Before the Mets-Madoff trial: Wilpon and company want to ban the phrase 'other people's money'; Picard wants to ban Sandy Koufax
10:41 pm Mar. 12, 20121
New York Mets C.E.O. Fred Wilpon and his partners have asked a judge to bar the trustee for the victims of Bernie Madoff’s Ponzi scheme from using the phrase “other people’s money” when talking about the money Madoff paid to them.
The trustee for the Madoff victims, Irving Picard, has asked the same judge to disallow testimony from four distinguished witnesses for the Wilpon side, two of whom are Hall of Fame pitcher Sandy Koufax and former Manhattan district attorney Robert Morgenthau. He's also asked that the Wilpon group not be allowed to discuss his team's legal fees.
Late on Monday, less than a week before jury selection begins for Picard’s $386 lawsuit against the Mets ownership group, the two sides engaged in a parry-and-thrust that will help determine what evidence the jurors will see, as they filed motions with the Southern District Court asking Judge Jed S. Rakoff to include or exclude various pieces evidence.
Wilpon's attorneys filed two motions, which seem to have little impact on the core evidence Picard will rely on in the coming trial. One motion asks for Judge Jed S. Rakoff to strike some evidence as it relates to Sterling Stamos, the investment vehicle created by his company, Sterling Equities, to diversify from Bernie Madoff, along with a number of emails that were sent after Madoff's fraud ended in December 2008 indicating that Sterling Stamos C.E.O. Peter Stamos knew about the potential for Madoff's fraud years earlier.
The second phrase is the proposed ban on Picard saying “other people's money” to describe the fictitious profits Bernie Madoff paid to Wilpon and his partners, calling it prejudicial.
Picard, meanwhile, has made five such requests. The most notable is the striking of four potential witnesses: Koufax (who is a childhood friend of Wilpon), Morgenthau, Michael Dowling and Robert Rosenthal. Picard also wants to prohibit the Wilpon attorneys from making reference to his fees in the case, any inaction against Madoff from the Securities and Exchange Commission, any evidence of the partnership between Bernie Madoff and Merrill Lynch Technology, and for the court to deem certain statements by Sterling Stamos partners and employees as admissions of the defendants.
There's a lot to unpack there, so let's start with the Wilpon attorney requests. Sterling Stamos is deeply problematic for Wilpon and his defendants for a number of reasons. For one thing, the entity was created in 2002 to diversify holdings from Bernie Madoff, but the company's board of directors included several partners—including Wilpon's brother-in-law and original Sterling partner Saul Katz—along with a number of physical similarities, such as sharing an office and computers.
The trustee also has evidence—both direct testimony of Sterling partners and supporting documents—that Sterling Stamos only separated, at Saul Katz's behest, once it became necessary to do so to keep Wilpon and Katz's investments with Bernie Madoff from being revealed to regulators. He also has evidence in direct testimony that the separation between the two entities was in name only, and that the employees of both answered to Katz.
And most damaging of all, Sterling Stamos hired Noreen Harrington as chief investment officer—essentially, to provide due diligence on investments—only to have Harrington tell Saul Katz that she believed Madoff to be either front-running, an illegal activity, or else “a fiction.” According to Harrington, Katz got angry at her for making this assertion; Katz, in his testimony, says he doesn't remember the meeting. Harrington asked for a meeting with Madoff to do further due diligence, but never received one. After being told Sterling Stamos was going to make an investment with a Madoff feeder fund, Harrington resigned.
In other words, anything the defense can do to separate Sterling Stamos in the jury's mind from the Sterling partners would prove useful.
The same is true of a number of emails touting the judgment of Peter Stamos, the C.E.O. of Sterling Stamos, for steering his clients clear of Bernie Madoff. The emails came from, among others, Basil Stamos, Peter's brother, and Ashok Chachra, then Sterling Stamos's chief strategist. Stamos has denied this, but both his disagreement with much of Harrington's testimony, and the fact that he continues to work as CEO of Sterling Stamos could undermine his version of events, which skews heavily toward Wilpon and his partners. If it is also undercut by these emails, it further limits his effectiveness as a witness on the defense's behalf.
As for the phrase “other people's money,” the more that a jury hears that every dollar Bernie Madoff decided to pay out came not from investments, but from what other people had given him, the less sympathetic a jury is likely to be toward the defendants.
On Picard's end, the easiest motion to explain is his desire to keep his fees out of the case. Picard's legal team has spent more than three years reconstructing the most massive fraud in financial history from scratch then determining who made and lost money in the scheme, and has then gone about suing those who won to recover the money for those who lost, all at a 10 percent public interest discount. And the fees aren’t paid by the Madoff victims, but by the Securities Investor Protection Corporation. This judge has already ruled that the Wilpon attorneys could not depose Picard on this subject, ruling that such testimony would be irrelevant. But jurors could simply hear his $273 million total in fees, and decide he’s in it for the money.
The same is true for the failure of the S.E.C. to bring Madoff's crime to light. Should that be allowed as a defense by the Wilpon attorneys, it will be up to Picard to show that Wilpon and his partners were not swayed by the S.E.C.'s failings—and there is conflicting testimony by several Sterling partners that suggests just that. But without needing to address it, the trustee would simply be able to focus on the assertion that all that the Sterling partners knew, without having to clear that baseline.
The evidence from the Wilpon lawyers concerning a partnership between Merrill Lynch and Bernie Madoff concerns a 1999 partnership between Merrill Lynch and Madoff's technology business, something wholly apart from his investment business (that turned out to be no investment business at all, but rather a Ponzi scheme) is intended to redirect jurors from the evidence that Merrill Lynch not only refused to invest with Madoff in 2007, but warned Sterling Stamos specifically about why they wouldn't do so, according to the trustee.
As for the effort to deem certain statements by Sterling partners and employees as admissions, that one's pretty self-explanatory. The more cemented those statements are as facts, the less heavy lifting the trustee needs to do with his evidence.
The most notable thing about the motions may be what isn’t in them: There is no effort by the defense to eliminate the trustee's evidence, supported by testimony and documentation, that the Sterling partners explored buying fraud insurance to protect their Madoff holdings, and that they only declined to do so when they determined they couldn't protect more than a small percentage of their Madoff accounts.
There’s also no Noreen Harrington. That mean that if her testimony is limited in any way, it won't be from any action of the defense, but from Judge Rakoff acting of his own accord.