New York Mets executives argued Thursday that a lawsuit claiming they should have heeded warning signs of a 25-year fraud carried out by jailed financier Bernard Madoff is "a fiction" and should be thrown out.
"There were no warnings," lawyers for Mets owner Fred Wilpon, team president Saul Katz and others said in a filing in U.S. District Court in Manhattan. They said the Mets owners and their families and friends were betrayed by a friend and realized a loss of more than a half billion dollars when the epic Ponzi scheme was revealed in December 2008.
The papers were filed in response to a lawsuit brought by court-appointed trustee Irving Picard, who has filed more than 1,000 lawsuits seeking to recover billions of dollars lost by investors in Madoff's fraud. Picard has argued that investors such as the owners of the Mets owe as much as $1 billion to other investors because they withdrew enough money that they came out hundreds of thousands of dollars ahead of their original investment.
Picard's lawsuit against the Mets executives "is a fiction," the lawyers said. They noted that no other investor was able to spot the fraud early either and they insisted that they had no idea that Madoff was not investing their money as he said he was.
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 of the team to hedge fund manager David Einhorn for $200 million.
According to the court papers, the Mets executives used Madoff accounts in much the same manner as they might have used traditional bank accounts, depositing excess cash for short-term investment before withdrawing it for use in operating their businesses. The lawyers said the Mets would deposit cash received from Mets season ticket sales during the winter with Madoff to maximize returns until the funds were needed a few months later to meet expenses.
Madoff, 73, is serving a 150-year sentence after admitting in 2009 that his private investment business was a fraud since at least the early 1990s. Picard has alleged that the fraud lasted at least 25 years. Investigators say about $20 billion was originally invested with Madoff, who told the investors that their money had grown in value to about $68 billion. In fact, there was only a few hundred thousand dollars remaining when the fraud was discovered.
The Mets executives said through their lawyers that they should never have been targeted by Picard. A message left with Picard's office for comment Thursday was not immediately returned.
The lawyers challenged Picard's claims that the Mets executives and others they knew made a massive profit of $300 million from "other people's money" during a quarter of a century of investing with Madoff.
"Contrary to the extreme and damaging allegations in this complaint, the overall return on the Sterling defendants' investments was hardly "staggering," particularly over a 25-year period. Had the defendants invested their funds with Berkshire Hathaway, for example, their return on income would have been vastly greater," the court papers said.