Gone Fishing: Why the Madoff Trustee Won't Reel In New York Mets Owners
Let's sue two: After taking legal action against JPMorgan Chase (JPM) for its role in allegedly facilitating Bernie Madoff's $65 billion swindle, the trustee representing his victims is accusing New York Mets owners Saul Katz and Fred Wilpon of wrongfully profiting from the fraud.
Or at least I think that's the charge. Although the lawsuit runs to 365 pages, it's not exactly clear what the two financial moguls are supposed to have done. One thing the complaint doesn't say is that the two directly abetted Madoff in his scheme, as JPMorgan is alleged to have done.
Instead, Katz and Wilpon are accused of choosing "to simply look the other way" as suspicions about Madoff grew. They are said to have "turned a blind eye" to such evidence, including the dubiously consistent returns he generated for investors. The owners also elected to "blindly accept their good fortune without conducting any investigation whatsoever," claims the trustee, Irving Picard of New York law firm Baker Hostetler.
Does stupidity require punishment?
But what's the rightful punishment for stupidity? After all, Katz and Wilpon had $500 million invested with Madoff when the scam was revealed -- and lost it all, their lawyer says. Meanwhile, if the two strongly suspected Madoff was crooked, then why didn't they bail?
Picard also says Katz and Wilpon "knew or should have known" that Madoff's investment returns were suspicious. Well, which is it? Because there's a difference. For instance, I should know that my beloved Chicago Cubs will never win the World Series. But do I know that in fact? Nope, (and wait 'til next year, by the way!).
Through their attorneys, the moguls claim they had no idea Madoff was up to something:
For 25 years [Katz and Wilpon] saw nothing to indicate that Madoff was not trading securities as he was reporting he did. Moreover, the partners took legitimate comfort from the fact that numerous highly regarded and sophisticated lending institutions readily accepted their Madoff investments as security for multi-million dollar loans.Lenders like JPMorgan, which suspected for years that Madoff was crooked. Unlike Katz and Wilpon, however, the financial giant had the good sense -- if not the rectitude -- to run like an alley cat shortly before the scheme collapsed. JPMorgan withdrew $241 million from Madoff's funds only weeks before he was arrested.
You can't blame Picard for swinging a big stick, of course. Given his mission to recoup whatever he can for people who lost money dealing with Madoff, it makes sense to go after heavy-hitters like JPMorgan, UBS and the Mets. But this latest suit has the feel of a favorite past-time among ballplayers: fishing.
Image from Wikimedia Commons
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