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Judge tosses all but two of the bankruptcy trustee’s claims against the Wilpons

Sep 27, 2011, 5:50 PM EST

Fred Wilpon, Jeff Wilpon

The judge has issued a ruling in the bankruptcy case involving the Fred Wilpon, Saul Katz and the Bernie Madoff fraud.  Full reports aren’t out yet, but it sounds like a bit of a mixed-bag, but generally good news for Wilpon and the Mets:

  • Good news for Wilpon and the Mets: all but two counts brought by the bankruptcy trustee, Irving Picard, have been dropped;
  • Bad news for Wilpon and the Mets: one of the two claims that remain — fraud — could, theoretically speaking, still leave them on the hook for a $1 billion liability, should the trustee prove his case;
  • Good news for Wilpon and the Mets: there appears to be a higher burden of proof placed on the trustee than he had originally sought in order to make such a recovery: he has to prove that “the defendants willfully blinded themselves to Madoff Securities’ fraud” as opposed to having to show that they could have been aware of it had they exercised good judgment.

There is still risk here, but the risk of the massive, Mets-killing award of $1 billion is much lower, because the trustee will have to show some serious bad acts on the Wilpons’ and Katz’s part in order to get there, not just that they were generally unaware.  And while, yes, there are many people who are skeptical that sophisticated business people like Wilpon and Katz had no reason to investigate Madoff’s investments further, there hasn’t been any suggestion that I’m aware of that they ignored actual evidence that a fraud was afoot and played the see-no-evil, hear-no-evil trick with respect to it.

So where does that leave things? Both sides seem to have risk here. The trustee has had most of his case blown away and, while there still exists the potential for a home run, it’s no sure thing at all. The Wilpons still have that giant potential liability there, but it’s not imminent. This is generally where parties to a big money suit take a step back and try to settle. It might be the best course for both parties here.

  1. natstowngreg - Sep 27, 2011 at 6:25 PM

    Actually, I can believe they got fleeced, even though they should have known better. Seems like a lot of people (and not just rich people) lost a lot the past 3 years when they should have known better. Like those who invested thinking the housing bubble would just keep going, and those who took excessive risks dealing in bad financial products.

  2. bbk1000 - Sep 27, 2011 at 7:38 PM

    This is bad news for any Mets fan as the best hope was the Wilpons being forced to sell. When they pulled out of the Einhorn deal should have been a clue one way or the other.

    Just an opinion but they are one of the worst owners in sports…

    • ohkhan - Sep 27, 2011 at 10:28 PM

      i bet you bengals fans would disagree

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