Friday, March 18, 2011
Picard amends suit against Wilpons
By Adam Rubin
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
“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.
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