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Email Strikes Out Wilpon: JP Morgan on Deck


March 21, 2011 Email Blast To Select Clients -- Subscribe to Our Mailing List

By Jay B. Itkowitz

Sitting for his first interview since his arrest in December 2008, from the federal correctional complex in North Carolina that he now calls home, Bernard L. Madoff, confirmed the ugly truth that the public has slowly come to realize about his massive fraud. While commenting on the hedge funds and banks that were exposed to his scheme, he said, "They had to know".

Several lawsuits filed by state and federal authorities, private individuals and institutions, and the Bankruptcy Trustee overseeing the liquidation of Bernard L. Madoff Investment Securities (BLMIS), Irving Picard, have exposed the complicity of hedge funds and other reputed financial institutions in Madoff's scheme. Central to the success of these lawsuits has been the effective use of electronic discovery (e-discovery).

The latest and most prominent beneficiary of ill-gotten gains to draw the ire of Mr. Picard is Fred Wilpon, owner of the New York Mets, who, along with Saul Katz and Sterling Equities, are alleged to have willfully ignored several red flags that the consistent returns they enjoyed as a result of investing with Madoff were derived from a fraudulent scheme. Lying at the heart of Picard's complaint against Wilpon and his fellow defendants, are emails sent by employees of Sterling's hedge fund, Sterling Stamos, in the days following the news of Madoff's collapse. The emails recount how the Chief Investment Officer of Sterling Stamos had long ago concluded that Madoff was a "scam" and how the Wilpon and Katz families continued to invest with Madoff even after Sterling Stamos advised them of its concerns.

Similarly, in his complaint against JP Morgan Chase, Picard cites to emails sent by JP Morgan employees just after the revelation of Madoff's scheme, discussing JP Morgan's desire to keep confidential its sudden redemptions of its investments in two BLMIS feeder funds, informed of course, by its serious suspicion that Madoff was operating a massive fraud.

With communications technology playing an ever increasing role in our daily lives, e-discovery is now the ground-zero of litigation. Businesses, small and large, that are aware of their duties of document preservation, the uses of meta-data in litigation, and how evolving technologies are being employed to strike out litigants in court, will have a leg up on the rest of the competition. For example, as recently as March 4, 2011, the New York Times reported on a new analytical software that can scan the text of e-mails, take into account when an e-mail was sent, and match it with a key event in the case that may indicate the author's intent or knowledge! Maybe the title of our next article will be "Software Decks Wilpon."

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