Mets’ Owners and Madoff Trustee Settle Suit - NYTimes.com

Saul Katz and Fred Wilpon at Mets training camp.  NY Times

The Times reports that Fred Wilpon, Saul Katz, et alii have settled with Irving Picard the SIPC trustee trying to recover funds lost by investors in the Madoff ponzi scheme:

The $162 million [settlement] includes the $83 million that the Mets owners had already been ordered to pay the trustee, is to be paid out of money Wilpon and Katz expect to recover as a "net loser" of the Madoff scheme. Recovery chances are good, said David J. Sheehan, counsel to Picard.  

I have had trouble grasping the theory that trustee Picard was relying on to recover from Mets owner Fred Wilpon and his partners and family.  He alleged in the complaint 

The Sterling partners, their family members, their related trusts, and various entities they own, operate, and control were collectively one of the largest beneficiaries of Madoff’s fraud, reaping hundreds of millions in fictitious profits over their quarter-century relationship with Madoff.  The Sterling partners, their family members, trusts and Sterling-related entities made so much easy money from Madoff for so long that despite the many objective indicia of fraud before them, the Sterling partners chose to simply look the other way...

It's not collusion, it's not aiding and abetting, it is...what is it?   Dishonest advice to friends?   Maybe negligent misrepresentation.  Unclean hands? That seems closer to it.  And the settlement works that way.  In the end Wilpon & Katz lost money with Madoff.  But they are entitled to recover a proportionate share of the money the trustee recovers from culpable wrongdoers - like the feeder funds with whom significant settlements are being achieved, such as the $1 billion settlement wit Tremont Group Holdings, Inc.  
Now Wilpon & Katz's recovery will be reduced by the amount of their share of such settlements.  So even though they lost money, their constructive knowledge of the scheme, their conduct in recommending Madoff's fund to friends and others, disentitles them to recovery.      

More dubious are claims like that against J.P. Morgan who, Picard charged, aided and abetted the fraud.  There the trustee's efforts have been limited.  Picard may not assert claims, the District Court held, on behalf of investors.  It is BMIS - Madoff's firm- that he is liquidating and as SIPC trustee Picard he stands in its shoes.   

Mets’ Owners and Madoff Trustee Settle Suit - NYTimes.com:

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