Sept. 24 (Bloomberg) -- American Securities Management LP, a business partner of the owners of the New York Mets, was targeted in a revised lawsuit by the liquidator of Bernard Madoff’s firm demanding $91.9 million that allegedly was taken out of the con man’s firm since January 2000.
After meeting Fred Wilpon and Saul Katz, owners of Major League Baseball’s Mets, the company, formerly known as American Securities LP, joined with the Mets owners’ Sterling Equities Inc. in 1991 to create a $4.5 billion-asset real-estate investment company, Sterling American Property Inc., according to Madoff trustee Irving Picard. Madoff was among the investors, Picard said in a bankruptcy court filing yesterday in Manhattan.
Closely held American Securities and its executives had access to the con man and should have responded to so-called red flags warning of fraud, Picard said in an amended complaint.
Charles Klein, a founder and managing director of American Securities, didn’t immediately return a call seeking comment on the complaint. Funds bearing his name are among the more than 30 defendants in the suit, along with funds and foundations of the late William Rosenwald, an American Securities founder who used the company to invest his share of his family’s Sears Roebuck & Co. fortune, according to Sterling American’s website.
In his $1 billion suit against the Mets owners, Picard says they shopped for fraud insurance in 2001 and were well aware that Madoff may have been fraudulent, which they have denied. American Securities “hedged its bets” on funds it invested with Madoff by buying fraud insurance as early as 2000, or eight years before Madoff’s arrest, Picard said.
The company and its insiders paid “a six-figure annual premium” for what they described in internal e-mails as a Madoff policy “designed to cover dishonest acts by Madoff” and protect against fraud, Picard said.
The company had about $27 million with Madoff at the time and bought the insurance even though Klein considered the investment “low risk,” the trustee said.
American Securities referred the Mets owners to an insurance agent who offered them a fraud policy with a $500,000 deductible that cost 30 cents per $100 of investment, according to Picard’s court filings. Wilpon and Katz have said they didn’t buy any insurance.
Of the money Picard is demanding from American Securities, about $10 million was fake profit, he said.
Madoff, 73, is serving a 150-year sentence in a federal prison in North Carolina.
The case is Picard v. American Securities, 1:10-ap-05415, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
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