Nine jurors will decide whether the New York Mets owners have to pay $303 million to the trustee liquidating Bernard Madoff’s former firm in a trial to begin March 19 in Manhattan.
U.S. District Judge Jed Rakoff set the number of jurors and other ground rules for the trial of trustee Irving Picard’s claims against Mets owners Fred Wilpon, Saul Katz and a group of related defendants.
Rakoff ruled this week that the Mets defendants must give up as much as $83 million in fictitious profits from Madoff’s Ponzi scheme and face a trial over whether they acted in bad faith, a decision that could cost them $303 million more, he said.
The parties said they expect the trial to take 10 days, which may result in a verdict before the team opens the season against the Atlanta Braves on April 5.
Rakoff, saying it’s difficult for jurors to absorb too many facts at the start of a trial, said he will limit opening statements by each side to 45 minutes. Rakoff said he’s reluctant to ask jurors to decide too many individual questions in their verdict, saying they tend to take “holistic views of cases.”
Rakoff said he will instruct jurors not to read about the case on Facebook and other social media sites, in addition to avoiding news stories about the case. Robert Wise, a lawyer for the Mets, told Rakoff he expects that Picard may call Wilpon and Katz as part of his case.
“The court remains skeptical that the trustee can ultimately rebut the defendants’ showing of good faith, let alone impute bad faith to all the defendants,” Rakoff said in his March 5 ruling. “The principal issue remaining for trial is whether the defendants acted in good faith when they invested in Madoff securities in the two years prior to bankruptcy or whether, by contrast, they willfully blinded themselves to Madoff’s Ponzi scheme.”
The Mets owners had opposed a jury trial and tried unsuccessfully to get Madoff trustee Irving Picard’s remaining lawsuit dismissed after Rakoff cut it to $386 million from $1 billion. Picard’s lawyers had said they were confident a jury would find the Mets owners knowingly ignored the fraud because it benefited their businesses, which included real estate as well as the team.
Picard must prove to a jury that the Mets owners and other defendants were willfully blind to Madoff’s scheme to recover the $303 million, representing principal they took from their Madoff accounts in the two years before the con man’s 2008 arrest, Rakoff said. The Ponzi scheme cost investors an estimated $20 billion in principal, according to Picard.
“It’s a very hard road for Picard, but going to trial has little downside for him,” said Chip Bowles, a bankruptcy lawyer in Louisville, Kentucky. “Picard may get a jury to buy willful blindness and still can appeal” if he doesn’t prevail at trial.
Rakoff said he will decide separately how much of the $83 million must be given up, and by whom. The sum represents fictitious profit from the Ponzi scheme in the two years before it collapsed. To take it back, Picard has said he only has to prove that Madoff was running a fraud.
The Mets defendants include partnerships, trusts and related entities of Wilpon, Katz and their relatives. The two main entities that own and operate the baseball team are liable for no more than $30 million of the $83 million, although Wilpon and Katz personally might owe as much as another $11 million, according to court documents.
The Mets owners, after losing $500 million in the Ponzi scheme, have cut the team’s basic payroll to about $90 million this season, from $140 million last year. They also have sold seven minority ownership stakes in the team, mostly to existing business partners, Wilpon said last month. His target is to sell a total of 10 shares valued at $20 million, each representing about 4 percent of the franchise.
Rakoff ruled March 5, just hours before the Mets played the Washington Nationals in Port St. Lucie, Florida, in their first spring training game. The team has won three games and lost three in spring training so far.
Wilpon and Katz have said they trusted Madoff, who they said had a solid reputation. Both sides presented conclusions disguised as facts that might not be admissible at trial, Rakoff said.
“Conclusions are no substitute for facts, and too much of what the parties characterized as bombshells proved to be nothing but bombast,” he said in the ruling.
If Picard doesn’t present evidence of willful blindness at trial, the Mets owners could ask Rakoff again to dismiss the remaining suit.
As the Mets team lost more games than it won, annual attendance at Citi Field stadium in Queens, New York, has dropped 27 percent since 2009, to 2.29 million last year, according to Standard & Poor’s analyst Jodi Hecht.
Madoff, 73, pleaded guilty in 2009 to orchestrating what prosecutors called the biggest Ponzi scheme in history, and is serving a 150-year sentence in a federal prison in North Carolina. Picard and his law firm, Baker & Hostetler LLP (1155L), have charged about $273 million in fees for liquidating the Madoff firm since it collapsed in December 2008.
The case is Picard v. Katz, 11-cv-03605, U.S. District Court, Southern District of New York (Manhattan).