For Wilpon and Katz, the episode did not garner anywhere near the public attention their entanglements with Madoff have, but there are striking similarities. Indeed, a review of court records and interviews suggests the debacle with Israel’s hedge fund, Bayou, was a painful precursor to the Madoff case.
The firm Wilpon and Katz started, Sterling Stamos, was accused of having withdrawn money from a fund run by Bayou after detecting evidence of possible fraudulent activity. The firm took out nearly all of its $30 million from the fund months before it collapsed.
And the eventual tie-in to the Madoff case:
According to two lawyers involved in the case against the Mets, the trustee, Irving H. Picard, argued in a lawsuit filed in December that the history of Wilpon and Katz’s dealings with Madoff meant they knew or should have known it might be a scheme, and that, as a result, other victims were entitled to hundreds of millions of dollars above and beyond what Wilpon and Katz might have made as profits. “Some of the legal principles adopted in Bayou are the same ones that the trustee is applying,” said Richard Kirby, the lead lawyer for the creditors committee in the Bayou case.
In other words, Picard is using the age-old “fool me once, shame on you; fool me twice, shame on me” mantra. Except the Wilpons got fooled twice. Continue reading The Wilpons: Not newbies on this Ponzi scheme fraud thing