Mets Owners 'Turned a Blind Eye' to Madoff Suspicions, Lawsuit Claims

Dec. 4, 2010 — -- The owners of the New York Mets "willfully turned a blind eye" to indications their millions of dollars in investments with their long-time friend Bernard Madoff were part of what turned out to be the biggest fraud scheme in Wall Street history, court documents released today allege.

The documents, a 370-plus page complaint filed by the trustee representing the victims of Madoff's now-infamous Ponzi scheme, allege that Sterling Equities, an investment firm run in part by Mets owners Fred and Jeff Wilpon, were told by an investment partner that Madoff's numbers were "too good to be true" but the company was "in too deep... to do anything but ignore the gathering clouds."

The complaint alleges that after Madoff's arrest in 2008, an employee for a Sterling Equities hedge fund, Sterling Stamos, sent an email in which the employee wrote, "I guess our CIO [Chief Investment Officer] always said it was a scam," the filing says. The complaint also claims Sterling Equities "was aware of and even enabled" Madoff's attempts to avoid regulatory scrutiny by insulating the firm from contact by other clients and their own employees.

"Attempts to negotiate with the Sterling Defendants have not resulted in a resolution of the amount owed to the Madoff Customer Fund," David Sheehan, attorney for trustee Irving Picard said in a statement today. "We believe that the Sterling Defendants received substantial funds – in the hundreds of millions of dollars – illegally through their [Bernard L. Madoff Investment Securities] accounts and we seek these recoveries for ultimate distribution to BLMIS customers with valid claims."

Sterling Equities released a statement today calling the suit against the company "an outrageous 'strong-arm' effort."

"The conclusions in the complaint are not supported by the facts," the statement said. "The plain truth is that not one of the Sterling partners ever knew or suspected that Madoff ran a Ponzi scheme. Because the Trustee has no evidence to support his claims even after a year-and-a-half review of over 700,000 pages of documents and many, many hours of depositions, he has created a claim that we 'knew or should have known' that Madoff was a fraud.

"The Trustee also alleges that we were blinded to Madoff's crimes because our businesses 'depended' on the returns. That is complete nonsense," the statement said.

Fred Wilpon and son, Jeff Wilpon, are longtime friends of the Madoff family. Bernie Madoff's son Mark, who recently committed suicide, was close friends with Jeff Wilpon when both were growing up in Roslyn, Long Island.

Major negotiations between Sterling Equities and trustee Irving Picard over the suit ended Thursday. In a letter from the Mets owner's attorney Karen Wagner to the judge, she said both parties pushed for the release of the documents to counter "one-sided and misleading" media reports based on apparent leaks of the original complaint against the Mets owners.

"These leaks resulted in a media storm to which we were forced to respond," Wagner wrote Thursday. "The defendants have strong objection to the heated rhetoric and unfounded conclusions in the complaint."

On Dec. 7, 2010, Picard filed suit against Sterling Equities because the company was deemed a "net winner" in Madoff's multi-billion-dollar investment scam. According to the initial filing, the Wilpons, who own a controlling stake in the team, withdrew $48 million more from their Madoff accounts than they invested.

Last week, the Wilpons announced economic "uncertainty" was forcing the team to consider selling a 25 percent interest National League Franchise, which value was estimated in 2010 at $858 million.

Bernie Madoff was arrested Dec. 11, 2008 at his Manhattan home by federal agents, charged with running the largest fraud in Wall Street history. He is now serving a 150-year sentence for his $65 billion Ponzi scheme he ran for 20 years.

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