Trial Judge Wallops Wilpon Again, Making Mets Sale More Likely

Judge Rakoff  walloped New York Mets owner Fred Wilpon yesterday in Federal District Court, ruling that Wilpon and his partners would have the burden of proof in showing that they did not act in bad faith while participating in profits derived from Bernie Madoff’s lengthy and massive Ponzi scheme.

This ruling could have gone either way. The case had originally been filed in Bankruptcy Court by the Madoff trustee, Irving Picard (whose charge is to recover as much as possible of the hundreds of millions of dollars lost by Madoff investors), but Wilpon’s lawyers “removed” the case to Federal Court — where the burden of proof usually lies with the moving party – in this case, Trustee Picard.

But Judge Rakoff just ruled that the Bankruptcy Court burden of proof rules will nonetheless apply, thereby assigning that burden to Wilpon.  The judge had previously ruled that “willful blindness” to the Madoff fraud would have to be shown for the Trustee to recover (more than the $83 million which the Judge has already ruled must be paid by Wilpon.)  Because of yesterday’s ruling, though, it’s now clear that Wilpon must show by a preponderance of the evidence that he and his partners were not “wilfully blind” to the fraud. Why all the fuss about who has the burden of proof?

1. It’s always harder to “prove a negative”, and Wilpon will now have to show that he and his partners did not act with “willful blindness.”

2. As a general rule, claims of fraud have to be proven “with particularity” — a detailed and high standard of proof, which would’ve made the Trustee’s job difficult. Getting out from under that high burden of proof is a gift to the Trustee, and a big blow to Wilpon.

3. Wilpon Long-Ago Ignored a Red Flag: There is already sworn and documentary evidence that unequivocal advice had been given to Wilpon and his associates many years ago, by an independent third-party accountant named Harrington – retained by Wilpon’s group specifically to evaluate Madoff’s investment operation – that Madoff’s investments were either unreliable or fictional, and that Wilpon and his associates ought not, therefore, invest with Madoff.  That advice was ignored.

Harrington’s version of events – which is not likely to change at trial – appears to provide a very solid prima facie foundation which would allow a jury to conclude that Wilpon was, in fact, “willfully blind” to Madoff’s fraud.

The trial starts March 19; this pre-trial ruling, by itself, will likely create one more very significant road block for Wilpon in his desperate scramble to both retain immediate short-term lending he needs to repay substantial Mets’-related debts (some due by April 1), and to retain ongoing majority ownership of the Mets.

The writing on the wall is increasingly suggesting that the Mets’ may see new majority ownership sometime soon.

About brewonsouthu

lawyer, with interest in college sports and NCAA oversight and decisions, and sports generally.
This entry was posted in Bernie Madoff, Fred Wilpon, Irving Picard, New York Mets, Uncategorized and tagged , , , , , , , . Bookmark the permalink.

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