So The Mets Sold 48% of The Team After All..
Barron’s Dec. 15, 2008, issue, published right after Bernard Madoff confessed to conducting a massive Ponzi scheme, noted that a prime victim of the swindle was Fred Wilpon, the New York Mets’ principal owner.
Soon after, on Fox Business News and on New York sports radio station WFAN, I predicted that the scam would force Wilpon and Saul Katz, another chief owner, to sell at least part of the team. (Seven years earlier I had written an article for Barron’s questioning Madoff’s investment claims.) But a team official, interviewed by Fox Business News, said I was “flat-out wrong” and “grossly irresponsible” and that the team wasn’t for sale, in whole or part. As it now turns out, Wilpon & Co. have sold almost half of the team to raise a badly needed $240 million. In part, the Mets’ financial woes reflect the team’s miserable onfield performance and eroding attendance. But it also reflects the pressures wrought by the Madoff scheme and the attempt by Irving Picard, the trustee seeking restitution for victims, to extract a huge payment from Wilpon and Katz, whom he accused of knowingly ignoring the scam, while getting income from Madoff.
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With a reduced payroll, the Mets may see attendance continue to decline at Citi Field.
Picard initially sued the Mets co-owners for $1 billion in phony profits he claimed they withdrew over the decades prior to Madoff’s arrest. But a judge this month ruled that the trustee is entitled to only $83.3 million. And Monday, the two sides agreed on a $162 million settlement of all claims—an outcome widely viewed as a win for the embattled owners.
The $162 million represents fictitious profits that Wilpon and Katz and their group withdrew during the last several years they had active accounts with Madoff. At the same time, the Mets officials claim that they lost $178 million in the scheme.
If Picard recovers all of the approximately $20 billion victims apparently lost, he could pay off Madoff investors at 100 cents on the dollar. So far, the trustee has recovered about half of the money lost. That means of the $178 million that the Wilpon accounts lost, about $89 million has already been recovered. So the balance of the total settlement the Wilpon/Katz group would have to give back is around $73 million.
The Mets owners also have benefited in recent weeks by selling 4% shares of the team to 12 investors for $20 million apiece. They’ve reportedly used part of the money to repay a $25 million debt to Major League Baseball and a $40 million loan from Bank of America.
But the bolstered finances probably won’t produce a big payoff on the field. The team, which Wilpon has said is losing $70 million a year, is expected to have a payroll around $90 million this year, down from $142 million in 2011, when it had a 77-85 won-lost record.
– Erin E. Arvedlund