March 2009 and is now serving a 150-year prison sentence in North Carolina.

Picard filed the lawsuit under seal in December. Wilpon agreed to unseal it only after settlement talks broke down.

METS FOR SALE?

According to the complaint, Picard is seeking $295.5 million of fictitious profits from Sterling partners, family members and affiliates; $14.2 million of principal withdrawn in the 90 days prior to the collapse of Madoff's firm; and $12 million of other "fraudulent" transfers.

Picard has recovered roughly $10 billion from various parties to repay former Madoff clients.

Forbes magazine last April said the Mets were the third most valuable team in baseball at $858 million, trailing the New York Yankees and Boston Red Sox.

Wilpon has said he might sell 20 to 25 percent of the Mets, while retaining a majority stake [ID:nN28107090], but a big settlement could force a change in ownership.

"At the end of the day, anyone coming in is going to want some kind of voice, is going to want a piece of the whole pie," said a sports banker who asked not to be identified.

Another banker who asked not to be quoted said SNY is the Mets' main profit center, and it would be hard to sell part of the team without offering a buyer a stake in the network.

Both bankers requested anonymity because they lacked authority to discuss specific teams.

The case is Picard v. Katz et al, U.S. Bankruptcy Court, Southern District of New York, No. 10-ap-05287. (Reporting by Jonathan Stempel in New York and Ben Klayman in Detroit; Editing by Lisa Von Ahn, Phil Berlowitz and Matthew Lewis)

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