NEW YORK CITY — The owners of the Mets turned a blind eye to Bernard Madoff’s massive fraud, reaping $300 million in false profits and using a large chunk to run the team, according to a lawsuit unsealed Friday.
The suit also claims the owners were so dependent on the disgraced financier’s too-good-to-be-true returns that it “faced a severe and immediate liquidity crisis” when Madoff’s crimes were revealed in 2009.
The searing allegations were made by Irving Picard, the trustee appointed to recover funds for investors burned by Madoff’s scheme. The suit filed by Picard in federal bankruptcy court in Manhattan names Sterling Equities, along with its partners and family members, including Met owner Fred Wilpon, team president Saul Katz and chief operating Jeff Wilpon, the owner’s son.
“Given Sterling’s dependency on Madoff, it comes as no surprise that the partners willfully turned a blind eye to every red flag of fraud before them,” Fernando A. Bohorquez, Jr., a lawyer representing Picard, said Friday.
The suit had been filed under seal in December while the parties tried to work out a settlement. But lawyers told a judge this week that talks had collapsed and consented to having the complaint made public.
Its opening salvo: “There are thousands of victims of Madoff’s massive Ponzi scheme. But Saul Katz is not one of them. Neither is Fred Wilpon.”
The complaint alleges the partnership “received approximately $300 million in fictitious profits” from hundreds of accounts opened with Madoff’s firm. Of that, it says, $90 million of “other people’s money” were withdrawn to cover day-to-day operations of the Mets.
Wilpon and Katz fired back Friday with a statement calling the suit “an outrageous strong-arm effort to force a settlement by threatening to ruin our reputations and businesses we built for over 50 years.”
The pair called the accusations “abusive, unfair and untrue,” insisting they were victims of the fraud.
“We should not be made victims twice over — the first time by Madoff and again by the trustee,” they wrote.
The suit has cast a cloud over the Mets ownership, which has said it’s exploring a partial sale of the team. But Wilpon and Katz denied Friday that the operation was ever dependent on Madoff.
“That is complete nonsense,” they said. “We have good, sound businesses that were successful years before we invested with Madoff, including both real estate and the New York Mets.”
Madoff, 72, is serving a 150-year sentence in a federal prison in North Carolina after admitting that he ran his scheme for at least two decades, using his investment advisory service to cheat individuals, charities, celebrities and institutional investors.
Losses are estimated at around $20 billion, making it the biggest investment fraud in U.S. history.