MANHATTAN (CN) - On the eve of a trial slated for today, the owners of the New York Mets agreed to pay $162 million to settle claims that they willfully blinded themselves to Bernie Madoff's epic Ponzi scheme.
A jury could have ordered Sterling Partners, the group that owns the Mets, to pay more than double.
Irving Picard, the trustee handling the recovery of Madoff's fraud, said he agreed to dismiss the complaint in return for the settlement. Picard was appointed as trustee under the Securities Investor Protection Act (SIPA).
In a March 5 order, U.S. District Judge Jed Rakoff ruled that the Mets' owners would need to pay up to $83 million before trial and up to $386 million if Picard could prove that the Mets owners showed bad faith in their Madoff dealings.
Rakoff indicated that he believed Picard's case would be a tough sell.
"The defendants' motion for summary judgment is denied, though the court remains skeptical that the trustee can ultimately rebut the defendants' showing of good faith, let alone impute bad faith to all the defendants," Rakoff wrote.
Picard's chief counsel, David Sheehan, called the settlement the "best possible outcome" for Madoff's victims.
"The SIPA trustee believes that this settlement represents the best possible outcome for BLMIS customers with allowed claims, as it provides for the recovery of 100 percent of the $162 million in fictitious profits for the six-year period," Sheehan said in a statement, abbreviating the name of Bernard L. Madoff Investment Securities.
"At the same time, the SIPA trustee has withdrawn all willful blindness claims against any Sterling party," he added. "All settlements negotiated by the SIPA trustee are predicated on the fact that the SIPA Trustee works for the best interests of BLMIS customers. Settlement terms are reached to create the maximum recovery for the BLMIS Customer Fund, taking into consideration factors such as the vicissitudes of time-consuming litigation and the financial situation of the parties involved."
Under the terms of the agreement, Mets owners Fred Wilpon and Saul Katz will guarantee up to $29 million of the amount.
Rakoff, who sparked a national conversation with his effort to quash a settlement between the SEC and Citigroup, will consider whether he will approve the Picard settlement at an April 13 hearing.
The Sterling Partners emphasized that they acted in good faith, and that the settlement reflects this.
"We're pretty pleased to have this behind us," Katz said in a statement. "As we've said all along, the fact is we have done everything in good faith. The settlement itself bears that out - that we've acted in good faith."
Wilpon thanked former New York Gov. Mario Cuomo who he said "never gave up."
"As we've said from the very beginning when this lawsuit started, we are not willfully blind, we never were, we acted in good faith, and we're very pleased that this settlement bears that out," Wilpon said in a statement. "That's very important to us. Now I guess I can smile-maybe I can take a day off, but I can't wait to get back to our businesses which I love."
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