FOR IMMEDIATE RELEASE
STERLING PARTNERS REJECT MADOFF TRUSTEE’S LAWSUIT AS WORK OF FICTION
GREAT NECK, N.Y., March 20, 2011 – In court papers filed today, Fred Wilpon, Saul B. Katz and their Sterling Equities partners (the “Sterling Partners”) began the process of defending themselves in court against the false allegations made by the Trustee overseeing the liquidation of Bernard L. Madoff Investment Securities LLC (BLMIS). In the motion filed today, the Sterling Partners provide clear evidence that the Trustee’s amended complaint:
Makes false allegations in an effort to force a settlement from a highprofile group of individuals.
Makes false charges against the Sterling Partners that are directly contrary to the evidence available before the complaint was filed.
Omits evidence overwhelmingly favorable to the Sterling Partners that was not made available to the Sterling Partners before the complaint was filed.
Was filed containing false allegations despite repeated warnings that these charges would inflict harm upon the Sterling Partners’ reputations and businesses.
Ignores established law governing the liquidation of a federally regulated broker-dealer institution.
The Sterling Partners’ response motion categorically and unequivocally rejects each of the Trustee’s charges, demonstrating how the complaint makes allegations that are contradicted by the evidence. Examination of the evidence makes clear the Trustee’s complaint was crafted to pressure the Sterling Partners to pay a huge settlement. The Sterling Partners had a working relationship with Madoff that millions of Americans have with their brokers. They entrusted their investments to him, looked to him for liquidity from their funds when they needed it and relied on the statements they received from him as evidence of the securities they owned.
Fred Wilpon and Saul Katz said, “After months of damaging leaks, false accusations and withholding of evidence, we can finally legally respond to the work of fiction created by the Trustee. Let us be very clear: we did not know that Madoff was engaged in a fraud. There were no red flags and we received no warnings. It’s important to remember that before Madoff confessed his crimes, most of the world, including the SEC, viewed Madoff as a legendary Wall Street figure who was a pioneer in electronic trading and had served with distinction as the Chairman of NASDAQ.
“At every step in this process, the Trustee has dismissed our requests for information in his possession when we have cooperated fully with him. We will continue to defend ourselves vigorously and set the record straight.”
Among the many false allegations in the Trustee’s complaint, the Sterling Partners’ motion refutes the following, which represent the crux of the Trustee’s case:
1. False allegation: The Trustee claims “the partners willfully turned a blind eye to every red flag of fraud before them.”1
o The facts: There were no red flags and no warnings about Madoff conveyed by anyone to the Sterling Partners. Every witness, whose testimony the Sterling Partners and their counsel have, testified under oath that there was no sign that Madoff was engaged in fraud.
2. False allegation: In the core allegation in the complaint, the Trustee claims that representatives from Sterling Stamos “repeatedly warned” the Sterling Partners that Madoff was “too good to be true.”
o The facts: Peter Stamos, CoFounder and CoManaging Partner and Chairman and Chief Executive Officer of Sterling Stamos, testified under oath precisely the opposite:
“…I said to Mr. Katz on a number of occasions that my assumption is that Mr. Madoff is the most honest and honorable man, among the most honest and honorable men that we will ever meet. Number one. 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…
[The first assumption was b]ased on his reputation, based upon his long track record, based upon having seen him receive these awards and the positions that he held as Chairman of the NASDAQ, having built this great company. He was, quite frankly, legendary, to all of us. And I stood in awe of that with Mr. Katz, and I assumed that.”
“All the way to the time when the fraud was discovered, I had the same conclusion. Other than not putting more than 10 percent into a manager, and that as a fiduciary I could not put my capital, my fund’s capital there, I agreed with [Saul Katz]. Legend in the industry and all of the things that he said.”
Responding to a question from the Trustee whether he thought that Madoff was a “scam” or “too good to be true,” Mr. Stamos testified, “I can’t recall ever using those words to describe Mr. Madoff.”
3. False allegation: The Trustee characterizes Madoff’s “black box” investing strategy as being “mysterious” and therefore a “red flag.”
o The facts: “Black box” or proprietary trading strategies are common on Wall Street, are employed by numerous legitimate and successful funds and are entirely legal.
o The facts: Madoff was a SECregistered brokerdealer, regulated by the SEC. The SEC itself, with its vast resources and trained fraud investigators, did not uncover any sign of impropriety at BLMIS
o The facts: Madoff was a member of the Board of Governors of the National Association of Securities Dealers. He also was a member of the Cincinnati Stock Exchange and pioneered its conversion to an allelectronic exchange. Madoff also served as one of two vice chairmen of the Securities Industry Association and as the head of its Trading Committee and as Chairman of NASDAQ.
4. False allegation: The Trustee claims that the Sterling Partners should have known about the Madoff fraud because they had a long, personal relationship with Madoff and were successful businesspeople.
o The facts: The Sterling Partners are retail, or nonprofessional, investors who under oath have testified that they do not have investment expertise in the securities market. This is precisely the reason they entrusted their investments to Madoff and other professionals. The Sterling Partners, like all customers of federally registered brokerdealers, relied on their account statements as evidence of their ownership of securities.
o The facts: It defies logic to suggest that personal access to and friendship with Madoff offered the ability to uncover fraudulent activity. Highly sophisticated investors and leading financial experts had similar access to Madoff, and none discovered illegal activity.
The motion filed today by the Sterling Partners can be found on the Sterling Equities Partners website at www.sterlingequities.com.
The Sterling Partners move to dismiss the complaint filed against them by the Trustee.
18 comments
stickguy
3/20/2011-7:39pm at 7:39 pm (UTC -4)
well, I made it half way through before I had to stop due to pain.
I assume this is what Rubin didn’t want us to miss, in the euphoria of an Ollie release?
anyway, after reviewing this, 2 things immediately come to mind:
1) The lawyers on both sides are getting rich off of this.
2) I really, really really want BB games that count to start. now.
Oh, #3 would be, I honestly don’t give a crap anymore. Settle, go to trial, sell the team or part of if, go bankrupt, I just don’t care. Wake me up when it is all over and let me know the outcome!
Mr North Jersey
3/20/2011-8:08pm at 8:08 pm (UTC -4)
metsfan4decades
3/20/2011-8:47pm at 8:47 pm (UTC -4)
‘I assume this is what Rubin didn’t want us to miss, in the euphoria of an Ollie release?’
–I’m assuming this as well.
I read the entire thing. Could not agree more with #1.
Victims or not, the more money Picard & Co. ‘recover’, the richer they get as well. I’m tired of reading about them like they’re some kind of ‘saviors’.
For those that don’t want to read the whole thing, this statement included sums it up in a nutshell;
‘Examination of the evidence makes clear the Trustee’s complaint was crafted to pressure the Sterling Partners to pay a huge settlement’.
No doubt in my mind the response from Sterling would be right along these lines.
dpnyc
3/21/2011-8:50pm at 8:50 pm (UTC -4)
AMEN!!
metsfan4decades
3/20/2011-8:51pm at 8:51 pm (UTC -4)
Saw this over on MLBTR:
‘Luis Castillo Close To Joining Phillies’
hazmet
3/20/2011-9:10pm at 9:10 pm (UTC -4)
I can’t wait to see Luis reaction when Charlie doesn’t bat him second in the line up.
stickguy
3/20/2011-9:53pm at 9:53 pm (UTC -4)
don’t laugh, but with their current lineup (without Utley) they just might hit him leadoff!
kingman 26
3/20/2011-9:04pm at 9:04 pm (UTC -4)
LOL!
Yes, and on WFAN they said they would do everything necessary to bring a winner to Citi.
Blah blah blah.
What are they going to say? “Well, we knew Bernie was up to some spectacular tricks, but since we kept using his fund as a payroll aid for all parts of the Met organization, we thought it best to look the other way and not mention it around the country club!!”
Honestly, I don’t even really care; the games start in 11 days–that’s what interests me.
kingman 26
3/20/2011-9:05pm at 9:05 pm (UTC -4)
But thanks for posting it Rusty!!
Even if you DID have to use that damn unnecessary apostrophe in “Wilpons.”
Why Rusty why? Et tu, Rusty??
hazmet
3/20/2011-9:14pm at 9:14 pm (UTC -4)
Just watched a segment on MLB Network and a ranking one of their analyst does each year called the “The Next 12″. This is an assessment of who the next 12 pitcher’s are below the ace status that are staged to step into an ace position. Based on trends and a minimum of 500 innings pitched in a career and some other hocus pocus I’m sure. For consideration in the next 12: Mike Pelfrey and RA Dickey.
Hey, I’ll take it. Just nice to hear something good about some Mets starters for a change.
metsfan4decades
3/20/2011-9:30pm at 9:30 pm (UTC -4)
That and one of the Mets starters does not include Perez.
oleosmirf
3/20/2011-10:46pm at 10:46 pm (UTC -4)
the trustees are suing based on the belief that the Wilpons should have known it was “too good to be true”. That’s a pretty big stretch…
stickguy
3/20/2011-11:13pm at 11:13 pm (UTC -4)
Picard though can’t lose. He is working on a % recovered, plus T&E.
so, he could look at reason, and just say screw it, accept the $300mill, take is x%, and move on.
Or, he can ask for the moon even if it is a long shot, take it through trial, and know that in the end he is almost guaranteed to at least get a verdict of the $300 mill. So he still gets his x% of that, plus now he dips in for a whole bunch of extra billable hours.
so basically, he has no incentive to settle. The Wilpons certainly do, but it takes 2 to tangle. Or a judge to throw out the extra $700mill “punitive” claim.
metsfan4decades
3/20/2011-11:37pm at 11:37 pm (UTC -4)
I don’t know what’s more entertaining tonight:
Reading debate after debate among Met fans on various blogs either defending or condemning the Wilpons
or
Reading debate after debate among Met and Philly fans with Philly defending the Castillo signing and Met fans laughing, getting some small satisfaction from the signing.
stickguy
3/20/2011-11:49pm at 11:49 pm (UTC -4)
Oh, I am much more enjoying the castillo debate.
and frankly, there is no guarantee that Castillo even makes the team. He may not be overall better than a couple of the guys they have competing.
Mostly though it show a fundamental difference between the 2 teams. Philly is old, and 100% a win now before guys fall apart team, so rolling with an old fart for 1 year (or however much of it Utley misses) is logical. The Mets though you can argue are more of a long shot, so going with a young guy (building for the future) is a better option, and if they get lucky, they will contend. Not likely with Slappy though.
Hey, if I was running the Phils, I would have picked him up too on a MiL contract. And I will think it is hysterical when he finds himself spending the summer in Allentown!
Little fuzzy here, but since he signed a MiL deal, I assume that means he has to spend the summer there if the Phils want him to, otherwise he would have to quit and forfeit his salary, but would that include the Mets share? I am guessing no.
njstuckintx
3/21/2011-12:00am at 12:00 am (UTC -4)
Louie at 400K is much more attractive than 6 mil, no matter what condition he’s in.
TRS86
3/21/2011-8:02am at 8:02 am (UTC -4)
Stick I would think there is a clause in the contract that says if he does not make the team he gets his release. Most likely the Phillies did not want to make room for him on the 40 man until they had to if he makes the team.
stickguy
3/21/2011-9:22am at 9:22 am (UTC -4)
I assume so to, but did not see anything reported, though it is early yet.