Bernard Madoff’s investors may benefit from a judge’s ruling that New York Mets owners Fred Wilpon and Saul Katz may have to pay no more than two years of profit and principal to the liquidator of the con man’s firm, lawyers for some Madoff investors said.
Ruling yesterday on Madoff trustee Irving Picard’s demand for $1 billion from the Major League Baseball team owners, U.S. District Judge Jed Rakoff dismissed nine of 11 counts in the case. Today, he indicated that Picard probably can’t recover more than about $380 million. Picard sought 25 years of transfers, claiming the Mets owners failed to probe Madoff’s fraud.
“For our clients this is very good news, because it knocks the exposure to payments within two years” of the bankruptcy filing by Madoff’s firm in 2008, Jonathan Landers of Milberg LLP said in a phone interview. He is representing investors in more than 25 so-called clawback lawsuits brought by Picard, including some awaiting Rakoff’s attention.
Rakoff said in his ruling that Picard “simply” had to prove that investors didn’t give back “fair value” in withdrawing profits. That part of the decision “gives investors a possible defense” against the two-year clawbacks, Landers said.
“Five thousand innocent victims of Mr. Picard’s persecution will sleep well tonight for the first time in 2 1/2 years,” Helen Chaitman, a lawyer who represents Madoff investors, said of Rakoff’s ruling in an e-mailed statement.
Rakoff said in an order published today that while it “appears” that the most Picard can take from the Mets owners is $386 million, “it remains an open question” whether he should be limited to two years of transfers. Rakoff told lawyers for both sides to brief him on the issue at a hearing set for 3 p.m. New York time in Manhattan.
Allowing Picard to reach back longer than two years to claw back profits would “chill” Madoff investors, said Chip Bowles, a bankruptcy lawyer at Greenebaum Doll & McDonald PLLC in Louisville, Kentucky, who isn’t involved in the case.
“If you don’t give value, you’re going to have to give all the profits back,” Bowles said. “The only way you give value is by putting in an equal amount of principal.”
The Mets owners said yesterday in a statement they were pleased with Rakoff’s ruling. For Picard, who has filed about 1,000 suits, the decision may mean he gets much less than the $100 billion he is seeking to compensate investors who took less money out of the Ponzi scheme than they put in.
Amanda Remus, a Picard spokeswoman, said the trustee would comment after “a thorough evaluation” of the ruling.
The district court case is Picard v. Katz, 11-cv-03605, U.S. District Court, Southern District of New York (Manhattan).
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