The New York Mets’ $162 million settlement Monday in the Bernard Madoff fraud case looms as a victory for a financially beleaguered baseball franchise that has experienced few of them in recent years.
“I think it’s a win for the Mets,” said Wayne McDonnell, a sports business professor at New York University’s Tisch Center for Hospitality, Tourism and Sports Management, after Mets owners Fred Wilpon and Saul Katz settled a lawsuit by Irving Picard, the trustee for Bernard L. Madoff Investment Securities LLC.
The Mets and holding company Sterling Equities stood to lose $303 million had they lost the case. Picard had originally sought $1 billion from the ballclub.
“This time a year ago, we were talking about a $1 billion lawsuit,” McDonnell said. “We were saying the Mets were in jeopardy and that Wilpon would never own the team again. Fast forward 14 to 16 months, and that figure is down to $162 million.”
Under the settlement, Picard will now consider the Mets owners’ claim that they lost $178 million to Madoff’s scheme. “So it could be a wash,” McDermott added.
The trustee had argued that the Mets owners knew of Madoff’s corruption but continued their investments because they were profitable. Lawyers for Wilpon and Katz said the owners hadn’t known about the Ponzi scheme, for which Madoff was convicted in 2009. He is serving a 150-year sentence.
Jury selection was scheduled to begin Monday for a trial that would have determined whether Wilpon and Katz could prove they were not “willfully blind” to Madoff’s scheme. Wilpon is the team’s board chairman and chief executive, while Katz is president.
The Mets owners will pay nothing the first three years, then the $162 million in the two years thereafter. The amount equals “fictitious profits” that the Sterling parties withdrew during the six-year period before the liquidation proceeding.
The Securities Investor Protection Corp., which chose Picard as trustee, endorsed the settlement. “This settlement is in the best interest of the Madoff victims, who will benefit from the additional monies being added to the customer fund for distribution,” SIPC president Stephen Harbeck said in a statement.
The Mets, however, are far from in the clear financially. They are still on the hook for a $40 million bridge loan from Bank of America Merrill Lynch in December, one year after getting a $25 million loan from Major League Baseball.
“No way are they out of the woods,” said McDonnell. “But they no longer have to worry about burden of proof or willfully blind. Fred Wilpon can sell stakes of the Mets on his terms, not Irving Picard’s terms, not Judge Rakoff’s terms and not a jury’s terms.”
Wilpon has expressed interest in selling minority stakes of the team in tranches while retaining a majority interest.
Bonds sold by the New York City Industrial Development Agency paid to build Citi Field, which the Mets opened in 2009.
The agency sold $629.6 million of tax-exempt bonds secured by payments in lieu of taxes and $65.5 million of taxable bonds in 2006 and 2009 on behalf of Queens Ballpark Co.
