Madoff-Mets Settlement: It Ain’t Over Till It’s Over

June 8, 2012Articles Law 360

On May 31, 2012, U.S. District Judge Jed S. Rakoff issued his much-anticipated and delayed order approving the settlement agreement between Madoff Trustee Irving Picard and the numerous defendants, constituting the Wilpon-Katz-Mets individual, business, family trust and charitable interests (collectively, the “Wilpons”).

However, would the great Yogi Berra — famous for saying, “it ain't over till it's over” — be likely to agree that it is over? There appear to be a few loose ends still present, within the Wilpons’ case itself and generally for the many unresolved Madoff/Picard matters.

The Picard/Wilpons battle in federal court began one year and five days before approval of the settlement agreement. Some of the loose ends that exist or could still surface include the following:

1) Judge Rakoff committed that he would issue an explanatory opinion “later” with respect to his March 5 and 12, 2012, orders that lacked accompanying opinions when rendered.[1] To date, the judge has not yet published such opinions. Because such orders may have played a crucial or even decisive role in leading to the settlement agreement between the litigants, such opinions would be helpful in understanding the legal foundations for Judge Rakoff’s orders and the settlement agreement. As Judge Rakoff is a respected and thoughtful jurist, his opinions could assist in guiding other Madoff cases.

2) Prior settlements by the trustee in other Madoff cases, such as the Picower settlement and the Hadassah settlement, have been appealed by other claimants without success. It is possible that such a challenge could occur in the Wilpons’ matter as well. Such challenges could be assisted by the opinions referred to in item 1 above.

3) The U.S. Supreme Court could agree to hear a case during the appeal period in the Wilpons’ matter, in which the Supreme Court could consider the method of calculating “winners” and “losers” that was adopted by Judge Rakoff and others in various cases in the Madoff bankruptcy proceedings.[2]

4) There are questions as to the inclusion of the private charitable foundations of the Wilpons in the global settlement agreement.[3] [4] It remains to be seen how the inclusion of such private foundations will be reported, if at all, in future Forms 990 to be filed with the Internal Revenue Service by such foundations. It is possible that there could even be excise taxes imposed by the IRS with respect to such foundations' inclusion.

5) If the settlement agreement remains undisturbed, it will be a number of years, perhaps as many as six, before we know, what, if anything, the Wilpons will be required to pay out of pocket.

In light of the foregoing, the approval of the settlement agreement by Judge Rakoff may not be the final word that would satisfy Yogi that the Wilpons' matter is "over."

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