Skip to content

Madoff trustee throws some new stuff at Wilpon and Katz

May 20, 2011, 10:30 AM EDT

Fred Wilpon, Jeff Wilpon

Both the New York Times and the Post today run with the latest filing in the Bernie Madoff/Wilpon/Mets case. The allegation: in 2001 Wilpon and Katz went shopping for “fraud insurance,” and that by doing so it shows that they had reason to believe that Madoff was, in fact, a fraud, it says.

For those who forget, the trustee, Irving Picard, is claiming that because Wilpon and Katz “knew or should have known” that Madoff was a fraud, they are responsible to pay back hundreds of millions of dollars to Madoff victims, so this would be evidence supporting that, he claims.

Eh.  Look, I’m still generally skeptical of claims by the Wilpons that they were babes in the woods here, but this “shopping for fraud insurance” allegation doesn’t do much to support that in my mind.

For one thing, they didn’t buy the insurance. If they thought there was a serious risk of Madoff’s pyramid crumbling down, wouldn’t they have?

And more to the point, isn’t shopping for insurance a sign of prudence?  Just because I buy auto insurance doesn’t mean I’m gonna go crash my car into things. Just because I buy home owner’s insurance doesn’t mean I’m gonna burn the place down. I trust my doctor, but I’m damn glad he has malpractice coverage.

Insurance is just something you look into as a matter of course. You’d be shocked to see how many specialized insurance products are out there on the market. It’s almost as if insurance companies have a keen sense of how to prey on the insecurities of people in order to make a buck. They don’t mean anything in and of themselves.

So, sorry. If there were emails from back then saying “Hey, Fred! We all know that Madoff is a scam artist, so let’s buy some awesome insurance so we can skate!” fine, then it’s something. But the mere fact that someone was looking at this kind of insurance doesn’t do a whole hell of a lot for me. At best it’s spice in the gumbo. It’s not the shrimp, and without any shrimp, it’s pretty useless.

  1. Old Gator - May 20, 2011 at 11:25 AM

    Lloyd’s of London: if ya love me, you’ll use me.

  2. APBA Guy - May 20, 2011 at 11:39 AM

    What insurance is that, Yogi?

    • Old Gator - May 20, 2011 at 11:46 AM

      And the duck replied wauuuuuugggghhhhwaughwaughwaughwaugh!

      Oops. Wrong duck. The janitor must’ve unplugged Walt’s brain from the cryogenics monitor again.

  3. tuftsb - May 20, 2011 at 1:18 PM – Wall Street Journal 5/11:

    Mr. Picard contends that Mr. Stamos “openly questioned Madoff’s legitimacy for years and recommended to the Sterling Partners that they should redeem” their other investments with Madoff. But Mr. Stamos actually testified under oath that “I’m embarrassed to say that I said to Mr. Katz on a number of occasions that my assumption is that Mr. Madoff is the most honest and honorable man, among the most honest that we will ever meet. Number one. And number two, that he is perhaps one of the—my assumption is he’s perhaps one of the best hedge fund managers in modern times.”

    Mr. Picard maintained in court and led the media to believe that Mr. Stamos was a whistle-blower. Mr. Stamos did send an email in December 2008 saying that “Fortunately, our firm did not invest with Madoff. That firm and fund wouldn’t make it through our risk and ops controls—lack of transparency, no third party administrator, etc. Unfortunately, our partners—Saul and Fred—against our recommendations invested as individuals and through their real estate firm.”

    Based on the public evidence so far, it looks as if Mr. Stamos was merely being a good fiduciary, urging the Wilpon-Katzes to diversify their investments and warning them about the risks of proprietary trading strategies like the one Madoff said he was running. The Sterling partners had about nine-tenths of their securities investments with Madoff, Mr. Picard estimates. As Mr. Stamos put it, “What I recall telling him [Saul Katz] was don’t put more than 10% of your assets in any one manager.”

    Mr. Picard also makes much of an email from Sterling Stamos’s chief strategist Ashok Chachra calling Madoff “too good to be true” and a “scam.” But that email was sent a day after the fraud was exposed—and Mr. Chachra testified that beforehand there was “no reason to think there was anything wrong.” His deposition, which the Wilpon-Katzes also obtained, reveals that Mr. Picard’s team did not ask Mr. Chachra about the email, while Mr. Stamos said that “I can’t recall ever using those words to describe Mr. Madoff.”

    Picard is a clown – but one with unlimited powers (think Ken Starr) and a bankruptcy judge that can pretty much do what he wants behind him.

    • paperlions - May 20, 2011 at 2:26 PM

      Considering the major differences in the way Madoff’s scam was run compared to legitimate investment firms, many of these differences being the way he dealt and interacted with investors and the format and types of information he provided (or rather didn’t provide)…..I find it hard to believe that any honest person would truthfully refer to Madoff as “the most honest and honorable man, among the most honest that we will ever meet”. Honest and honorable people do not operate in secrecy and keep their investors/partners in the dark. There are 3 options: 1) Stamos is an idiot, 2) there is nothing like an honest or honorable man in investment banking, 3) Stamos is lying.

  4. hermitfool - May 20, 2011 at 1:40 PM

    Think Ken Starr? He wasn’t a patch on Elliot Spitzer.

    • Old Gator - May 20, 2011 at 4:01 PM

      Thinking Ken Starr causes my right arm to shoot out involuntarily. Think Dr. Strangelove.

  5. jimbo1949 - May 20, 2011 at 4:41 PM

    1) You have auto insurance because it’s the law.
    B) You have home insurance because your mortgage bank says so.
    iii) Wilpon couldn’t afford/find anyone willing to take the risk. (according to NYT)

Leave Comment

You must be logged in to leave a comment. Not a member? Register now!

Top 10 MLB Player Searches
  1. D. Wright (2457)
  2. D. Span (2305)
  3. G. Stanton (2226)
  4. Y. Puig (2187)
  5. J. Fernandez (2147)
  1. G. Springer (1965)
  2. B. Crawford (1897)
  3. M. Sano (1776)
  4. M. Teixeira (1769)
  5. J. Hamilton (1696)