|Print this story||Permalink|
The relationship between Bernard Madoff and Sterling Equities, the company controlled by New York Mets co-owners Fred Wilpon and Saul Katz, bloomed in the 1970s and soon after it was referring people to invest with Madoff, who turned out to be running a $65 billion Ponzi scheme.
The relationship, detailed in court papers by the trustee of the Madoff bankruptcy, which is suing Sterling for up to $1 billion, started when Fred Wilpon’s son, Jeff, attended school with Madoff’s sons, Mark and Andrew.
Fred Wilpon and Katz, who are brothers-in-law, may be forced to sell a stake in the Mets because of the suit.
“It was not long before Madoff and Fred Wilpon formed a mutually beneficial relationship whereby Madoff invested in some of Sterling’s real estate ventures and Fred Wilpon invested in” Madoff’s company, Bernard L. Madoff Investment Securities, the lawsuit claimed.
The partners of Sterling Equities opened “a handful” of accounts with Madoff in 1985, which grew to 12 within a little over a year and 58 by 1990, according to the suit.
By 2001, Sterling had 246 accounts with Madoff with $798 million invested — about a 1,500 percent increase over 10 years.
“Soon after the Sterling partners opened their own [Madoff] accounts, they began opening ... accounts for friends, close business acquaintances and Sterling employees — all of whom they referred to Madoff,” the suit said.
By December 2008, as Madoff’s Ponzi scheme was crashing down, Sterling referred about 178 “outsider” investor accounts to Madoff, according to the suit.
“The list of outsiders with KW BLMIS accounts opened by Sterling is as varied as it is long,” the suit claimed. “Sterling’s referrals of outsiders provided Madoff with hundreds of millions of dollars in additional capital to further his fraud. Moreover, these outsiders profited from the fraud as they withdrew approximately $67 million in fictitious profits from BLMIS.”
The suit claimed getting a coveted Madoff account “was not easy.”
“Sterling internally needed to approve the account and Saul Katz had the final say,” the suit said. “Far more outsiders were turned down than actually got into the elite pool of Madoff’s investors through Sterling.”
In order to get the account, the lawsuit charged, investors were not allowed to speak to Madoff or anyone from his company about their holdings.
The suit claimed Sterling Equities “took great strides to insulate the outsider account holders from Madoff, as one of the requirements to obtain a BLMIS account through Sterling was that all communications regarding the account had to go through Sterling; never directly through Madoff or anyone else at BLMIS.”
The suit claimed Sterling partner Arthur Friedman was the go-between with the company and Madoff and that Friedman was responsible for opening and closing all Sterling-related Madoff accounts.
Sterling allegedly also used the Madoff accounts as an employment incentive, as new employees were given the opportunity to invest with Madoff, the suit claimed.
About 90 percent of the company’s 401(k) plan was invested with Madoff when the Ponzi scheme was uncovered in December 2008, the suit said.
“Despite referring its friends, business acquaintances, and employees to BLMIS — indeed, even offering BLMIS as a 401(k) plan investment option — Sterling performed no diligence on Madoff or BLMIS in response to any of the various red flags to which it was exposed,” the suit claimed.
The Mets said they were looking to sell a minority stake in the team due to “uncertainty” created by the lawsuit.
Donald Trump expressed interest in the team, but only as a majority owner.
Jeff Wilpon, Fred Wilpon’s son and chief operating officer of the Mets, said the lawsuit will not affect the team’s operations.
“This is an ownership issue, a Sterling Equities issue, and it has nothing to do with what goes on here,” he said at the team’s spring training complex in Florida. “As you know, our payroll is going to be $145 [million], $150 million. That’s tops in baseball, or right up there, and we’re going to be committed to make sure all the resources are here and continue to run this team the way it’s been run.”
Reach reporter Howard Koplowitz by e-mail at email@example.com or by phone at 718-260-4573.
©2011 Community Newspaper Group
|Print this story||Permalink|
By submitting this comment, you agree to the following terms:
You agree that you, and not TimesLedger.com or its affiliates, are fully responsible for the content that you post. You agree not to post any abusive, obscene, vulgar, slanderous, hateful, threatening or sexually-oriented material or any material that may violate applicable law; doing so may lead to the removal of your post and to your being permanently banned from posting to the site. You grant to TimesLedger.com the royalty-free, irrevocable, perpetual and fully sublicensable license to use, reproduce, modify, adapt, publish, translate, create derivative works from, distribute, perform and display such content in whole or in part world-wide and to incorporate it in other works in any form, media or technology now known or later developed.