Fred Wilpon, Saul Katz and their Sterling Equities partners, fired back at Madoff trustee Irving Picard, in a comprehensive response to his case against them.
On Sunday night, attorneys for Wilpon and Katz, who also own the New York Mets, filed a motion to dismiss the $1 billion clawback case Picard has built against them.
"After months of damaging leaks, false accusations and withholding of evidence, we can finally legally respond to the work of fiction created by the trustee," Wilpon and Katz said in a joint statement. "Let us be very clear: We did not know that Madoff was engaged in a fraud. There were no red flags and we received no warnings."
Picard's case portrays the Sterling partners as net winners instead of victims in Madoff's ponzi scheme, which was discovered in December 2008.
On Friday, an amended complaint filed with the US Bankruptcy Court for the Southern District of New York, boosted the dollar figure of alleged fraudulent transfers from the $300 million to $1 billion.
Picard has alleged that executives with Sterling Stamos, the fund of funds that falls under the Sterling Equities umbrella, had informed Sterling principals that Madoff was a fraud, that there were red flags and that he was too good to be true.
But lawyers for Sterling now say that that information, which is the basis for the case, is nowhere to be found in any testimony given to Picard.
Despite being portrayed as "sophisticated investors" by Picard, testimony taken of both Wilpon and Katz by Picard's lawyers before his initial complaint was even filed, suggest the opposite. The testimony is revealed in the new filing.
"I don't do well in the markets, the stock market," Katz said. "I'm not good at it, it's not my business. I don't have an active account anywhere."
Wilpon, when asked if he understood how Madoff made money off his investment business replied, "I'm not an investment person...so I wouldn't have any kind of expertise."
"The central allegations in the complaint are directly contradicted by sworn testimony taken by the trustee's counsel prior to filing the complaint," said New York Mets general counsel David Cohen, in a statement.
"The complaint, which ignores that testimony, was filed in an effort to extract a huge and unwarranted settlement—with complete disregard for the harm that these misleading allegations would cause to the reputations and businesses of the Sterling Partners."
The court appointed former New York Governor Mario Cuomo as a mediator in the case to see if the two sides could work out their differences. Lawyers for Sterling say they are willing to participate.
Although Picard has received roughly $10 billion in clawbacks, through settlements, the defendants in the case say they believe clawbacks are illegal.
Even if Madoff never made a single trade, he was a registered broker, meaning that the law, they say, entitles them to receive the money Madoff said he owed them, whether that money is real or fictitious.
The defendants, Wilpon and Katz, are currently exploring the idea of selling at least 25 percent of the Mets. Major League Baseball has approved at least three bidding groups, according to the New York.
Questions? Comments? SportsBiz@cnbc.com