NEW YORK -- The New York Mets owners and a trustee for Bernard Madoff's fraud victims have settled for $162 million in a case aimed at repairing the damage from a massive investment scheme.
The agreement was announced Monday by Judge Jed Rakoff just as a civil trial was set to begin in U.S. District Court in Manhattan to determine if the team's owners might owe as much as $386 million because they were among those who made significantly more than their original investment in Madoff's investment company.
Trustee Irving Picard had argued the team owners knew that Madoff's corrupt investment scheme was a fraud but continued their investments anyway because they were making a lot of money. Lawyers for the owners insist their clients had no idea the investments were a sham.
The settlement was agreed to Friday, Rakoff said in court, and the parties involved successfully kept it under wraps over the weekend until it was announced Monday morning.
The case has damaged the Mets' financial picture, forcing the team to slash payroll and try to raise tens of millions of dollars by selling small chunks of the team.
The deal left Fred Wilpon and Saul Katz, principal Mets owners, who together personally promised to pay $29 million, speaking confidently of the team's future as they expressed relief outside the courthouse.
"Now I guess I can smile. ... Maybe I can take a day off," Wilpon said.
Katz said the team's finances were secure.
Rakoff said Picard had reviewed the evidence and will no longer pursue a claim of "willful blindness" against the defendants.
"I am very, very pleased for ourselves and our families. This was really a team effort," Wilpon said as he left the courthouse.
"We are not willfully blind... We acted in good faith," he said. He said he was going to Florida Tuesday to resume work at "trying to bring the New York Mets back to prominence." Asked if the Mets will have to raise any more money through other investors and he said: "We'll address that."
The settlement gives the team breathing room because it does not require any money to be paid for at least three years. It also creates the possibility that the owners could owe nothing if they can secure $162 million of the $178 million they are seeking in claims of their own against the Madoff estate.
Katz said he was "very pleased to have this behind us." He said outside the courthouse that the Mets were on secure financial footing. "Always was," he said.
David J. Sheehan, the lawyer for trustee Irving Picard, said outside court that the Mets owners will now work with Picard to recover money. "In a sense, we're now partners," he said.
Sheehan said he thought the outcome was fair.
"Whenever you have the settlement its the result of a very businesslike -- and that's what this was -- negotiation taking into account both sides interests," Sheehan said. "I think this has all the hallmarks of a good settlement in the sense that nobody came alway absolutely happy with how it came out. But I think ultimately the most important thing is that the victims will receive the benefit of $162 million dollars. Ultimately that's the goal of all the litigation brought by the trustee is to enhance the fund for the victims. This does that."
A reporter noted that the $162 million was far less than the original $1 billion being sought.
"I understand that," Sheehan said. "But on balance, taking into account all the various factors in the case, this is a very fair and reasonable outcome."
Rakoff already had ruled the team's owners must pay up to $83.3 million in profits they received from Madoff.
But another ruling blocked Picard from trying to collect the full $1 billion he sought to recoup. He has filed hundreds of lawsuits to force those who profited from their investment to pay into a fund for Madoff's victims.
"The closer you get to trial the closer you get to the reality of trial," said former New York Governor Cuomo, the appointed mediator in the case.
Cuomo said the settlement allows Wilpon and Katz to return to normal with their reputations intact as honest business people. He also said that his firm looked into the Mets' finances and found they weren't "broke."
"First of all we have to understand that litigation is negative energy so we are very pleased to have this behind us," Katz said. "As we've said all along, the fact is we have never done anything but we've done everything in good faith."
Wilpon said that the group was not accustomed to the courts, and the process took a toll.
"This was something unusual for us," Wilpon said.
Cuomo had a front seat for the morning proceedings directly behind attorneys for both parties. At one point Rakoff pointed out his help in mediating the dispute and Cuomo slowly stood in acknowledgement.
Cuomo walked out of the front door of the court house before Wilpon and Katz and spoke in a soft voice. Clearly, Cuomo had the respect of both sides who thanked him for his part in the process.
The 14th floor courtroom was at capacity, and extra chairs were brought in to accomodate the lawyers and media assembled. Four court-sketch artists jockeyed for the best view, and two complained as they were moved to the back row.
Outside, Pearl Street was lined with news trucks, their satellite receivers jutting through the roof like telephone poles. Once word of the settlement got out, the cameras took their position just outside the door behind a metal barricade.
Dodgers Hall of Fame pitcher Sandy Koufax had been scheduled to testify in the trial about Wilpon's intentions. Koufax invested in Madoff's private investment business at Wilpon's recommendation.
"Although this is something of an anticlimax, it is always helpful and positive when the parties are mutually able to resolve their dispute," Rakoff said.