By Robert H. Louis
Special to the Legal
The arrival of pitchers and catchers for spring training signals the beginning of what we hope and expect will be an exciting year for the Phillies. We're tempted to look around the league to see how other teams are doing. How about those Mets? Word has reached us of a troubling development out of New York, a suit against the team owners by the trustee seeking to recover improper payments made by one Bernard Madoff.
According to a reliable newspaper, the trustee charged with unraveling Madoff's wrongdoing, Irving Picard, has sued the Mets owners to recoup investment returns they received from extensive investments with Madoff over a period of many years. It's just a series of allegations at this point, but the trustee claims that the owners received investment returns that were fictitious; and that they should have realized that such consistent, high-level returns were simply not attainable. Their relationship with Madoff was sufficiently close, the suit alleges, that when they took over full ownership of the team, they offered him a chance to become a part-owner (which he declined).
Among the uses made of Madoff’s services was the investment of deferred income to players and managers, contingent on performance and longevity. It's claimed that the owners decided to try to make some money on the deferrals with Madoff's help, relying upon his long track record, with average returns of 18 percent per year and little fluctuation. It's not known whether any of those deferred payments will be endangered by the discovery of Madoff"s phony investment returns, but the articles suggest that the owners might have to sell the entire team and not just the 25 percent they announced would be offered for sale.
As lawyers, we do not give our clients investment advice or choose their investment advisers for them. But our work is made easier when our clients employ reputable investment advisors, as well as skilled accountants and other professionals. We can stress to clients that the best result for them will be achieved when advisors know and interact with each other, and have mutual confidence. On this basis, it seems appropriate that when a client introduces someone new into the relationship, we suggest a full exchange of information among the advisers, the effect of which could be to raise concerns if the new adviser is not forthcoming.
Postscript: The President’s budget proposal, just issued, assumes that the recent changes in federal estate law will not continue in effect beyond 2012. This has a significant effect on the planning that should be done right now. More on this later.
Robert H. Louis is a partner and co-chairman of the personal wealth, estates and trusts department at Saul Ewing. His practice includes estate, tax and retirement planning for individuals and closely held businesses. He is a fellow of the American College of Tax Counsel and a graduate of the Wharton School and the Harvard Law School. Louis can be reached at [email protected] and 215-972-7155.
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