Bloomberg News

Madoff Trustee Assails Rakoff’s Mets Ruling, Seeks Appeal

October 10, 2011

(Updates with excerpt from filing in fourth paragraph.)

Oct. 10 (Bloomberg) -- The liquidator of Bernard Madoff’s firm assailed a judge’s ruling in a $1 billion lawsuit against the New York Mets owners, saying it “arbitrarily” gave some of the con man’s investors fictitious profits that “all customers were previously denied” by a higher court ruling.

Trustee Irving Picard made the statements in a filing in U.S. District Court in Manhattan. Picard also asked U.S. District Judge Jed Rakoff to clear the way for an appeal of his ruling.

Rakoff last month cut Picard’s suit against the baseball team’s owners by two-thirds, saying he could try to reclaim only two years of withdrawals from the Ponzi scheme. The ruling, which would allow Fred Wilpon and Saul Katz to keep purported profits resulting from Madoff’s “machinations,” was “in direct contravention” of an appeals court ruling that ruled out account statements as a basis for compensating Madoff investors for losses, Picard said in his Oct. 7 filing.

“The Second Circuit held that it would have been ‘legal error’ for the trustee to discharge claims for securities upon the false premise that customers’ securities positions are what the account statements purport them to be,” Picard said in the filing. “Yet under this court’s order, those machinations are given legal effect.”

‘In Question’

The U.S. Court of Appeals in New York said Aug. 16 that Picard can ignore fictitious profits on money Madoff never invested when calculating losses and deciding who is entitled to be repaid. Some investors who wouldn’t get paid under the formula asked for a rehearing, saying the appeals court ruled differently in a previous case.

Rakoff’s decision limiting Picard to two years of withdrawals could cost the trustee about $2.7 billion on all of his clawback suits, Picard has said. Another $3.5 billion of so- called preference payments is “in question” because of another aspect of Rakoff’s ruling, he has said.

In the Oct. 7 filing, Picard asked Rakoff to enter a final judgment in the Mets case so it could be appealed, or to allow an appeal without the final judgment. If Rakoff lets the trustee appeal, the appeals court will decide whether to review the judge’s ruling.

The Mets case is Picard v. Katz, 11-cv-03605, U.S. District Court, Southern District of New York (Manhattan).

--Editors: Stephen Farr, Mary Romano

To contact the reporter on this story: Linda Sandler in New York at lsandler@bloomberg.net.

To contact the editor responsible for this story: John Pickering at jpickering@bloomberg.net.


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