On Monday afternoon, the first in a long line of cases stemming from the infamous Madoff ponzi scheme to make it to trial was settled out of court. Settlement has largely been agreed to by the public as the best option for all involved, as the stakes were high for both sides in the upcoming litigation. Irving Picard, the court appointed Madoff trustee who is currently championing hundreds of lawsuits in attempt to return up to $20 Billion to victims, had just last week filed a request in court seeking to bar all evidence during the trial regarding the legal costs accrued by him and his firm, Baker & Hostetler. Although it is unknown exactly how much Picard has received for his work on the Madoff case since being appointed trustee in December of 2008, his firm’s most recent fee application spanning June 1 – September 30, 2011 sought legal costs in the amount of $48 Million.
The defendants in the action were Major League Baseball New York Mets’ owners Fred Wilpon and Saul Katz, who stood accused of “willful blindness” (they knew, or should have known) of Madoff’s fraud. Picard had sought $380 Million in damages reflecting principle that the Mets’ owners recouped right before Madoff’s arrest, and “fictitious profits” they earned as part of the ponzi scheme. It’s no secret that the Mets baseball club is already low on cash, and the outcome of the case would affect their ability to compete with other MLB teams for top players in the coming years. Outside the realm of baseball, some legal experts were using this first case as a barometer as to whether Picard will be successful against other large defendants such as HSBC and JP Morgan Chase & Co.
Typically, legal fees earned by trustees are not heard as evidence during a bankruptcy trial before a jury. However, lawyers for Wilpon and Katz argue the exclusion of any evidence of Picard’s fees are unfair in this case, where Picard is attempting to “portray himself as a tireless champion of defrauded victims” while he bills at a rate of $850 per hour. His lead counsel David Sheehan, another partner at Baker and Hostetler has also billed almost 1,000 hours at $850 per hour for this action alone.
Unfortunately, the case settled over a $162 Million deal before the judge ever ruled on the legal fee matter. The Mets may still be alive for now, but Picard’s work is far from done. It will be interesting to see whether Picard’s next opponent takes a cue from Wilpon and Katz and also tries to make transparent the trustee’s bank account.
*Picard v. Katz, U.S. District Court, Southern District of New York, No. 11-3605.
