It was an investment that was too good to be true, they were reportedly told more than once. But the owners of one of New York's iconic baseball teams took the money anyway, padding their personal fortunes, real estate ventures and sports franchise with ill-gotten millions courtesy of Bernard Madoff.
That's the crux of the allegations against the owners of the New York Mets by the trustee charged with recovering money for Mr. Madoff's victims.
In a lawsuit originally filed in December but unsealed Friday, the trustee accuses Fred Wilpon and Saul Katz, the owners of the Mets, together with their business partners and relatives, of hoarding $300-million (U.S.) in "fictitious profits" from Mr. Madoff's Ponzi scheme.
The men, their families, and business associates "made so much easy money from Madoff for so long" that they "chose to simply look the other way" despite numerous red flags, the suit claims.
Mr. Wilpon and Mr. Katz hit back in a statement Friday, saying that while the allegations in the complaint "may make for good headlines, they are abusive, unfair and untrue." They accused the trustee, Irving Picard, of trying to "strong-arm" them into a financial settlement.
Mr. Picard has filed a flurry of lawsuits in recent months as he attempts to return money to those swindled by Mr. Madoff. Their cash losses are now believed to amount to $20-billion and Mr. Picard has recovered roughly $10-billion to date.
Unlike many investors in Mr. Madoff's scheme, Mr. Wilpon and Mr. Katz withdrew more than they put in, the lawsuit says. It alleges that gains from the fraud flowed throughout their numerous business ventures. The Mets, for instance, benefited from about $90-million in fake profits withdrawn from accounts at Mr. Madoff's firm, the suit says, much of which helped fund things like the team's payroll and stadium operations.
The accusations come one day after another lawsuit by Mr. Picard was unsealed which seeks billions from J.P. Morgan Chase & Co. That suit alleges that J.P. Morgan abetted Mr. Madoff's business despite serious doubts about him among the bank's senior executives. J.P. Morgan has denied any knowledge of the fraud.
Together the two lawsuits paint a picture of how Mr. Madoff's tentacles extended throughout Wall Street and New York's business community. But they also show, in vivid detail, how a current of skepticism flowed around him, with many investors convinced something wasn't right.
In the case of Mr. Wilpon and Mr. Katz, those warnings came from trusted associates, including the people with whom they launched a hedge fund called Sterling Stamos. One executive at the fund said repeatedly that Mr. Madoff was "too good to be true." Another noted that Mr. Wilpon and Mr. Katz continued to invest with Mr. Madoff against the executive's recommendations.
An additional red flag came from investment bank Merrill Lynch, which worked closely with the Sterling Stamos hedge fund. Since the late 1990s, Merrill had "flatly refused" to deal with Mr. Madoff's investment scheme, the suit says, because the bank believed it was not legitimate.
The relationship between Mr. Madoff, Mr. Katz, and Mr. Wilpon goes back over 25 years and wasn't restricted to business. They all lived in Long Island, their children went to the same schools, and they attended family events like weddings and bar mitzvahs.
Mr. Katz and Mr. Wilpon said in their statement that their long friendship with Mr. Madoff made his fraud even more painful. The two men, their partners, and their families "invested with Madoff in good faith right up to the day his crime was exposed," the said. "We were as shocked as the rest of the world when the money in our accounts vanished."Report Typo/Error