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March 21, 2011 9:29 PM

Mets Owners Respond to Picard's Amended $1 Billion Complaint

Posted by Alison Frankel

From The Am Law Litigation Daily

Anyone who is a longtime and thus long-suffering New York Mets fan knows that the team's owners--the Wilpon and Katz families--are capable of making stunningly bad decisions. (Exhibits A and B: Oliver Perez and Luis Castillo) And since they were first targeted in a clawback suit by Bernard L. Madoff Investment Securities bankruptcy trustee Irving Picard of Baker & Hostetler, the Mets owners have insisted that they, like Madoff's other victims, were deceived by the Ponzi schemer, in perhaps the worst of their unfortunate decisions.

On Sunday, the Wilpons and Katzes finally filed their formal response to Picard (who himself filed a 381-page amended $1 billion complaint against the Mets owners on Friday). In a 107-page motion to dismiss, the Wilpons's lawyers from Davis Polk & Wardwell allege that the complaint by Picard and his Baker & Hostetler counsel twists and misrepresents evidence in an effort to bolster the trustee's claims that the Wilpon and Katz families and their related business enterprises knew or should have known that Madoff was a fraud.

"The trustee took a huge amount of discovery before he filed this complaint," the Davis Polk memo says. "He has for months refused--and continues to refuse--to disclose his precomplaint discovery, insisting that 'every allegation in the 1,365 paragraphs of the [original] complaint was made in good faith. But the evidence he himself compiled shows that most of its key allegations are indisputably false."

Picard's most damning allegations against the Mets owners concern alleged warnings they received from principals in Sterling Stamos, a hedge fund the Mets owners' started up in 2002 with financier Peter Stamos, in a effort to diversify their investments. According to the Picard complaint, the fund's chief investment officer, Ashok Chacra, said in a December 2008 e-mail after Madoff's scheme came to light that he'd warned the Katz and Wilpon families for years not to invest with Madoff because Madoff didn't meet Stamos's due diligence requirements. Stamos himself, according to the trustee made similar comments in a December 2008 e-mail.

But according to the Mets owners' filing, the trustee's complaint completely ignores Stamos's own deposition testimony, conducted in the Mets' case, that he never doubted Madoff's legitimacy. If he told the Wilpons and Katzes to move their money out of Madoff investments, Stamos testified, it was only because he wanted to oversee a bigger percentage of the Mets owners' money. In fact, Stamos testified, until Madoff confessed to his fraud, he regarded Madoff as an investment wizard.

"I'm embarrassed to say that I said to Mr. Katz on a number of occasions that my assumption is that Mr. Madoff is the most honest and honorable man, among the most honest and honorable men that we will ever meet. Number one. And, number two, that he is perhaps one of the--my assumption is he's perhaps one of the best hedge fund managers in modern times," Stamos said at his deposition, according to the Mets owners's filing.

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