Lawsuit excerpt on Mets/Madoff tie

The lawsuit alleges that $94 million of the $300 million in false profits directly is related to the Mets. Here is the excerpt from pages 147-149 of the lawsuit detailing that allegation:

Sterling Used BLMIS Accounts To Support The Operations Of The New York Mets

The quintessential example of the intertwined nature of Sterling’s business and its investments with Madoff, as well as Sterling’s unorthodox use of its BLMIS accounts in lieu of a traditional cash management strategy, is the Mets.

Many of these Mets-related KW BLMIS Accounts were used to provide the cash flow necessary to run the day-to-day operations of the Mets. Specifically, the cash withdrawals from Sterling’s Mets-related KW BLMIS Accounts, which included Fictitious Profits, were critical to Sterling’s ability to run the Mets because they were used to cover significant expenses, such as payroll, players’ deferred compensation, and stadium operations. In fact, the estimated returns from the Mets-related KW BLMIS Accounts were consistently built into the Mets’ cash flow projections and budget analyses. The pattern of Sterling’s deposits and withdrawals into and out of the Metsrelated KW BLMIS Accounts reflect the seasonality of the Mets’ business. Approximately 80% of the total deposits into the Mets-related KW BLMIS Accounts were during baseball’s offseason months of October through March. Conversely, approximately 75% of the total withdrawals from the Mets-related KW BLMIS Accounts were during baseball’s regular season months of April through September.

In addition, the withdrawals from the Mets-related KW BLMIS Accounts were so important to the smooth operation of the Mets that Sterling often provided Madoff with advance notice of these withdrawals, specifying dates and amounts. This process ensured that Madoff had adequate time to make the cash available to the Mets—regardless of whether he was supposedly in or out of the market.

Sterling’s use of the Mets-related KW BLMIS Accounts in lieu of traditional cash management practices evidences the Sterling Partners’ willingness to ignore the risks and volatility normally associated with owning stocks and options, as well as their unrealistic confidence in Madoff’s high and consistent returns. Despite this reliance and the implausibility of such consistent returns month after month and year after year—including during periods of significant fluctuations in the market—Sterling conducted no diligence on Madoff or BLMIS in response to the red flags of which it was aware.

As discussed earlier, the Sterling Partners withdrew over $94 million in Fictitious Profits from the Mets-related KW BLMIS [Madoff] Accounts.

When the Mets needed money, the Sterling Partners withdrew funds from the Mets-related KW BLMIS Accounts. For example, when faced with liquidity issues, such as lags in ticket sales, Sterling frequently “scraped” from these accounts to address the cash shortages.