Over the last couple of days, so many things are being uncovered. The relationship between Bernie Madoff, Ponzi scheme creator, and those of position within the Mets organization namely Fred and Jeff Wilpon and Saul Katz. It could have the illusion of creating a tangled web, but it really isn’t. It’s relatively easy to follow.
Madoff, a lifelong Mets fans, was practically integrated into the Mets and their financial dealings by the Wilpons. Before Madoff was brought into the picture, he had consistently shown major returns on Wilpon investments. So, why not have Madoff aid the Mets when it came to the Mets making long term deal to players and staff when deferred money was involved. Yes, we all know of the Bobby Bonilla deal, but he wasn’t the only one. There are others.
Those deferred monies were invested by Madoff. And as was the case with prior investments by the Wilpons (and others), Madoff showed strong returns. Returns that were well above what was expected. Almost “too good to be true” returns.
We all know of the fallout from Madoff’s dealings. He was arrested, convicted and imprisoned for his creative financing. Many lost their life savings. Others prospered. The Wilpons and Katz were among those that did prosper. It’s now even being suggested that Fred Wilpon and Saul Katz knew of Madoff’s underhandedness. They knew Bernie Madoff was screwing people out of their dough.
Upon Madoff’s arrest, his assets were seized and were put up for auction in an attempt to recover the slightest bit of finds from his dereliction of duties as an investor. Among those items, a personalized Mets jacket. Nice to have for any time you’re at the ballyard.
Now, this isn’t exactly a means to tie Madoff, the Wilpons and Katz all together. A personalized jacket is far from such. Rumblings of a substantial number of meetings are. In fact, Madoff’s offices were located in a building by a holding company operated by Fred Wilpon.
Fast forward to this past December. A lawsuit filed by Irving Picard, a trustee overseeing the Madoff matters, against Fred Wilpon and Saul Katz in which he (Picard) is attempting to recover more money for those that have been damaged by Madoff’s vile work. Why? Irving contends that Wilpon and Katz knew or should have known of Madoff’s unseemly ways. Yes, this suit involves strictly cash. While I could not find any particular source to post an exact amount Irving has filed for (the suit is sealed), you can only imagine it would be substantial in amount.
How did Picard come upon Wilpon and Katz? He did what any detective in any Hollywood movie or TV show does, he followed the money. Picard pursued those that were listed as withdrawing more money than they had invested with Madoff. This point has created a major fuss and peeved those that did manage positive gains with Madoff. A form of profiling that may not be far off base. You collect a buttload of cash, possibly under illegal pretenses that are unknown to you, and you cry foul. That’s not a stunner.
Hey, maybe some of these gains were legit. I mean the Mets made a cool $48 million with Bernie Madoff. Why not anyone else? Yep, you’re scratching your head like me. How could they bank that much coin and others were literally left penniless? Know you’re getting part of the picture.
Just this past Tuesday, MLB Commissioner Bud Selig met with Wilpon and Katz to discuss the team’s finances. This meeting has been in order and on the docket for about two weeks. The meeting took place at the MLB offices. In essence, could this be seen as a call to the principal’s office?
Last Friday, Fred Wilpon announced that the Mets were considering selling up to a 25-percent stake in the team. The Mets are estimated to be worth about $835 million. If anyone were to get that much of a share, that would run about #200-$210 million, give or take few thousand. Sounds good, huh? There are a few drawbacks with this. CNBC’s Darren Rovell points out a flaw or two:
"“This won’t work and the most business savvy already know this because before they went public with this they surely pitched it privately to the richest Mets fans.“They of course said no. What person, in this environment, would pay some $200 million to be a limited partner that has no control of the team?”"
That’s just the beginning.
First, it’s now public knowledge that these funds will be used to “finance” a settlement of the lawsuit filed by Picard. Second, Fred Wilpon has already stated that the current Mets brass will “continue to control the franchise and govern its operations”. Lastly, you will receive no stake in SportsNet New York, the main cash cow for the Mets.
To review: your cash is paying a lawsuit (no “real” investment), no say in operations and no extra monies from SNY or part of SNY. You may get a nameplate to go along with your title of minority owner.
Sign me up for this deal! I can’t lose! Investing $200 mill and have nothing to show from it?
Wait. Wonder where this idea was concocted?
But that’s not all. Just today, the Wilpons and Katz are fighting back (through a couple of lawyers) just as any good withstanding New Yorker would do. Two lawyers that represent the Wilpons in the trustee matter fired back today. Mike Lupica of The New York Daily News provides insights from the Wilpons side.
First off, I do appreciate Lupica’s upfront comments regarding his point of view.
"“This isn’t about whether I (Lupica) like Fred and Jeff Wilpon or you don’t. Or what you think about what has happened to the Mets over the past two years. And nobody is ever going to have to run a benefit for Fred Wilpon whether he reaches an agreement with Picard – for whom nobody is ever going to run a benefit, either – or not.“But if you have been following the outrageously one-sided coverage the last few days, you can’t possibly think this is a fair fight.”"
Lupica adds that it is frowned upon for the an attorney to comment on possible litigation. It supposed to be. David Caplan, one attorney representing the Wilpons, reminds us of proper etiquette.
"“We are legally bound not to discuss (the lawsuit’s) contents,” one of the lawyers for the Wilpons, David Caplan, said Wednesday. “Other people appear not to have complied with that order. It’s why you haven’t seen any comments from us until today.”"
So, there’s a leak somewhere. Trying to get the media on their side?
Caplan also denies that the Wilpons made substantial gains through Madoff. In fact Caplan states that “they lost money”.
Karen Wagner, another attorney for the Wilpons in this matter addressed the issue if her clients knew of Madoff’s deeds:
"“They did not know Bernie Madoff was running a Ponzi scheme. We believe that (Picard) knows that as well. There is no evidence that any (Wilpon) partner knew that Madoff was engaged in a fraud.“The SEC couldn’t figure it all out, there’s no reason why we should have figured it out.”"
And there is a point here, but isn’t this all getting to the “he (Picard) said, he and she (Caplan and Wagner) said” kind of thing? While the constructed path may not be so hard to follow, all the verbal jousting can be. Innuendo seems to have reared its ugly head in all of this if you believe the comments from the Wilpons’ attorneys.
Or are we just being fed another line?
The biggest question for me is this: If the Wilpons and Katz are in the clear on this whole Madoff matter and they know damn well they are, then why pay the money? I mean, don’t you want a chance to prove your innocence in a court of law? Not so much according to Wagner.
"“The answer is that they want to put this episode behind them and are willing to pay a price to do just that,” Wagner said. “Put the episode behind them and move on with the rest of their lives.”"
Wagner adds litigation can be (and I add that it usually is) long and drawn out. Get this over with and move on no matter the cost, huh?
I know cases fall under this situation every day within our legal system. I’m not foolish enough to believe otherwise. You claim you’re innocent but the Wilpons are willing to pay a low potential nine figure number just to “put the episode behind them”?
This isn’t a matter of taking sides either. It’s a matter of the power of the wallet strikes again. Maybe that’s the side to be on here.
Or it could be the potential power of a finding a minority owner in this case.
Update: Picard has informed the judge overseeing the matter that all settlement talks are now off and he wishes the seal be removed from the court filings. All of this is in conjunction with the attorneys representing Sterling Equities, whose principals are Wilpon and Katz, spoke openly to Rovell. Rovell denotes this via Twitter.
Update #2: The court documents were unsealed and Picard is seeking $300 million in purported false profits and using said profits to run the Mets. The suit is also claiming that when Madoff’s scheme was exposed, the Mets were faced with a question of liquidity. Wilpon and Katz wrote that they were also victims to Madoff and that Picard is seeking to make them a victim once again.
A point of note here. On four of the markets biggest days for losses in recent memory (Black Monday in 1987, the dot-com bubble being burst in 2000, 9/11 and the onset of the recession and housing market burst in 2008), the account Madoff has set for Sterling showed positive returns on those dates.