Tag Archives: Jeffrey Toobin

Fred Wilpon

Jeffrey Toobin has an excellent in-depth New Yorker profile of New York Mets owner Fred Wilpon, long known as an honourable businessman who has been caught up in the Bernie Madoff scandal.

The Wilpon team believes that Picard and his top deputy, David Sheehan, have shown excessive zeal in pursuing the case. Madoff agrees. “When Sheehan and his assoc. were down here taking my statements for four days, I kept on insisting that Fred and Saul knew absolutely nothing of my crime,” Madoff e-mailed me. “He kept on rolling his eyes at me. I have always said that there is a big difference between the Banks and Funds (who had complete access to my financials in their files, and the sophistication to realize that the information they disclosed did not reconcile with their individual clients’ financials, including their [Madoff company] account statements), and the individual clients who had no access to that information, ie: Fred and Saul as well as most other individuals who were not complicit.” The person close to Picard denies any improper motive or conduct in the investigation.

There is something troubling, however, about the way the Picard complaint portrays Stamos as the Cassandra of the Madoff scandal—the person whose persistent warnings were ignored by Wilpon and Katz. Wilpon’s lawyers at Davis Polk discovered that Stamos had given a deposition during Picard’s investigation, and the transcript gives a very different picture of Stamos’s state of mind from that portrayed in Picard’s complaint. “I’m embarrassed to say that I said to Mr. Katz on a number of occasions that my assumption is that Mr. Madoff is . . . among the most honest and honourable men that we will ever meet,” Stamos testified. “And number two, that he is perhaps one of the—my assumption is he’s perhaps one of the best hedge fund managers in modern times. . . . All the way to the time when the fraud was discovered, I had the same conclusion.” In fact, it appears that no one in the Stamos firm had any words of warning about Madoff’s Ponzi scheme until after his fraud was discovered.

Complaints in civil cases are designed to be argumentative documents, but Picard’s words about Stamos seem typical of an approach that seems to find malevolent intent in virtually everything Wilpon and Katz did. Picard notes, for example, that the Sterling accounting department “created what was known at Sterling as the monthly ‘Hell Sheet,’ which calculated” the balances in all Madoff accounts. According to Sterling, the document was known as the “Hell Sheet” because it was compiled by a bookkeeper named Helene. Last week, in a new brief filed in the case, Picard again mocked the “implausible” notion that “the Sterling Partners are unsophisticated investors who were duped by a trusted friend.” He argued that Wilpon, who had served on the board of directors of Bear Stearns, and his partners “were anxious not to ‘look behind the curtain’ as they profited at the expense of Madoff’s new victims.” Picard also pointed out that the Sterling group, in 2001, had considered purchasing fraud insurance for its Madoff accounts, though it ultimately decided against doing so. The trustee asserts that in the case against Wilpon his legal burden is modest. He says he must show only that a reasonable investor would have been “on notice” that Madoff was a fraud.

Picard must be doing something right: he has already achieved considerable success in recovering funds for Madoff’s victims. According to a press release he issued in early May, he has recovered “more than $7.6 billion, representing 44 percent of the approximately $17.3 billion in principal that was lost in the Ponzi scheme” by customers who filed claims. To do so, Picard has filed more than a thousand lawsuits. Many of these cases have settled; none have yet gone to trial. Picard has also said that he expects his own investigation to cost more than a billion dollars. His law firm has already billed more than a hundred and forty-five million in fees.

From Wilpon’s perspective, the Picard lawsuit could scarcely have come at a worse time. In addition to the losses from his Madoff accounts, the Sterling real-estate portfolio has been hurt by the recession. The Mets’ troubles have also taken a financial toll. In 2009, the year Citi Field opened, the Mets drew about 3.2 million fans. Last year, attendance fell to 2.6 million. This year, with another poor team, the Mets are on track to draw perhaps 2.4 million, though their payroll remains a hundred and forty million dollars, one of the highest in the major leagues. Last year, the Mets were forced into the embarrassing position of having to borrow twenty-five million from Major League Baseball, to tide them over for the year.

Darren Rovell of CNBC takes a look at the profile and looks at how Wilpon’s comments about some Mets players (while honest) damaged the franchise.