The New York Mets were sued Tuesday by Irving H. Picard, the trustee charged with distributing money to victims of convicted felon Bernard Madoff's Ponzi scheme, the organization acknowledged.
CNBC reported that the Wilpon family, which owns the team, also was sued.
A statement from the organization indicated the sides already are in settlement negotiations. And the Mets pledged the situation would not affect the team's operations.
According to recent New York Times reports, one Mets fund -- called "Mets Limited Partnership" -- invested $522.7 million with Madoff over the years and withdrew $570.5 million -- resulting in a $47.8 million profit.
Sterling Equities, the Wilpon-owned real estate company, released this statement: "The Trustee for Bernard L. Madoff and BLMIS today has filed a complaint against various Sterling partners and entities. Because the parties are engaged in settlement negotiations, the complaint is filed confidentially, under seal.
"Consequently, we will have no further comment at this time. Regardless of the outcome of these discussions, we want to emphasize that the New York Mets will have all the necessary financial and operational resources to fully compete and win. That is our commitment to our fans and to New York."
In October, Mets principal owner Fred Wilpon spoke about being a victim of Madoff.
"I would say the Madoff issue, certainly for the people in this room that represent Sterling, their [lost] money 'smarts.' There's no question," the 74-year-old Wilpon said. "You don't like to lose money that is just stolen from you. But the betrayal is something I'll never, ever forget. I'll go to my grave in that one, as will [team president] Saul [Katz] and [chief operating officer] Jeff [Wilpon] and the rest of our partners. That was a total betrayal of us. We were investors for something like 25 years."
As for the effect on the Mets, Wilpon added then: "I'm not minimizing the money, but it was only one part of our business and took some liquidity away. But that's not the part of the business that was running the shop. We have several other parts of our business.
"We have several other kinds of companies, and all are doing either reasonably well or very well. The real estate business is down generally, but ours is pretty darn good -- the development business as well, and some of the other businesses."
Recently hired Mets general manager Sandy Alderson wouldn't say whether he brought up the Madoff situation during his interviews, saying he was going to stick to the team statement.
Speaking at baseball's winter meetings, he made clear the Mets weren't going to be adding payroll.
"There's been an understanding on my part from the very beginning that there was going to be somewhat less flexibility this year than probably would be the case in future years. I not only understand that, I support the idea," he said. "I don't have any understanding about what the payroll will be or can't be going forward, but, look, let's say arguably we have like $50 or $60 million coming off next year, do I think it would even be prudent to invest that full 50 or 60 again in a situation which binds us going forward, so that we're only in the market every three years when this lump sum comes off our books? No. That's not how we want to approach it.
"So next year if 50 comes off, it's very unlikely that we would respend the 50 and commit ourselves for another four years out for all that money and then leave ourselves with a three- or four-year dark period when we can't do anything else."
Meanwhile, a 97-year-old Boston-area apparel entrepreneur agreed Tuesday to forfeit $625 million to be distributed to cheated investors in the Ponzi scheme, authorities revealed.
The U.S. government said in papers filed in federal court in Manhattan that Massachusetts businessman and philanthropist Carl Shapiro, one of the first investors in Madoff's investment business and a longtime Madoff friend, entered the forfeiture deal along with his partners.
The papers were filed by the government to recover the money from the accounts of JP Morgan Chase Bank, N.A. It said the proceeds would be distributed to Madoff investors. The papers said Shapiro held an account in his name with Madoff's investment business since 1961 and had controlled accounts for others from time to time. Madoff started his investment business in 1959.
The latest actions come as a deadline approaches this weekend to file court papers before the revelation of the fraud reaches two years.
In recent weeks, Picard has filed dozens of actions in which he tries to recover profits made by some investors at the expense of others so the money can be redistributed to everyone. The recovery of such funds is known as a "clawback."
In December 2008, Madoff revealed to his sons and later to the FBI that he had operated a bogus investment business for decades, reporting to investors that their $21 billion had risen in value to more than $65 billion when it actually had dwindled to just a few hundred million dollars. The 72-year-old Madoff is serving a 150-year prison term after pleading guilty to fraud.
Picard said Tuesday in a statement that he had asked the U.S. Bankruptcy Court in Manhattan to approve the Shapiro deal, including $38 million to be forfeited by Robert Jaffe, Shapiro's son-in-law, in connection with his role with Cohmad Securities Corp., an investment firm that was in the same building as Madoff's company. He said the amount includes everything Jaffe withdrew from Madoff since the 1980s.
"This agreement represents a financially rewarding outcome and it is a strong example of the progress we are making in assembling the largest fund possible for the benefit of BLMIS customers with valid claims," Mr. Picard said.
Securities Investor Protection Corporation Board Chairman Orlan Johnson called the settlement an important milestone.
"The Madoff case is now entering a new phase. I hope this marks the beginning of a period that will see many such settlements," he said.
Oren Warshavsky, a lawyer who worked on the Shapiro settlement, said the $38 million to be forfeited by Jaffe was "particularly gratifying" because it exceeded Picard's demand that Jaffe give up all fees paid to him along with an amount equal to all his withdrawals since he opened his accounts.
"In satisfying the Trustee's demand in full, Mr. Jaffe has distinguished himself from the other officers and directors of Cohmad, who have yet to recognize any culpability for their involvement in recruiting victims for Madoff," he said.
Shapiro spokesman Stephen Fishbein said the Shapiro family was pleased with the settlement. He said it will provide "substantial funds" to be distributed to those most hurt by Madoff's fraud.
He added that the Shapiros had "worked closely with the authorities on this matter and appreciate the efforts of both the Department of Justice and the trustee in bringing about this resolution."