Madoff, WaMu, Borders, Lehman, Viceroy Resort: Bankruptcy

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March 22 (Bloomberg) - Fred Wilpon, Sterling Equities Inc., owner of baseball team the New York Mets, Wilpon and friends, family and associates have filed a motion March 20 to reject the new revised version of the complaint 373 pages where the liquidation trustee Bernard L. Madoff Investment Securities Inc. seeks to recover $ 300 million of fictitious profits and 700 million in repayments.

The Wilpon group, in their 94-page brief supporting dismissal, say they were “victims” who were “defrauded by Madoff” and “never should have been targeted by the trustee.” They say there are no facts to support the trustee’s complaint.

The motion to dismiss won’t be decided until late June, at the earliest.

Under a schedule worked out in February, the Wilpon group could have waited until mid-April to file the dismissal motion. Instead, they filed the motion to dismiss two days after the amended complaint.The trustee is not due to answer the motion to dismiss until mid-May. Wilpon group may submit a response in mid-June The bankruptcy judge will likely hold a hearing before the rules.

Technically speaking, the movement Wilpon is a request for Summary Judgement, as he brings the facts to the attention of the judge who does not appear in the complaint. If the bankruptcy judge views newspapers as an application for summary trial, he may dismiss the complaint if there are disputed issues of material fact. In other words, the bankruptcy judge on summary judgment may not decide which facts are true and which aren’t. The judge must assume facts pleaded by the trustee are true even if Wilpon comes up with evidence to the contrary.

Wilpon describes how his group gave the trustee 850,000 pages of documents and provided sworn testimony from five witnesses over 10 days. They say not a single document from their files contained any warning that Madoff was engaged in fraud.

The trustee bases his complaint on the theory that a Madoff customer must return repayments of principal if there were sufficient “red flags” to indicate there was a Ponzi scheme afoot. Wilpon’s brief sees the law in a different light.

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