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(Reuters) - Owners of the cash-strapped New York Mets baseball team lost a key ruling ahead of a federal trial over whether they should return $303 million because they turned a blind eye to Bernard Madoff's fraud.
Ruling on what he called a "central issue" in the case, U.S. District Judge Jed Rakoff in Manhattan said co-owners Fred Wilpon and Saul Katz have the burden of showing they acted in good faith in receiving money from Madoff's firm in the two years leading up to its December 2008 bankruptcy.
Rakoff rejected the owners' argument that Irving Picard, the trustee seeking money for Madoff's victims and the plaintiff in the case, bears the burden under federal bankruptcy law of proving their "willful blindness" to recover the transfers.
"The burden of proving, by a preponderance of the evidence, that the defendants received the aforementioned transfers in good faith (i.e. in the absence of willful blindness) rests on the defendants," the judge wrote in a brief order issued on Wednesday.
Rakoff said his ruling was in accord with a prior determination he had made, but that he ruled in response to questions from both sides at a March 9 conference.
The judge on March 5 had also ruled that the Mets owners must also repay as much as $83.3 million of fictitious profit from Madoff's firm.
A jury trial over the remainder of what was once a $1 billion case is scheduled to begin on March 19.
The Mets have been slashing payroll after losing an estimated $70 million last year, and have been selling small ownership stakes to outside investors.
Madoff, 73, pleaded guilty in 2009 to running a Ponzi scheme that prosecutors have called the largest on record. He is serving a 150-year prison term.
The case is Picard v. Katz et al, U.S. District Court, Southern District of New York, No. 11-03605.
Reporting By Jonathan Stempel