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Monday, March 05, 2012

Bloomberg:  Mets Owners Told to Pay Illegal Madoff Profits

U.S. District Judge Jed Rakoff refused today to dismiss the suit as baseball team owners Fred Wilpon and Saul Katz had asked. Rakoff ruled that Madoff trustee Irving Picard can claim as much as $83.3 million without a trial. Picard seeks another $303 million, and must prove to a jury that the Mets owners and other defendants were “wilfully blind” to the fraud.

“The court remains skeptical that the trustee can ultimately rebut the defendants’ showing of good faith, let along impute bad faith to all the defendants,” Rakoff said in his ruling in U.S. District Court in Manhattan. “The principal issue remaining for trial is whether the defendants acted in good faith when they invested in Madoff securities in the two years prior to bankruptcy or whether, by contrast, they wilfully blinded themselves to Madoff’s Ponzi scheme.”

So they’re likely out the $83mm, but looking pretty good on the rest.  The Wilpons may survive yet.  God help us all.

Fat Al Posted: March 05, 2012 at 12:18 PM | 128 comment(s) Login to Bookmark
  Tags: mets

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   1. Fat Al Posted: March 05, 2012 at 12:37 PM (#4074186)
I hadn't realized that this is to be a jury trial. That could be a problem for the Wilpons since Rakoff's skepticism on the bad faith issue may not mean much.
   2. manchestermets Posted: March 05, 2012 at 12:42 PM (#4074194)
How can the judge award some damages without a trial? Is that award the result of a legal judgement on some undisputed facts or something like that?
   3. Dan Posted: March 05, 2012 at 12:45 PM (#4074201)
I think Rakoff is a lot more sympathetic to the Wilpons than a jury will be. I don't know that a jury will find them "willfully blind" to the ponzi scheme or not, but I certainly wouldn't dismiss the possibility as quickly as the judge appears to be doing.
   4. Arbitol Dijaler Posted: March 05, 2012 at 12:49 PM (#4074208)
How can the judge award some damages without a trial? Is that award the result of a legal judgement on some undisputed facts or something like that?


Yes.
   5. Greg Pope thinks the Cubs are reeking havoc Posted: March 05, 2012 at 12:53 PM (#4074213)
I think Rakoff is a lot more sympathetic to the Wilpons than a jury will be.

Keeping in mind that I only know law stuff from TV here. Is this one of those times when a judge could set aside the jury verdict? What are the rules for a judge to do that?

Along similar lines, let's say that the jury finds the Wilpons guilty, say, in June. Is there an appeal process? What would happen during the appeal?
   6. Ephus Posted: March 05, 2012 at 12:54 PM (#4074215)
Trial ---> Bankruptcy Court (this time for the Mets). At that point, the Dodgers auction will have concluded, and the Mets will be the only MLB property for sale.
   7. RoyalsRetro (AG#1F) Posted: March 05, 2012 at 01:00 PM (#4074227)

Keeping in mind that I only know law stuff from TV here. Is this one of those times when a judge could set aside the jury verdict? What are the rules for a judge to do that?


Its pretty rare. IIRC, the case has to be one where a reasonable person would find the evidence to have gone the other way, or there was some sort of misleading evidence or argument that was to be struck from the record, but which was heard by the jury and influenced them regardless.
   8. cercopithecus aethiops Posted: March 05, 2012 at 01:00 PM (#4074228)
Is this one of those times when a judge could set aside the jury verdict?


Isn't every jury verdict one of those times when a judge can set aside the jury verdict?

EDIT: and just because it's rare doesn't mean it isn't always a possibility.
   9. The Id of SugarBear Blanks Posted: March 05, 2012 at 01:06 PM (#4074234)
The big news is that the Wilpons have to post a bond to appeal and the bond is $91 million. Where are they going to get that kind of money, and is MLB (and the banks) going to let them post the bond before they pay them back?
   10. SouthSideRyan Posted: March 05, 2012 at 01:11 PM (#4074239)
The big news is that the Wilpons have to post a bond to appeal and the bond is $91 million. Where are they going to get that kind of money, and is MLB (and the banks) going to let them post the bond before they pay them back?


Duh, $20M shares in the Mets.
   11. Ephus Posted: March 05, 2012 at 01:13 PM (#4074241)
1. Given that Judge Rakoff just denied summary judgment to Wilpon/Katz on the willfully blind allegations, I think it is extremely unlikely that he would overturn a jury verdict. The denial of summary judgment essentially necessarily means that if the jury resolves all disputed issues of fact in favor of Picard, Picard could win.

2. The $91 million bond (at a minimum) is the reason I believe the Mets are heading to bankruptcy court. Even if the individual defendants could find the money for the appeal bond, the recent experience with the Dodgers and the Rangers shows that the team will fetch more money in a bankruptcy auction (where MLB has very limited rights to block a transaction) then through an ordinary sale. r
   12. charityslave is thinking about baseball Posted: March 05, 2012 at 01:14 PM (#4074243)
I forget-is this the end of the beginning or the beginning of the end?
   13. villageidiom Posted: March 05, 2012 at 01:19 PM (#4074251)
I forget-is this the end of the beginning or the beginning of the end?
Both. Every new beginning is some other new beginning's end.

I hate that song, likely for irrational reasons.
   14. The Piehole of David Wells Posted: March 05, 2012 at 01:24 PM (#4074255)
I hate that song, likely for irrational reasons.


I liked the band they were (Trip Shakespeare) before they were the band that sang that song, and so, I like that song too.

Also, what is the likelihood that the Wilpons, etc., just put up their own money to hold onto the Mets? I'm sure they think the Mets are still a great investment and that just given time they can get their house into order because the team pulls in so much money. It's not so far down the road that these #### contracts will come off the books and they can just put a skeleton team on the field and plow the money that will undoubtedly flow their way into paying their debts. That, I would imagine, is what they're thinking.
   15. Frisco Cali Posted: March 05, 2012 at 01:28 PM (#4074257)
I hate that song, likely for irrational reasons.

Weird. Hate is usually so rational.
   16. Joe Kehoskie Posted: March 05, 2012 at 01:30 PM (#4074260)
I wonder if today's news might have an impact on the Dodgers sale. Steve Cohen, a NYC-area resident whose net worth is north of $8 billion, currently has his checkbook open to buy the Dodgers, and he's being represented by Steve Greenberg, who's listed as a Mets director at MLB.com.

Even with all the money in NYC, it doesn't seem like there's a long list of multibillionaires clamoring to buy an MLB team. It would seem a little risky for the Wilpons to let the guy who might be their best suitor run off with a different team. (Cohen reportedly made a run at the Mets last year before the ill-fated Einhorn deal was announced.)

In any event, March should be a very interesting month for inside-baseball junkies.
   17. The Id of SugarBear Blanks Posted: March 05, 2012 at 01:39 PM (#4074266)
Cohen's one of the buyers of the $20M shares, one of the only, if not the only, publicly-reported purchaser outside the inner circle.
   18. Dan Posted: March 05, 2012 at 01:40 PM (#4074267)
Maybe Cohen will just buy the Dodgers and bring them back to Brooklyn instead of getting involved in the Wilpons' mess!
   19. DA Baracus Posted: March 05, 2012 at 01:51 PM (#4074278)
I forget-is this the end of the beginning or the beginning of the end?


It's Before the Beginning for all you Peter Green fans.
   20. Lassus Posted: March 05, 2012 at 01:53 PM (#4074282)
I liked the band they were (Trip Shakespeare)

Saw them by chance in college on the "Are You Shakespearienced?" tour, and am a life-long fan, including all successive incarnations. Note also that Dan Wilson co-wrote the 2007 song of the year with Dixie Chicks and three songs from Adele's destroyer Grammy-winner "21", including "Someone Like You".


Anyhow, I still think the Wilpons make it out of this with the team after the endgame. I hope I'm wrong.
   21. charityslave is thinking about baseball Posted: March 05, 2012 at 01:56 PM (#4074290)
Even with all the money in NYC, it doesn't seem like there's a long list of multibillionaires clamoring to buy an MLB team



Mark Cuban, come on down!
   22. RoyalsRetro (AG#1F) Posted: March 05, 2012 at 02:15 PM (#4074309)
I loved Semisonic, although that song got way overplayed. If you were at a bar around 2-3 a.m. in the 90s, you were going to hear that song.
   23. David Nieporent (now, with children) Posted: March 05, 2012 at 02:47 PM (#4074346)
1. Given that Judge Rakoff just denied summary judgment to Wilpon/Katz on the willfully blind allegations, I think it is extremely unlikely that he would overturn a jury verdict. The denial of summary judgment essentially necessarily means that if the jury resolves all disputed issues of fact in favor of Picard, Picard could win.
...based on the summary judgment record. We don't know what the factual record will look like after trial.
   24. Sam M. Posted: March 05, 2012 at 03:09 PM (#4074361)
We don't know what the factual record will look like after trial.


I have a pretty decent idea, but fair enough. It is possible that the record after trial will yield insufficient evidence to even support a verdict for Picard, thus allowing (indeed, requiring) Rakoff to overturn a verdict for the trustee if the jury is ill-advised enough to return one. But I don't think that will be the case, except under what I suspect will be Rakoff's erroneous view of the law relating to what is required to show bad faith. That will set the stage for the Second Circuit to weigh in on appeal.

But I'll go out on a limb here. Of these two scenarios, I'll predict that # 1 is more likely:

1) The Vindicate Picard Scenario

The Second Circuit affirms a jury verdict in favor of Picard (and if necessary, reverses a Rakoff ruling overturning such a jury verdict), while at the same time reversing many of Rakoff's pro-Wilpon/Katz pre-trial rulings that limited their potential exposure.

2) The Vindicate Rakoff Scenario

The Second Circuit affirms a ruling by Rakoff overturning a pro-trustee jury verdict, and also affirms most or all of Rakoff's pro-Wilpon/Katz pre-trial rulings. Of course, this one can happen only if Rakoff actually overturns such a verdict, so there's only a relatively small chance it could happen in the first place.


Of course, there could be possibilities in between: for example, maybe a pro-Picard verdict is affirmed, but most of Judge Rakoff's rulings that favored Wilpon/Katz are also affirmed -- doses of vindication for everyone! Wilpon ends up owing probably about $300M or so . . . .
   25. Greg Pope thinks the Cubs are reeking havoc Posted: March 05, 2012 at 03:21 PM (#4074371)
Sam, what happens if the Wilpons lose the jury trial and the Wilpons appeal? They get to just keep doing whatever they want until the appeal comes through?

How long should we expect the first trial to take and how long for the inevitable appeal process? And, lastly, is the Second Circuit the highest appeal?
   26. Ephus Posted: March 05, 2012 at 03:33 PM (#4074378)
what happens if the Wilpons lose the jury trial and the Wilpons appeal? They get to just keep doing whatever they want until the appeal comes through?

How long should we expect the first trial to take and how long for the inevitable appeal process? And, lastly, is the Second Circuit the highest appeal?


1. If the Wilpons lose and appeal (which is now certain for at least $83 million in excess profits), they have to post a bond for 110% of the amount of the verdict. If they do so, the Trustee cannot execute the judgment until the appeal is decided, so the Wilpons would be able to do whatever they wanted in the interim.

2. I think the expectation is that the trial will take a few weeks, and the jury would render a decision immediately (or as immediately as their deliberations allowed). The next step would be for the losing side to ask Judge Rakoff to set aside the verdict for lacking support in the record -- they could ask for (1) reversal (because there was no evidence to support the verdict) or (2) a new trial (because the verdict was against the great weight of the evidence). The briefing on that motion would take weeks, and I would expect an opinion from Rakoff in a couple of months -- so we are looking at mid-Summer before the case would be ready for appeal.

3. The appeals process ordinarily takes about 12 - 18 months in a civil case. The Second Circuit is not the highest appeal, but the Supreme Court has discretion over whether to hear the next appeal. Each year, thousands of litigants ask the Supreme Court to hear their cases, but less than 100 per year are taken. In the unlikely even the Supreme Court heard the appeal, that process would conclude by June 2013.
   27. Erix Posted: March 05, 2012 at 03:34 PM (#4074380)
The Beginning is the End is the Beginning
http://www.youtube.com/watch?v=MKU_98Bq6DM
   28. Mike Emeigh Posted: March 05, 2012 at 03:44 PM (#4074395)
Note that Rakoff did not rule on exactly how much that Picard would get without a trial, he only ruled against the Wilpon/Katz motion for dismissal, which keeps alive the possibility that Picard could get up to $83.3 million. He could get less than that - Rakoff will rule on that at some future date.

-- MWE

   29. depletion Posted: March 05, 2012 at 03:55 PM (#4074409)
Off topic: Dykstra gets 3 years for auto theft plus...
   30. Sam M. Posted: March 05, 2012 at 03:57 PM (#4074412)
Note that Rakoff did not rule on exactly how much that Picard would get without a trial, he only ruled against the Wilpon/Katz motion for dismissal, which keeps alive the possibility that Picard could get up to $83.3 million. He could get less than that - Rakoff will rule on that at some future date.


I have not heard any credible basis on which the excess profits claim would be anything less than $83M. As I understand it, as long as the claim is not dismissed, the amount is pretty much understood by all concerned to be $83M. But it is true that, technically, Rakoff did not finally rule on the amount. So at least for now, the Wilpons don't have to appeal and they don't have to come up with the money to post the bond that goes with the appeal. Of course, if the judgment ends up being for the $83M plus an amount for willful blindness, thus bringing the verdict up to around (or over) $300M, then the bond they'll have to put up for their appeal will be somewhere in the $350M range, which is frankly hard to see them coming up with.

Maybe David Einhorn will lend it to them.
   31. JPWF1313 Posted: March 05, 2012 at 04:02 PM (#4074415)
In the unlikely even the Supreme Court heard the appeal, that process would conclude by June 2013.


I don't think the 2nd Circuit decision would be handed down by then.
If this eventually goes to SCOTUS we are talking bout 2014/2015 for closure.


   32. JPWF1313 Posted: March 05, 2012 at 04:21 PM (#4074432)
Rakoff in full glory:
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. More generally, the Court is concerned that much of the "evidence" that the parties proffered on summary judgment did not comport with the Federal rules of Evidence and therefore is neither cognizable on these motions nor admissible at trial. Conclusions are no substitute for facts, and too much of what the parties characterized as bombshells proved to be nothing but bombast. Nevertheless, there remains a residue of disputed factual assertions from which a jury could infer either good or bad faith depending on which assertions are credited. In short, the principal issue remaining for trial is whether the defendants acted in good faith when they invested in Madoff securities in the two years prior to bankruptcy or whether, by contrast, they willfully blinded themselves to Madoff's Ponzi scheme.


March 19 Trial date...
   33. Joe Kehoskie Posted: March 05, 2012 at 04:30 PM (#4074448)
Of course, if the judgment ends up being for the $83M plus an amount for willful blindness, thus bringing the verdict up to around (or over) $300M, then the bond they'll have to put up for their appeal will be somewhere in the $350M range, which is frankly hard to see them coming up with.

Would they need to come up with the full $350M, or is it like bail, where they can pay someone 10 (?) percent of the bond amount to post it for them?

(Just for the record, I have no personal experience with bail. Just going off Law & Order, etc.)
   34. snapper (history's 42nd greatest monster) Posted: March 05, 2012 at 04:34 PM (#4074458)
Would they need to come up with the full $350M, or is it like bail, where they can pay someone 10 (?) percent of the bond amount to post it for them?

What bailbondsman is going to be able to come up with $300M?

I think that's even out of Chico's league.
   35. JPWF1313 Posted: March 05, 2012 at 04:38 PM (#4074464)
Would they need to come up with the full $350M, or is it like bail, where they can pay someone 10 (?) percent of the bond amount to post it for them?


Yes they need to pay the premium on the bond.

The Wilpons' problem is that ANY judgment against them is going to be in the range where the bonding company is going to want security- and they have literally nothing left to pledge- the Mets? That would need MLB permission, SNY? that would need the OTHER shareholder's permission... I'm sure they'd be willing, just so long as any final judgment triggering of the Bond allows them to payoff the judgment by buying Wilpons' shares in SNY- and if the Wilpons lose SNY they're toast...
   36. JPWF1313 Posted: March 05, 2012 at 04:40 PM (#4074469)
What bailbondsman is going to be able to come up with $300M?


You are confusing bail bonds with ordinary money bonds- just about every Bonding company approved by the US Attorneys' office could come up with $300m - but no one is going to post that bond unless the defendant would be/ could be good for it.
   37. Ephus Posted: March 05, 2012 at 04:42 PM (#4074471)
What bailbondsman is going to be able to come up with $300M?

I think that's even out of Chico's league.


The answer is that the market will decide how much Wilpon/Katz would have to put up to have someone else put up the bond. I do not see anyway that Katz/Wilpon get a bond by putting up less than 100% of its face value. In these circumstances, if Wilpon/Katz did not have cash or cash equivalents to post and attempted to use real estate assets to collateralize the bond, I would expect the bonding company to require significant overcollateralization.
   38. The Id of SugarBear Blanks Posted: March 05, 2012 at 04:49 PM (#4074479)
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. More generally, the Court is concerned that much of the "evidence" that the parties proffered on summary judgment did not comport with the Federal rules of Evidence and therefore is neither cognizable on these motions nor admissible at trial.

You have to love when a federal judge goes with snarky, BTF, BBPro style scare quotes in an opinion. Sounds like Picard's proof represented "evidence" to roughly the same degree someone on public assistance "needs" a new iPad or flatscreen.
   39. snapper (history's 42nd greatest monster) Posted: March 05, 2012 at 04:50 PM (#4074480)
You are confusing bail bonds with ordinary money bonds- just about every Bonding company approved by the US Attorneys' office could come up with $300m - but no one is going to post that bond unless the defendant would be/ could be good for it.

There are Bonding companies capitalized in the billions of dollars? I find that hard to believe.

   40. The Id of SugarBear Blanks Posted: March 05, 2012 at 04:54 PM (#4074482)
The bond the Wilpons have to put up to appeal is dollar for dollar -- it has nothing to do with bail bonds.

They don't have to appeal yet, though at the end of the day they have next to no shot to not have to pay a floor of the $83M.
   41. snapper (history's 42nd greatest monster) Posted: March 05, 2012 at 04:57 PM (#4074488)
The bond the Wilpons have to put up to appeal is dollar for dollar -- it has nothing to do with bail bonds.

But if they were credit worthy (they're not) they presumably could get a third party to post the cash/negotiable securities for them. Right?

i.e. if they owned the Mets free and clear and nothing else, and were willing to pay interest plus a 10% fee, someone would post the $300 million, collateralized by 100% of the Mets.
   42. The Id of SugarBear Blanks Posted: March 05, 2012 at 05:04 PM (#4074502)
I guess, sure.

Bottom line seems to be that they're going to have to come up with a check for at least $83M by the all-star break. Picard isn't going to settle for less and they aren't going to be ordered to pay less by a jury. They were hoping to walk out of the courtroom today owing nothing.

They don't really have $83M in cash and liquid securities, but for extra-market forebearance by their creditors, including MLB. Will that forebearance continue?
   43. The Piehole of David Wells Posted: March 05, 2012 at 05:07 PM (#4074505)
Why would Rakoff rule that Picard could collect less than $83MM as Mike Emeigh suggests? The profits are and were not real. That's other people's money, plain and simple and I don't see how Rakoff can rule that it belongs to the Mets more than anyone else.
   44. Ephus Posted: March 05, 2012 at 05:12 PM (#4074507)
Actually, I think that Rakoff might rule that Picard collects more than $83 million on the excess profits claim, in order to allow for prejudgment interest. IIRC, interest should run on a fraudulent conveyance from the time that the transfer was made.
   45. Joe Kehoskie Posted: March 05, 2012 at 05:17 PM (#4074510)
They don't really have $83M in cash and liquid securities, but for extra-market forebearance by their creditors, including MLB. Will that forebearance continue?

I wonder if the Dodgers sale could end up saving the Wilpons — i.e., assuming the Dodgers sell for anywhere from $1.2 to $2 billion in the next 2-3 months, could some bank(s) decide the Mets must be worth at least that much and offer a giant refi before the Mets' next big debts are due?
   46. Sam M. Posted: March 05, 2012 at 05:21 PM (#4074519)
Bottom line seems to be that they're going to have to come up with a check for at least $83M by the all-star break.


I have to think they've known this for a good long while now. The handwriting has been on the wall that they were going to lose on this issue, and they've been lawyered-up for even longer than that. So if they have the ability at all to set aside any significant money, this would be the money they'd be setting aside. If they can't come up with the money to pay this without resorting to Defcon 1 (bankruptcy or putting the team/SNY up for sale otherwise), out of whatever assets they can scrape together, then we know they really are basically broke.

The only question in my mind is whether another test of this comes first: if they lose the trial and an even bigger judgment is entered, and they can't afford to post the appeal bond, for example. Either way, there's been some speculation around here that they really have more wiggle room than it appears. That theory is going to be put to the test.
   47. bobm Posted: March 05, 2012 at 05:29 PM (#4074527)
You have to love when a federal judge goes with snarky, BTF, BBPro style scare quotes in an opinion.

Judge Rakoff is definitely going to want to change his BTF username this week...
   48. JPWF1313 Posted: March 05, 2012 at 05:30 PM (#4074530)
There are Bonding companies capitalized in the billions of dollars? I find that hard to believe.

umm yes, including two companies that are clients for my firm.

You seem to be confusing "bonding companies" with those storefront bailsbondmen near every criminal court house, bonding companies in this context (bonding a multi-million dollar civil judgment) means someone like AIG or Travelers
   49. JPWF1313 Posted: March 05, 2012 at 05:31 PM (#4074532)
You have to love when a federal judge goes with snarky, BTF, BBPro style scare quotes in an opinion.


actually when judges do stuff like that they are almost begging not just for a reversal but for reassignment on remand
   50. Sam M. Posted: March 05, 2012 at 05:33 PM (#4074535)
bonding companies in this context (bonding a multi-million dollar civil judgment) means someone like AIG or Travelers


AIG and Fred Wilpon. A marriage made in corporate hell.
   51. snapper (history's 42nd greatest monster) Posted: March 05, 2012 at 05:34 PM (#4074536)

umm yes, including two companies that are clients for my firm.

You seem to be confusing "bonding companies" with those storefront bailsbondmen near every criminal court house, bonding companies in this context (bonding a multi-million dollar civil judgment) means someone like AIG or Travelers


I guess I don't understand this market. If a corporation has the collateral to post to an insurance company, surely they have the collateral to post to the court.

Where's the efficiency of going to the insurer?
   52. Sam M. Posted: March 05, 2012 at 05:39 PM (#4074539)
actually when judges do stuff like that they are almost begging not just for a reversal but for reassignment on remand


When I clerked on the Second Circuit, my judge wrote an opinion remanding a case and ordering reassignment because of the way the district judge had basically ignored the mandate the first time the case had been sent back to him. The language was pretty harsh, and it led to a nice pissing contest between the then-chief judge of the district court and the court of appeals. He claimed that the court of appeals lacked the authority to order the case reassigned on remand. He lost.

Good times.
   53. Swedish Chef Posted: March 05, 2012 at 05:40 PM (#4074540)
Where's the efficiency of going to the insurer?

It's not about efficiency, the court wants cash, the insurer will take other assets like your baseball team as security.
   54. Fat Al Posted: March 05, 2012 at 05:41 PM (#4074543)
Where's the efficiency of going to the insurer?


It's financing. Why do people get mortgages when they could pay cash? Spreads the risk, frees you from liquidating other assets, a million reasons. If you owe 300mm and you think you may be able to get it reversed, why would you want to leave your own money sitting with the court when you can pay someone else a vig to put their money up in the meantime?

Now the danger here, as in all financing, is that if the financing entity sees you as a bad credit risk, you are going to pay through the nose for that financing (or be denied altogether). That's really the wildcard.
   55. JPWF1313 Posted: March 05, 2012 at 05:44 PM (#4074547)
Bottom line seems to be that they're going to have to come up with a check for at least $83M by the all-star break.

I have to think they've known this for a good long while now.


I've read a few stories on this most recent decision, and I don't know where they are getting this from, but many reporters seem to believe that the Wilpons believed they had a shot at Rakoff tossing everything... I don't know if that's just because they've been taking the Wilpons' lawyers' pronouncements at face value, or some have actually interviewed/had conversations with Fred/Jeff/Saul/ etc.

Denial, not just a river in Egypt...

The only question in my mind is whether another test of this comes first: if they lose the trial and an even bigger judgment is entered, and they can't afford to post the appeal bond, for example.
Oh, they have assets sufficient to allow them to obtain and post a bond- the Bonding company terms on security may just be a little too onerous/scary for them.

You have to remember that not only have they lost their 40-50M annual "vig," but they are also incurring a hell of a lot more in interest expenses than they were before their BMIS money went poof- and attendance is down, they have cut payroll, but a lot of their other expenses are fixed, their relative cashflow in/out has probably gone down some 50-75M a year.

Also, the Wilpons/Katz/Sterling "core" business is New York area real estate development and THAT business has gone down a good 25% since its peak (it could be worse- they could have been in Vegas) - if you want to talk about gross worth, their gross worth is probably down a billion or so since 2008- half of that is BMIS evaporating of course. Their Net worth is down by even MORE than that.

I wouldn't be surprised if they have been freeing up some cash by amending old tax returns to carry back current operating losses...
   56. Joe Kehoskie Posted: March 05, 2012 at 05:48 PM (#4074551)
why would you want to leave your own money sitting with the court when you can pay someone else a vig

I see what you did there.
   57. snapper (history's 42nd greatest monster) Posted: March 05, 2012 at 05:49 PM (#4074552)

It's financing. Why do people get mortgages when they could pay cash? Spreads the risk, frees you from liquidating other assets, a million reasons. If you owe 300mm and you think you may be able to get it reversed, why would you want to leave your own money sitting with the court when you can pay someone else a vig to put their money up in the meantime?


I understand that, but for large corp. settlements, they're usually going to have good access to credit.

The Wilpon's are an exception.
   58. Sam M. Posted: March 05, 2012 at 05:50 PM (#4074556)
the Wilpons believed they had a shot at Rakoff tossing everything... I don't know if that's just because they've been taking the Wilpons' lawyers' pronouncements at face value, or some have actually interviewed/had conversations with Fred/Jeff/Saul/ etc.

Denial, not just a river in Egypt...


If the Wilpons actually believed this, and it wasn't just what they were putting out there for public consumption, then either (a) they were getting very bad lawyering, or (b) they weren't listening to their lawyers. Either is plausible. Even very good lawyers, with certain clients, know that the client simply doesn't want to hear anything but the rosiest possible forecast. If you try to tell them the truth about what might, or is likely to happen, they don't want to hear it. So the lawyer just gives up trying. Maybe the Sterling lawyers did that -- especially when Rakoff kept giving them favorable rulings on so many things, so it became impossible to tell Fred that this was the one mountain they weren't going to be able to climb.

For our sake (by which I mean Mets' fans), I hope they were delusional on this, and really haven't been making any plans to scrounge together the $83M minimum they need. Because if they can't scrape it together, then they really are hosed.
   59. Ephus Posted: March 05, 2012 at 05:55 PM (#4074557)
I understand that, but for large corp. settlements, they're usually going to have good access to credit.

The Wilpon's are an exception.


There can be significant transaction costs to liquidating assets to obtain the cash, such as realization of a capital gain, commissions, legal fees, etc. If you can obtain the cash without alienating the assets (and incurring those costs), there is enough savings to justify paying fairly significant interest.
   60. JPWF1313 Posted: March 05, 2012 at 05:56 PM (#4074559)
I guess I don't understand this market. If a corporation has the collateral to post to an insurance company, surely they have the collateral to post to the court.

Where's the efficiency of going to the insurer?


The court doesn't want "collateral," the defendant has the right to a guarantee that the judgment will be paid in exchange for not pursuing collection NOW. To bond a judgment (and prevent collection activity) the judgment debtor can either pay 110% of the money into court, or get a reputable bonding company to promise to [pay 110% should the appeal fail.

The "bond" is essentially a type of insurance policy. The beneficiary is not the debtor but the creditor.
Let's say Picard gets judgment for $83m the Wilpons are going to have to go someone like Chubb, or AIG or Travelers, and they'll have a few problems:

1: The minimum premium is going to $9M or so, cash upfront.
2: $91m (110% of 83) is going to be far above the approval authority of any individual underwriter in the bond department, which means it is going to go up the food chain
3: up the food chain means risk averse butt covering is going to get worse- and EVERY major insurance company has seen some Madoff related exposure, alarms are going to go off, more people will look, and they'll demand to see financials, and appraisals, and it wont be pro-forma- people will actually look at the stuff the Wilpon's submit.
4: They'll get turned down by a few companies, others will ask for "collateral," mortgages, personal guarantees, etc.,
   61. snapper (history's 42nd greatest monster) Posted: March 05, 2012 at 06:03 PM (#4074567)
There can be significant transaction costs to liquidating assets to obtain the cash, such as realization of a capital gain, commissions, legal fees, etc. If you can obtain the cash without alienating the assets (and incurring those costs), there is enough savings to justify paying fairly significant interest.

No, no I understand.

I'm just saying that most corporations would have far cheaper sources of cash, e.g. bank lines.
   62. JPWF1313 Posted: March 05, 2012 at 06:05 PM (#4074570)
So the lawyer just gives up trying. Maybe the Sterling lawyers did that -- especially when Rakoff kept giving them favorable rulings on so many things, so it became impossible to tell Fred that this was the one mountain they weren't going to be able to climb.


I've been looking at Picard's 56.1 statement, basically a lot of is the Stamos branch and Merrill Lynch* (who invested in the Stamos branch) tell Katz and Wilpon to be wary of Madoff, the response from the Katzes was essentially, "shut up we know what we are doing" [while sharing with each other seemingly every newsletter/journal article ever written speculating that Madoff was front running or doing something else illegal...) and the Wilpons were sticking their fingers in their ears and shouting "I CAN'T HEAR YOU"

The ONLY way a jury is going to find that Katz/Wilpon were not willfully blind is if Rakoff really goes overboard on excluding evidence.

*Years ago Sterling sought to have Merrill Lynch buy half of Sterling Stamos, Merrill Lynch was agreeable, but required that Sterling Stamos completely divest itself of Madoff, they also decreed that no Merrill Lynch customers' money be invested in Madoff- this was after a Stamos COO had told Saul Katz that she thought Madoff was running a fraud...
   63. Fat Al Posted: March 05, 2012 at 06:17 PM (#4074581)
Interesting stuff. Makes you wonder why Rakoff thinks it's all so thin. I'll have to take a look at the decision/papers.
   64. AJMcCringleberry Posted: March 05, 2012 at 06:20 PM (#4074583)
BTW, Mets game just started on MLB Network.
   65. Ephus Posted: March 05, 2012 at 06:35 PM (#4074589)
Interesting stuff. Makes you wonder why Rakoff thinks it's all so thin. I'll have to take a look at the decision/papers.


No opinion to read yet. But the answer you get depends entirely on the question you ask. If the question is "Did Wilpon/Katz willfully blind themselves to the likelihood that Madoff was running a Ponzi scheme?", then I think Rakoff is correct that the answer is likely "No." It just does not make sense for Wilpon/Katz to double down on an investment that they knew was doomed to fail. On the other hand, if the question is, "Did Wilpon/Katz willfully blind themselves to the likelihood that Madoff was engaged in securities fraud?" then I think it is a much closer question. All of the evidence that #62 cites leads to the conclusion that Wilpon/Katz were presented with strong evidence that Madoff was engaged in fraud (incorrectly believed to be front running) and chose not to utilize available means to corroborate that Madoff's returns were on the level.

When I quickly scanned the briefs, I did not see issue really being joined on which was the right question. I think a lot turns on it.
   66. Lassus Posted: March 05, 2012 at 06:42 PM (#4074593)
BTW, Mets game just started on MLB Network.

I was just coming here to post this! And Turner had one go through the wickets.

I may have to chatter from my phone, though, as I have ended up cordless tonight and am now at 16% power. Dur.
   67. Lassus Posted: March 05, 2012 at 06:48 PM (#4074595)
Harvey on the mound! Some good curveballs, everyone in the booth likes him. Thole throws out a runner, Harvey has the next guy ground out. Strikes out Teahan on three pitches.

WOOOOOOHOOOOO BASEBALL
   68. AJMcCringleberry Posted: March 05, 2012 at 06:52 PM (#4074598)
Harvey hit 92 on one fastball. Hit the corners on his pitches. I'm excited!
   69. Ravecc Posted: March 05, 2012 at 06:57 PM (#4074600)
Heck, Harvey hit 94.

OTOH, what the hell is that on Gee's chin?
   70. Lassus Posted: March 05, 2012 at 06:58 PM (#4074601)
Courtesy of an interview with Kevin Burkhardt, Mike Pelfrey is in the best mental shape of his life. So you guys don't all think I'm a complete loon, I am NOT confident about Pelfrey.

Also, Burkhardt called Daniel Murphy David. (Not to his face.)
   71. Ravecc Posted: March 05, 2012 at 07:04 PM (#4074603)
JOHAN!!!!
   72. Sam M. Posted: March 05, 2012 at 07:04 PM (#4074604)
Courtesy of an interview with Kevin Burkhardt, Mike Pelfrey is in the best mental shape of his life. So you guys don't all think I'm a complete loon, I am NOT confident about Pelfrey.


Define what would constitute loony confidence. I'm willing to say he'll have the third-best season of his career, with an ERA+ over 95.
   73. Lassus Posted: March 05, 2012 at 07:10 PM (#4074610)
I have fears he will be as bad as last season, maybe worse.

No I'm not going for a reverse jinx.

Harvey wild. ######, walks and Warthen. I look forward to his firing.
   74. AJMcCringleberry Posted: March 05, 2012 at 07:13 PM (#4074612)
Two walks and a HBP. Not good.
   75. AJMcCringleberry Posted: March 05, 2012 at 07:14 PM (#4074614)
I have fears he will be as bad as last season, maybe worse.

I wish they would've non tendered him. Probably not a smart move, but I just can't stand watching him.
   76. Sam M. Posted: March 05, 2012 at 07:14 PM (#4074615)
I have fears he will be as bad as last season, maybe worse.


Well, I have fears of that, too, but it's not really his pattern. He seems to have a relatively good season which for reasons known only to Mike Pelfrey and his maker, leads him to then tinker ("I wanted to build on last year and be even better!") -- thus producing the bad seasons. When he comes off the bad year, his mindset has been, "Get back to what made me successful," and that works for him. There's at least some reason to believe he'll go back to his solid, OK self. It's what he does.
   77. Lassus Posted: March 05, 2012 at 07:20 PM (#4074620)
Sam, I truly hope so.

OH MY GOD IKE DAVIS GOT A HIT.

I think I'm going to burst into tears.
   78. The Piehole of David Wells Posted: March 05, 2012 at 07:28 PM (#4074625)
####### Mets fans. Hijacking a Mets thread with Mets baseball. Come on! We were having an interesting discussion. Someone with the keys create a game thread and let's keep the discussion on track.
   79. Lassus Posted: March 05, 2012 at 07:28 PM (#4074626)
Nice play by Niwehndice, or however you spell it.
   80. Sam M. Posted: March 05, 2012 at 07:30 PM (#4074627)
Sam, I truly hope so.


Boy, if that doesn't capture the gloom of this franchise, circa 2012. It counts as "optimism" to express the "hope" that Pelfrey might be a 95 ERA+ pitcher.

Sigh.
   81. Lassus Posted: March 05, 2012 at 07:33 PM (#4074632)
Boy, if that doesn't capture the gloom of this franchise, circa 2012. It counts as "optimism" to express the "hope" that Pelfrey might be a 95 ERA+ pitcher.

Do not put me in with you Droopy Dogs because I've picked one headcase not to be confident about.
   82. Lassus Posted: March 05, 2012 at 07:39 PM (#4074635)
I am looking forward to Tejada giving us two SS batting titles in a row.
   83. The District Attorney Posted: March 05, 2012 at 07:42 PM (#4074640)
I wish they would've non tendered him. Probably not a smart move, but I just can't stand watching him.
I don't think you can do that, but I wish they were trying to get him to a team that could actually use what he provides. What, no contender needs a $6M SP who can give 200 usually-not-horrible innings and has at least a little chance to be something more? But I have never, in my entire life, heard anyone claim that the Mets are considering trading Mike Pelfrey.

He seems to have a relatively good season which for reasons known only to Mike Pelfrey and his maker, leads him to then tinker ("I wanted to build on last year and be even better!") -- thus producing the bad seasons.
Isn't the organization's own "tinkering" (i.e., making his motion more over-the-top) allegedly the reason he is f-ed up to begin with?

OH MY GOD IKE DAVIS GOT A HIT.

I think I'm going to burst into tears.
Do you have fatigue, achy joints and a rash?

   84. Sam M. Posted: March 05, 2012 at 07:46 PM (#4074644)
Isn't the organization's own "tinkering" (i.e., making his motion more over-the-top) allegedly the reason he is f-ed up to begin with?


That's part of it, but the other part is that every other year he seems to come up (or the organization does -- hard to know exactly who's to blame) with a new off-speed pitch they think he needs to complement his fastball.

Do not put me in with you Droopy Dogs because I've picked one headcase not to be confident about.


Hah. Well, but I'm just (mildly) resisting the claim that I'm "confident" for thinking Pelfrey might bounce back all the way to a passable version of mediocrity, instead of wallowing in outright suckitude.
   85. Lassus Posted: March 05, 2012 at 07:48 PM (#4074645)
Daniel Herrera!

Where's Benji?

Nice throw, Baxter!
   86. Lassus Posted: March 05, 2012 at 07:51 PM (#4074647)
I think I would like to never again see this Rottino character at third base.
   87. Sam M. Posted: March 05, 2012 at 07:52 PM (#4074651)
I think I would like to never again see this Rottino character at third base.


I was just thinking Rottino should be a brand of pasta, not a third baseman.

Now I'm hungry.
   88. Banta Posted: March 05, 2012 at 08:04 PM (#4074659)
Its probably not smart, but the Mets should just give Niewenheis the cf job. It'd make me more excited about the season. I have a strong feeling that Torres is gonna suck something fierce..
   89. Lassus Posted: March 05, 2012 at 08:05 PM (#4074660)
Ooooh exciting. Come on, random oaf-looking-former-pitcher!

EDIT: Well, that didn't work.

Hey Banta!
   90. Banta Posted: March 05, 2012 at 08:09 PM (#4074661)
Hi Lassus and all, I have woken from my offseason slumber
   91. Lassus Posted: March 05, 2012 at 08:11 PM (#4074663)
-scowl-

Not what I was expecting there. Really!
   92. Banta Posted: March 05, 2012 at 08:12 PM (#4074664)
Mets are in midseason form with the offense, badum ching!
   93. Sam M. Posted: March 05, 2012 at 08:12 PM (#4074665)
Its probably not smart, but the Mets should just give Niewenheis the cf job.


Part of me likes this. Part of me thinks that Nieuwenhuis would be much better off with 2-3 months building up shoulder strength in Buffalo after his labrum surgery, without the pressure to play every day.
   94. Fancy Pants Handles lap changes with class Posted: March 05, 2012 at 08:16 PM (#4074667)
OH MY GOD IKE DAVIS GOT A HIT.

I think I'm going to burst into tears.


Not bad for somebody with projectile leprosy... and hey, a fan got a souvenir too!
   95. Banta Posted: March 05, 2012 at 08:16 PM (#4074669)
Nieuwenhuis has more u's than I'd expect!
   96. PreservedFish Posted: March 05, 2012 at 08:16 PM (#4074670)
Nieuwenhuis has always seemed like a future 4th outfielder to me. But Andres Torres is a current 4th outfielder. So what the hell, go for it.
   97. AJMcCringleberry Posted: March 05, 2012 at 08:20 PM (#4074672)
I have a strong feeling that Torres is gonna suck something fierce..

When Torres stepped into the box I thought it was a pitcher. I know it means nothing, but just based on that I'm not optimistic about him.
   98. Banta Posted: March 05, 2012 at 08:23 PM (#4074675)
Torres's interview with Burkbag bothered me. And the fact that he's apparently the defacto lead off guy... yuck.
   99. Banta Posted: March 05, 2012 at 08:25 PM (#4074676)
Did you guys know that Chris Cotter has a show on Fox Business News? He's had it for a little while now, but it blew me away when I first saw him on there.
   100. Banta Posted: March 05, 2012 at 08:26 PM (#4074677)
PARK IT NIEUWENHUIS
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