A judge said Thursday he’ll decide by March 5 if a trial is necessary to decide if the owners of the New York Mets were willfully blind to the multibillion-dollar fraud by financier Bernard Madoff.
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US District Judge Jed Rakoff heard arguments from lawyers for more than two hours, questioning both sides at length. Afterward, he announced he’ll take a few more days to decide whether a March 19 trial is necessary to decide the validity of claims by a trustee recovering money for cheated investors.
The court-appointed trustee, Irving Picard, sued the Mets owners, saying they had to know Madoff was acting illegally. Rakoff has already limited what the team’s owners might have to pay to other Madoff investors to $386 million. The trustee had sought $1 billion.
Arguing on the trustee’s behalf, attorney David Sheehan scoffed at attempts to portray the Mets owners as ”unsophisticated run-of-the-mill guys” who had no reason to know Madoff was squandering about $20 billion on behalf of thousands of investors.
”We’re going to prove that’s not true,” Sheehan said.
He caught the judge’s interest with his description of a financial adviser, Noreen Harrington, who testified in a deposition that she told Mets co-owner Saul Katz in 2003 that she believed Madoff was either using his clients’ money to cheat in the stock market or was making up the steady profits in good times and bad. Rakoff sent his clerk to get the transcript and he read part of it into the record, particularly her claim that Katz disliked her theories.
”Obviously, he was visibly angry with me because these were people he respected,” she said.
Harrington, a former Goldman Sachs executive, said she requested to meet with Madoff but the meeting was never arranged.
Rakoff asked attorney Karen Wagner, arguing for the Mets owners, why Harrington’s testimony was not potential evidence of willful blindness, a legal standard that must be met before Picard can succeed in his claims.
She said Harrington testified only that Katz did not respond to the request for a meeting and then she resigned shortly afterward.
The judge said it was hard for him to see how the failure by Katz to arrange a meeting with Madoff for Harrington could amount to willful blindness since it appeared that she did not ask a second time and she quit soon afterward.
”There was no effort to hide anything here,” Wagner said of the Mets owners’ behavior. She said they felt confident in Madoff in part because they knew he was watched by government regulators and because banks and rating agencies seemed to approve of his business as well.
Former Gov. Mario Cuomo, a court-appointed mediator tasked with trying to settle the case, was asked by a reporter afterward about the odds that the case might be settled before Rakoff decides if a trial is necessary.
”I don’t do odds,” he said.
Madoff is serving a 150-year prison sentence after revealing the fraud in December 2008.