In an 11th-hour deal, the trustee overseeing the Madoff bankruptcy settled with the owners of the New York Mets, with defendants Fred Wilpon and Paul Katz agreeing to pay $162 million. The high-profile case spotlighted both the trustee's endeavor to claw back as much money as possible from investors who benefited from Bernie Madoff's long-running Ponzi scheme, along with the limitations of those efforts in court.
Trustee Irving Picard had been seeking roughly $300 million from the owners, arguing that Katz and Wilpon were sophisticated investors who should have known better, saying in a statement they "ignored amassing red flags of fraud."
Despite the allegations, the $162 million is probably a best-case outcome for the plaintiff. U.S. District Judge Jed Rakoff wrote that he was skeptical Picard could meet the burden of proof required to prevail in court, and disparaged the strength of the evidence brought by the trustee. "Conclusions are no substitute for facts, and too much of what the parties characterized as bombshells proved to be nothing but bombast," he said in a March 5 pretrial order.
"The settlement probably reflects a pretty substantial view that Picard felt he wouldn't prevail at trial," said Robert Jackson, an associate professor of law at Columbia University. "Because you have to prove a subjective state of mind ... that proof is very difficult to meet in any context," he said.
Despite Rakoff's stinging words, Jackson predicted Picard will continue to be aggressive in his use of the court system to recover money for Madoff'svictims. The trustee's website says that as of last month, it had recovered around $9 billion — a little more than half of the $17.3 billion in lost principal funds.
Many suits could wind up being settled out of court, though. "These investors were very savvy and knew a lot about the fund," Jackson said of Katz and Wilpon. "If Picard couldn't prove the state of mind in this case, he might be unlikely to prove it in other cases."
