Mets’ Owners “Win” Court Settlement

The Wilpons and Madoff trustee Irving Picard reached a settlement today. Though both sides might try to spin the case as a win, it’s the Wilpons that should be happier about how this case came to an end.

Irving Picard might choose to focus on the fact that the settlement required of the Wilpons that they pay $162 million to his clients, those that lost money in Bernie Madoff’s Ponzy scheme. It’s true that this $162 million number is impressive in some ways. It’s almost twice the $83 million that Judge Jed Rakoff basically guaranteed the trustee in his first landmark ruling in the case. It also represents the profits that the Wilpons’ many Madoff accounts made in a six-year window — settling the debate about two- and six-year windows that has been prevalent in this clawback case.

But it’s still an almost un-mitigated win for the Wilpons.

For one, they don’t have to begin paying the settlement for three years. That’s important to an ownership that has massive debt on the team, stadium, and television station coming to term in the next two years. They get a little grace period, and a little breather room that they can spend convincing investors that their ownership is sound.

More important, however, is the revelation that the Wilpons can now join the line of Madoff claimants. Not only did they make $162 million in net-winner accounts with the Madoffs, but they are also claiming $178 in losses on their net-loser accounts.

Why didn’t the Wilpons and the trustee just offset those two numbers to begin with? Well, because it’s been Picard’s stance that you have to pay for net winner accounts first and then get in line for net loser accounts. That publicly held stance has been cemented by this settlement, which will help Picard with future negotations, but it also means that the Mets’ owners could end up cancelling out much of their debt to the trustee’s fund.

How much? According to bankruptcy expert Douglas Furth, probably more than half. In my conversation with Furth today, the partner at a bankruptcy specialist expounded on the possible future return on the Wilpons’ $178 debt claim:

[Furth] points out that “net loser claims today are trending somewhat north of 50 cents on the dollar” in public markets — which means that “people who have studied this closer think that this is a good investment.” Someone paying more than fifty cents on the dollar for a Wilpon claim in 2012 believes that, by the time he is able to cash in that claim, that debt will return him enough money to make an investment of present-day cash make sense.

If the Mets’ owners do indeed get more than half of their losses returned to them, they might manage to lose less than nine figures in the Madoff mess. They still have massive debts coming to term on the ballpark, team and television network over the next three years. Mets ownership is not out of the woods yet.





With a phone full of pictures of pitchers' fingers, strange beers, and his two toddler sons, Eno Sarris can be found at the ballpark or a brewery most days. Read him here, writing about the A's or Giants at The Athletic, or about beer at October. Follow him on Twitter @enosarris if you can handle the sandwiches and inanity.

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sturock
12 years ago

I’m a Met fan. Why can’t these owners just go away? Why do I have the sinking feeling that they will be in charge for at least the rest of my lifetime? And I’m not going to feel any better about them should this team *ever* get good again.

vivalajeter
12 years ago
Reply to  sturock

sturock, leading up to the Madoff fiasco, the Mets had the highest payroll in the NL over the prior decade. It wasn’t well spent, but they spent money that would make most fans jealous. As far as getting new owners, be careful what you wish for.

Joey
12 years ago
Reply to  vivalajeter

vivalajeter, the reason that they had that giant payroll was because of the Madoff money. They were building Madoff profits directly into their contracts with players. Diverting money to the back end of contracts with interest because if they diverted a player’s money to the end of the contract at 3% for the player they would make an extra 7% off of that money. Madoff would guarantee them 10% return so even if they promised a player 5% more money in the long run it would actually make the Mets 5% as well.

It’s insane that the Mets aren’t being controlled by Major League Baseball. The Dodgers weren’t run as poorly as the Mets and MLB essentially forced that outfit to change entirely. But the Mets get loans from the MLB and a free pass for being active participants in a major Ponzi scheme.

The Mets were encouraging all of their employees to invest in Madoff. Not just players but staff as well. The Mets knew that Madoff would get those employees 10% no matter what on any invested money.

How can you run an MLB team and not realize that 10% returns NO MATTER WHAT happens in the market is suspect? They didn’t have any idea that Madoff was running a game? They didn’t once ask Madoff what stocks and businesses he was investing in?

Ridiculous.

caseyB
12 years ago
Reply to  vivalajeter

“The Dodgers weren’t run as poorly as the Mets”

LMAO. Are you joking? McCourt used Dodger money to buy multiple multi-million dollar homes across the country and put his sons on the payroll even though they were in school at the time! There are countless other financial infractions by McCourt too.

McCourt intentionally misused Dodger money. No one has ever alleged the Mets owners of misusing team money in such a manner. That’s a huge difference.

caseyB
12 years ago
Reply to  vivalajeter

Oh wait. This may be the biggest difference of all — McCourt had to file for bankruptcy to make payroll. The Mets owners never had to do that.

Matt
12 years ago
Reply to  vivalajeter

Off the field? One could argue the Bobby Bonilla deal was as egregious as McCourt’s houses, but that;s entirely debatable. On the field? I’d take my chances with McCourt. He seemed to realize that he had no idea how to run a team. The Wilpons think they know what they’re doing, and every decision they make is either wrong or misguided. Their track record is long and not good, even if you throw out the whole Madoff affair and the last two seasons entirely.

caseyB
12 years ago
Reply to  vivalajeter

There was absolutely nothing wrong with what the Mets owners did with Bonilla’s contract. Plenty of teams defer player money. What was wrong was that Madoff was scamming them at the time, something they didn’t know then.

Again, McCourt’s misuse of Dodger money was fully intentional. And you admit he knows nothing about baseball. Yet you prefer him as an owner over the Wilpons? That’s your choice, but I wouldn’t want that crook anywhere near my team.

As for current Mets management, I disagree with your assessment. I think Alderson is a capable GM, and his trade for Wheeler last season was one of the best trades in recent Mets history. So I have no issue with how the team is currently run, except I’d like to see the payroll raised some in the near future.

Matt
12 years ago
Reply to  vivalajeter

There was everything wrong with the Bonilla contract. The Wilpons thought they could make all of that money back using Madoff returns, which they assumed would be constant. That is wrong, period. I do think Alderson is a good GM as the Wheeler deal shows, but I doubt he has the autonomy for his team to ever be fully built. And yes, if I’m going to have a crook for an owner (and our owner just admitted by way of $162m that he is a crook), I’d rather have one who doesn’t think he knows how to run a baseball team. Because the Wilpons have proven, one Victor Zambrano trade at a time, that they have no idea how to make a good baseball decision.

caseyB
12 years ago
Reply to  vivalajeter

On Bonilla, we’ll have to agree to disagree. There was absolutely nothing wrong with how the Mets did that contract at that time. It was not only legal, it was within the rules of baseball at the time. What do you think other teams do with deferred contracts? They also invest the money.

As far as Alderson goes, I have no doubt he has the autonomy. What I think he lacks is the financial leeway to do everything he wants.

And you are absolutely wrong about what the agreement today represents. The total amount of the agreement represents a clawback of net profits — using a formula that applies to every single one of Madoff’s investors who had a net profit over the 6-year lookback period. Meanwhile Picard dropped any claim that the Mets owners were “willfully blind” or “should have known” about the scam. The Mets owners were fully exonerated of any wrongdoing by the agreement today. In fact, they may get money back in the end.

vivalajeter
12 years ago
Reply to  vivalajeter

Matt, regarding Bonilla, there are several factors that should be mentioned:

1) They agreed to the deal in 1999. It’s easy to forget, but at the time the stock market was on one of the best bull markets of all-time. There was nothing but optimism, so the thought of getting 8% or 10% per year was pretty easy to fathom.

2) They didn’t make the first payment to Bonilla for over a decade. I think the break-even rate was something around 5% (meaning, as long as they can invest that money for more than a 5% return, they’d be fine).

3) By making the deal, it freed up salary for the Hampton trade. They likely would not have made it to the World Series without Hampton.

4) When Hampton left, they received a compensation draft pick, which turned out to be David Wright.

As much as people like to make fun of his annual $1MM payments, it wasn’t a bad move at the time, and considering Hampton/Wright, it might have worked out best in the long-run too.

DD
12 years ago
Reply to  vivalajeter

Matt, how can you give Alderson credit for the Wheeler trade, but give the Wilpons, and not Steve Phillips, the blame for Zambrano?

Matt
12 years ago
Reply to  vivalajeter

I give Alderson credit for the Wheeler deal because all he was directed to do was trade beltran, the rest he did on his own. The Zambrano deal was 100% ownership (see Adam Rubin’s reporting on the subject, widely googleable, or read the account of it in Keri’s “The Extra %2”), and was done even after the medical staff wanted to void the deal because they were certain they could “fix” him. They wanted to flex their muscles. They are bad decision makers and bad for baseball, and I fail to see how anybody can argue otherwise.

Seriously, somebody give me one positive contribution the Wilpons have made to baseball, on a local or national level. The ballpark? I’d rather be at Shea. At least it’s our ball park, and not one made for a franchise that left long before I was born.

caseyB
12 years ago
Reply to  vivalajeter

Matt, yes it’s true the Wilpons were mostly responsible for Zambrano, but here’s what you’re forgetting — there was an interim GM in place at the time, Duquette. So you can almost understand their involvement in that instance. Apart from Zambrano, the Wilpons have had very little to do with baseball decisions. More precisely, they don’t make baseball decisions any more than the average MLB owner does. Their fault has been in hiring poor executives to run their baseball operations. Omar and Bernazard, for example, were wrong for the Mets.

As for them being bad for baseball, huh? How do you figure this? Also, what the heck do you mean by questioning what positive contribution to the game they’ve made? What positive contribution to the game has any other single owner made to the game? That is a really weird question and argument to try to make.