The bankruptcy trustee is using dubious methods based on flimsy evidence.
Bernie Madoff perpetrated the largest financial fraud in American history, but are his crimes now being compounded by the trustee charged with unwinding the Ponzi scheme? We’re beginning to wonder after scrutinizing the evidence against Fred Wilpon and Saul Katz, the New York Mets owners who stand accused of colluding with Madoff.
Messrs. Wilpon and Katz and their families are being sued by Irving Picard, a New York bankruptcy attorney appointed to liquidate Madoff assets and recover money from those who benefitted from his Big Con. Mr. Picard is borrowing from the method of overzealous prosecutors everywhere: distorted accusations, tailored for the media, that intimidate public figures into settling to avoid further embarrassment. His methods raise basic questions of transparency and due process.
In an amended complaint in March, Mr. Picard is looking to recover $295 million in fake profits that the Wilpon-Katzes made from Madoff investments—i.e., other investors’ money that Madoff allegedly passed on to them. He is also seeking $710 million that they withdrew against their principal, to repay the investors who came out net losers. Mr. Picard claims they were sophisticated businessmen who knew or should have known that Madoff’s returns were too consistent to be true, and that they “willfully turned a blind eye to every objective indicia of fraud before them.”
One of Mr. Picard’s marquee pieces of evidence is supposedly Peter Stamos, a friend of Mr. Katz and an investment partner. Mr. Picard claims Mr. Stamos “repeatedly warned” the Wilpon-Katzes that Madoff’s returns were fishy. But the Wilpon-Katzes later obtained Mr. Stamos’s deposition, long after Mr. Picard’s accusations had been splashed all over the New York tabloids—and it turns out that his full testimony directly and specifically contradicted Mr. Picard’s selective edit.
In 1972, the Wilpon-Katzes founded Sterling Equity Partners, a closely held family partnership that manages their empire of real estate, professional baseball, a TV network, and private equity and hedge funds. Sterling first invested with Madoff in 1985. In 2002, Sterling joined with Mr. Stamos to create the hedge fund Sterling Stamos.