On the surface, Irving Picard, the trustee of Bernard L. Madoff Investment Securities LLC (“BLMIS”), had a very good day. Judge Jed S. Rakoff granted Picard’s motion for summary judgment against Fred Wilpon and Saul Katz, the owners of the New York Mets, and their families and affiliated enterprises (the “Wilpon/Katz Group”) with respect to the $83 million of fictitious profits received by the Wilpon/Katz Group in the two year period before the filing of the BLMIS case. At the same time, Judge Rakoff denied the Wilpon/Katz Group’s summary judgment motion that sought to prevent Picard from clawing back any payments other than fictitious profits on the grounds that he could not prove that the Wilpon/Katz Group acted in bad faith in investing in BLMIS.
The Wilpon/Katz Group can take some comfort, however, from Judge Rakoff’s blunt skepticism regarding Picard’s ability to recover any further amounts. The ruling with respect to fictitious profits was hardly a surprise. In a ruling last September, Judge Rakoff had issued what amounted to a virtually gold-plated invitation when he said, “[T]he Trustee might well prevail on summary judgment seeking recovery of [such] profits.” However, with respect to the $300 million of invested principal that the Wilpon/Katz Group received from BLMIS during the two year period, Judge Rakoff reiterated his earlier expressed doubts in even stronger terms, stating that Picard’s efforts to demonstrate bad faith amounted to “nothing but bombast.”
The trial is scheduled to begin in two weeks on March 19. At this point, however, a settlement very likely makes sense for both parties. Although Picard has virtually no chance of recovering invested principal, Rakoff is going to allow him to present his evidence with respect to bad faith to a jury. The Wilpon/Katz Group, even if victorious after what will undoubtedly be an embarrassing and widely publicized trial, will thereafter face a lengthy appeal period. Picard has been successful before the Second Circuit, and may very well prevail in his appeal of Judge Rakoff’s earlier ruling from last September that, among other things, reduced the amount of fictitious profits which could be recovered from approximately $295 million.
The mediation efforts of former Governor Mario Cuomo may yet succeed.