2:11 pm Mar. 5, 2012
As of now, the Mets ownership group will have to reckon with a bottom-line judgment or a trial in a lawsuit brought against them by Irving Picard, the trustee for the Bernie Madoff victims.
They had been hoping to avoid this, and with a relatively sympathetic judge hearing their case, they believed they had a chance.
But on Monday, District Court Judge Jed S. Rakoff ordered the two sides to trial on three of the 11 counts originally sought by Picard. The trial is set to start on March 19.
Rakoff also awarded partial summary judgment to Picard on the money given to Wilpon and his partners by Madoff in the final two years of the scheme—a total of $83,309.162.
Mets C.E.O. Fred Wilpon and his partners face a crushing debt burden and have been canvassing urgently for minority investors in the team to provide an infusion of cash they need for repayments. They have been counting on the possibility that Picard's case against them would be thrown out of that the amount he was eligible to get from them would be greatly reduced. Or, at the very least, they needed some time before they were called upon to pay any of it out.
They got some of what they wanted, at least: Rakoff left himself wiggle room both on what the total payout will be and when it is to occur. Rakoff also put off deciding anything final about the scope of evidence Picard would have access to at the trial.
But the summary judgment granted to Picard is nonetheless very bad news for Wilpon and his partners, since it appears to confirm that they will have to come up with a large sum of money relatively soon, even with the exact timeline as yet determined.
As Rakoff wrote in his ruling:
“[T]he exact amount thereby due the Trustee (though capped at the $83,309,162 that the Trustee expressly seeks on this motion), and how payment should be apportioned among the defendants, will be determined in a subsequent order and may require further briefing and oral argument.”
The judge did not set any schedule for this briefing or argument, leaving open the possibility of another delay, like the more than three months he allowed to elapse before ruling on Picard's interlocutory appeal. The summary judgment also means that this particular part of the case will no longer be at issue in the March 19 trial, and therefore will not be bound by the same clock as all other issues.
It may not be much, but the Wilpon group will take all the time they can get, since they'll have to come up with cash (which they don't appear to have) in the amount of the summary judgment, whether they appeal the judgment or not. For instance, if the total turns out to be $83,309,162, Wilpon and his partners will need to pay that. If they appeal it, they'll need to post a bond worth 110 percent of that total, for a sum of $91,640,078.20.
For an ownership group struggling to sell 10 ownership stakes merely to raise enough money to pay off a $40 million bridge loan due this month to Bank of America, a past-due $25 million loan to Major League Baseball, plus a portion of that sale—believed to be $100 million—to JPMorgan Chase to pay off a portion of the $430 million they owe against the team, an additional total anywhere close to those totals, due immediately, would appear to be impossible.
As for proceeding to trial, Rakoff reprised the language he's been using for months, criticizing the trustee's case as he has in every recent order and hearing. He wrote that “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.”
Ultimately, that will now be for a jury to decide, but Rakoff further indicated that he could slice off chunks of the case Picard intends to present, after knocking out a pair of the trustee's expert witnesses during a hearing late last month, writing that “much of the 'evidence' that the parties proffered on summary judgment" did not comport with federal standards and would not be admissible for the trial.
He added: “Conclusions are no substitute for facts, and too much of what the parties characterized as bombshells proved to be nothing but bombast.”
In other words, what a jury will ultimately get to hear, starting on March 19, may differ significantly from what Picard has presented in his filings to date. That will only further complicate his effort to get a jury to find that a preponderance of the evidence supports a finding of willful blindness of fraud.
Picard may well seek to revisit the questions of how much of his evidence is admissible, how many of his claims are valid, and how long a period of time during the WIlpons' relationship with Madoff they can be held accountable for by appealing whatever results are of the proceedings in Rakoff's courtroom. But it's not clear yet that the litigation will even get that far.
Consider that the only way Wilpon and his partners can stop a trial from taking place in two weeks is to file for bankruptcy, which would stay the proceeding. They've given no indication that they will do so, and in fact have emphatically denied that such an option is even on the table.
But now, with time rapidly running out on a number of loans, no finalized additional owners in hand, and an unusually friendly judge (whose courtroom the Mets owners aggressively sought out as a venue) having failed to deliver a clean victory by throwing their pursuer's case out, they would seem to be running out of options.
Wilpon and his business partners at Sterling Equities responded with the following statement, emailed to me by a spokesman: "We are preparing for trial. We look forward to demonstrating that we were not willfully blind to the Madoff fraud."