Picard amends suit against Wilpons

March, 18, 2011
3/18/11
4:33
PM ET
Here is the press release from trustee Irving Picard's staff highlighting some of the changes in an amended lawsuit against Mets owners filed in U.S. Bankruptcy Court on Friday afternoon:

PRESS RELEASE OF IRVING H. PICARD

TRUSTEE FOR LIQUIDATION OF BERNARD L. MADOFF INVESTMENT

SECURITIES ANNOUNCES FILING OF AMENDED COMPLAINT AGAINST

STERLING EQUITIES, ITS PARTNERS – INCLUDING SAUL KATZ AND

FRED WILPON – AND RELATED ENTITIES

Recoveries sought now total more than $1 billion

NEW YORK, NY – March 18, 2011 – Irving H. Picard, the Trustee for the liquidation of Bernard

L. Madoff Investment Securities LLC (“BLMIS”) today announced the filing of an amended

complaint, in the United States Bankruptcy Court for the Southern District of New York, against

Sterling Equities (“Sterling”), its partners, their family members, and certain related trusts and

entities (collectively, the “Sterling Defendants”).

The amended complaint provides additional specific detail and quantification of the alleged

fraudulent transfers from BLMIS received by the Sterling Defendants.

In addition to the approximately $300 million in fictitious profits received by the Sterling

Defendants cited in the original complaint, the amended complaint states that the Trustee seeks

more than $700 million in alleged fraudulent transfers of principal received by the Sterling

Defendants, bringing the total recoveries sought by the Trustee from the Sterling Defendants to

more than $1 billion. The additional alleged fraudulent transfers of principal occurred during the six

years prior to the December 2008 commencement of the BLMIS liquidation proceeding and include

preferential transfers received by the Sterling Defendants within the 90-day period prior to the filing

date.

“The amended complaint sheds more light on the deep dependency of the Sterling business

organization on the continuation of the Madoff fraud and certain knowledge of indicia of fraud by

the Sterling partners,” said David J. Sheehan, counsel to the Trustee and a partner at Baker &

Hostetler LLP, the court-appointed counsel for the Trustee.

“Perhaps the most telling evidence of Sterling’s dependency on Madoff is the fact that postrevelation

of Madoff’s fraud, the Sterling partners were forced to negotiate with at least seven lender

banks, including Bank of America, JPMorgan Chase, Citibank, HSBC, M&T, Wachovia, and Bank of

New York (the “Lender Banks”), to restructure more than a half-billion dollars in collective debt –

not just the millions of dollars of debt secured by the Leveraged KW BLMIS Accounts,” said

Fernando A. Bohorquez, Jr., counsel to the Trustee and a partner at Baker & Hostetler LLP.

As described in the amended complaint, in the aftermath of the discovery of the Madoff fraud, with

full notice of the potential liability to the Trustee faced by the Sterling Defendants, Sterling and the

Lender Banks entered into various restructuring credit facilities containing certain provisions that

attempted to circumvent any potential recovery action initiated by the Trustee.

“The restructuring demonstrates both Sterling’s and the Lender Banks’ serious concerns regarding

potential recoveries by the Trustee, and supports the Trustee’s contention that the Sterling

Defendants were inextricably bound to the Madoff fraud,” said Mr. Bohorquez.

The amended complaint also provides additional substantiation of the inter-dependent relationship

between Sterling and BLMIS as well as certain Sterling partners’ knowledge of Madoff’s dishonesty

in his investment advisory business. For instance, the amended complaint details a multi-milliondollar

interest- and cost-free bridge loan from Madoff to Sterling in connection with its purchase of

the broadcast rights for the New York Mets from Cablevision. This transaction was documented by

a single letter agreement that falsely described the loan as an “investment” by Ruth Madoff in the

company that would later become the SNY network.

The Sterling complaint was initially filed under seal on December 7, 2010 in the United States

Bankruptcy Court for the Southern District of New York. The original complaint was unsealed on

February 4, 2011.

In addition to Mr. Sheehan and Mr. Bohorquez, the Trustee acknowledges the contributions of the

Baker & Hostetler attorneys who worked on this filing: Lauren Resnick, Kathryn Zunno, Steven

Goldberg, Amanda Fein, Keith Murphy, Marc Skapof, George Klidonas, and Henry Bodenheimer.

# # #

Adam Rubin has covered the Mets since 2003. He's a graduate of Mepham High School on Long Island and the Wharton School of the University of Pennsylvania. He joined ESPNNewYork after spending 10 years at the New York Daily News.
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Daniel Murphy
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