New York Mets ruling will delay payouts to Madoff victims
The trustee's attorney revealed at a Manhattan hearing that the a ruling limiting the team owners' exposure to $386 million will also affect other money being recovered for investors.
The trustee recovering assets lost in Bernard Madoff's fraud is delaying a planned Friday payout to those who lost money because of a judge's ruling that limits the amount the owners of theNew York Mets might have to return.
The trustee's attorney, David Sheehan, revealed at a Manhattan hearing Wednesday that the ruling by U.S. District Judge Jed Rakoff limiting the team owners' exposure to $386 million will also affect other money being recovered for investors.
Sheehan said court-appointed trustee Irving Picard expects to appeal the ruling, which was contrary to findings made by a bankruptcy judge and another district judge.
Sheehan said checks that were supposed to be mailed to investors on Friday will be delayed an undetermined amount of time while lawyers study the impact of the ruling. He added that they will definitely go out by the end of the year.
"We know people are depending on payouts," Sheehan said after the hearing.
Sheehan said about $6 billion of the $17 billion the trustee is trying to recover for investors could be affected by Rakoff's order, possibly reducing a potential payout by up to $3 billion. Rakoff tossed out most of the claims made by Picard. On Wednesday, he moved the trial date in the Mets' case to March 19 and set a schedule for lawyers to argue whether a jury should hear the case.
Thousands of investors lost billions of dollars in the fraud, which Madoff revealed in December 2008 when he confessed that statements telling investors they had about $68 billion weeks earlier were fraudulent. In fact, there was only several hundred million dollars left.
Picard said in a document filed earlier this year that the total principal lost by all investors was approximately $19.5 billion. He is pursuing $17.3 billion of it, because that represents the amount he would have to recover to return 100 percent of the principal lost by those who are eligible to receive a distribution in the bankruptcy proceeding.
He had planned to distribute more than $272 million on Friday on claims related to 1,224 accounts. The average payout was to be $222,551.
Madoff, 73, is serving a 150-year prison sentence.
Rakoff on Wednesday added to the good news he delivered to the Mets' owners when he said that their liability "may be much less than" $386 million, depending on how much of the amount is determined to consist of fictitious profits and how much was principal.
In his written decision, Rakoff made it harder for Picard to try to recover the principal payouts made to theMets owners, saying he would have to prove that they knew about the fraud.
In his lawsuit, Picard said the Mets owners received $83.3 million in fictitious profits and $301 million in principal in the two years before a bankruptcy filing was made regarding the Madoff assets.
Picard has argued that he is entitled to recover $295 million in fictitious profits and $710 million in principal received by the Mets owners and related entities in the six years before the bankruptcy filing was made.
Sterling Partners, a business entity that includes the Mets owners, said in a statement Tuesday that it was pleased that the judge had limited what Picard could claim to a two-year period.
Lawyers for Mets owners have repeatedly said that the defendants had no idea Madoff was not investing their money as he said he was.
Picard has filed more than 1,000 lawsuits seeking to recover billions of dollars lost by Madoff investors. Picard has argued that some investors, including the Mets' owners, owe large sums of money to other investors because they withdrew enough that they came out hundreds of millions of dollars ahead, at the expense of the others.
The Mets' finances have become a distraction for the team this year.
The club's cash-strapped owners announced in May that they had agreed to sell a minority share to hedge fund manager David Einhorn for $200 million. But the deal fell through Sept. 1, and the Mets said they would seek to sell shares of up to $20 million to family members and other potential investors without risking the possibility of losing a controlling interest.