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Burton Lifland, the bankruptcy judge overseeing the liquidation proceedings of Bernard L.
Madoff Investment Securities LLC ("BLMIS") made a shrewd decision last week
in appointing, on his own initiative, former Governor Mario Cuomo to act
as mediator in the lawsuit brought by Irving Picard, the BLMIS trustee,
Wilpon and Saul Katz, the owners of the New York Mets, and their families and
affiliated enterprises (the "Wilpon/Katz Group").
Judge Lifland has a history of acting on his own to bring
highly regarded individuals in to mediate seemingly intractable
situations. Many years ago, for example, he asked former Secretary of State Cyrus
Vance to step into the Macy's chapter 11 case. Bringing in a neutral
party of Cuomo's stature at this early stage can only help tone down the
rhetoric on both sides and perhaps get a derailed settlement process back on
A review of the 365 page complaint
filed by Picard, unsealed last week after its contents were leaked to the
news media, makes clear the enormous complexity of the case and the risks
facing both sides.
Although enormous media attention has focused on Picard's
efforts to seek recovery of at least $300 million in "fictitious profits" and
perhaps as much $1 billion for amounts withdrawn from BLMIS by the Wilpon/Katz
Group, only $162 million represents fictitious profits over the six years prior
to the bankruptcy case - the maximum "look back" period. Even if Picard is
able to prove fully his allegations regarding the willful disregard by the
Wilpon/Katz Group of the red flags concerning BLMIS, it would be an aggressive
(and questionable) expansion of the fraudulent transfer provisions of the
Bankruptcy Code and New York State law to recover any fictitious profits or
other withdrawals going back more than six years.
Read this article in its entirety at Kelley Drye &
Warren LLP's Bankruptcy
Law Insights blog
Read part one of this article
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