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Already reeling from yet another season of poor on-field performance and a free-agency push characterized by one analyst as “barely even trying,” the New York Mets’ front office received even worse news on Friday when its ownership was revealed as the subject of a $1 billion suit by the defrauded investors of Bernard Madoff. Irving Picard, the court-appointed trustee for Madoff’s victims, filed the suit in federal bankruptcy court in December, alleging that Sterling Equities and its partners, the owners of the Mets, reaped nearly $300 million in false profits from Madoff’s firm while turning a blind eye to the fraud.
Specifically, the suit names Mets principal owner Fred Wilpon, chief operating officer Jeff Wilpon, and team president Saul Katz, all partners of Sterling Equities. The suit alleges that Sterling “knew or should have known” that Madoff’s investment firm was a fraud. It claims that Madoff and Mets owner Fred Wilpon, described as good friends, enjoyed a mutually beneficial relationship in which Madoff invested $12 million of his money in Wilpon’s companies while Sterling held some 483 accounts with Madoff’s investment firm.
The suit further alleges that Sterling “willfully disregarded any criticisms of Madoff and simply buried their heads in the sand” during the twenty-five year relationship. It points out that financial industry professionals warned Sterling on numerous occasions that Madoff was operating a fraud, but Sterling chose to do nothing. The suit claims that Mets ownership was so dependent on these funds that it used $90 million worth to cover the Mets’ day-to-day operations – including player salaries — and that the organization faced a severe liquidity crisis once the massive fraud was uncovered in 2009.
Picard seeks up to $1 billion on behalf of Madoff’s defrauded investors, including $300 million in false profits and $700 million in withdrawn principal that Picard argues should be forfeited because of Sterling’s willful blindness. This potentially massive judgment against Sterling raises the probability for a settlement, which commentators agree is the most likely result here. However, the fact that the suit was unsealed Friday after several months of talks indicates that the two sides are still far apart.
Regardless, the suit has cast a shadow over the Mets’ upcoming season just days before pitchers and catchers are scheduled to report to spring training. Star third basemen David Wright has admitted that the pending suit will likely trickle down to affect the clubhouse. Mets owner Fred Wilpon has already announced his intention to sell up to twenty-five percent of the team to cover a potential settlement, though he maintains that he and Sterling’s partners had no inkling of illegal activity by Madoff before the fraud was uncovered.
This all but confirms Wilpon’s intention to seek a settlement in this case. Picard presents no direct evidence of knowledge by Sterling’s partners of Madoff’s fraud, relying instead on the implication of misconduct from a long, close personal and business relationship between Wilpon and Madoff. However, Wilpon and his partners clearly must realize that a trial in New York near the scene of Madoff’s fraud would draw a media circus, and that a jury would likely be particularly sympathetic to the claims of Madoff’s victims against such high-profile defendants.
While the outcome of Picard’s suit remains in doubt, one thing is for certain: the Mets won’t be outbidding the Yankees for any free agents in the near future.
– Henson Millsap
Tagged with: agency • bankruptcy • baseball • Bernie Madoff • courts • criminal law • David Wright • false profits • financial • fraud • Fred Wilpon • games • government • investing • Irving Picard • Jeff Wilpon • lawsuit • lawsuits • media • New York Mets • Saul Katz • settlement • sports • Sterling Equities • trustee
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