By Murray Chass

January 30, 2011

In seeking a buyer for a quarter of the Mets, the investment banker Steve Greenberg should not overlook a candidate already involved in the Mets’ predicament that Bernie Madoff has created for them. His name is Irving Picard.

It would only be fitting that the man whose lawsuit has sent Fred Wilpon scrambling for a minority partner should get the right of first refusal.Fred Wilpon3 225

Picard, a New York attorney, is the trustee for the victims of Madoff’s massive Ponzi scheme, authorized to recover as much of the billions of which Madoff defrauded his victims.

Fred Wilpon, owner of the Mets, and a variety of his companies are among the recipients of Madoff money that Picard has sued to recover the ill-gotten loot. Picard maintains that anyone who received so-called returns on their investments with Madoff received money that he stole from other investors.

Picard isn’t doing this work for the good of humanity. His deal with the government, according to a lawyer familiar with it, is that he receives 1.5 percent of the money he recovers beyond $1 billion. He reportedly has already recovered $10 billion, which means he has earned $135 million for himself on his way to an estimated several hundred million dollars.

In probably the most painful announcement he has ever made, Wilpon said last Friday he was seeking an investor or investors who would be interested in buying 20 to 25 percent of the Mets.

Wilpon didn’t put a dollar figure on the amount he was seeking, but based on the $858 million Forbes magazine has estimated is the Mets’ value and the $845 million the Chicago Cubs sold for 15 months ago, a 25 percent share should produce something in the neighborhood of $200 million.

There are plenty of wealthy people, in New York alone and especially Mets fans, who could make that kind of investment, but Picard is closest to the situation and should get the first shot at becoming Wilpon’s partner, particularly because part of the money he would be investing would be coming from Wilpon himself.

The New York Times, which did the best reporting on this particular story in Saturday’s newspaper, reported that the lawsuit Picard filed against Wilpon and his companies seeks $300 million in “fictitious profits” based on what they withdrew and additional millions, which I’ll explore later.

Speculation has Picard trying to get $1 billion from the Wilpon group, but others have scoffed at that figure. Nevertheless, whatever Picard gets – and he will get hundreds of millions – Wilpon would feel better about paying it if some of it would be coming back as an investment in the Mets.

Picard, however, would most likely have the same reservations about a Mets investment as anyone else. Two problems exist for potential partners.

First, they would be investing a lot of money without gaining any say in the operation of the team. Under Major League Baseball rules, each team has to have a control person who makes decisions, and with the Mets that person is and will continue to be Wilpon.

“Why would anyone buy, at a high price, a minority interest and be partners with Fred and his son?” asked a lawyer who has been involved in baseball. Then, referring to Wilpon’s effort to sell the share before going public, he added, “He hasn’t found any buyers previously because it’s a lousy deal. Anyone who buys in wants to be known as a major owner of the Mets, not put your money up and don’t ask questions…”

Steve Greenberg, the lawyer said, “got a very difficult assignment.” Greenberg is the Allen & Company managing director who is handling the sale for the Mets.

The lawyer suggested the only way Wilpon will get a partner is to reprise what he had when he was a 50-50 partner with Nelson Doubleday, Wilpon bought out Doubleday in August 2002. “But Fred wants total control,” he said. “He won’t do it. He wants his family to run it.”

Jeff Wilpon2 225Jeff Wilpon, the Mets’ chief operating officer, would be the first member of the family to run the Mets after Fred is no longer active. But Jeff is also a potential problem for the family. “Most buyers won’t want anything to do with Jeff Wilpon,” the lawyer said. “He’s a light weight and has a bad reputation. I can’t imagine a buyer not wanting an option to buy him out when Fred dies.”

Jeff Wilpon is typical of many sons of wealthy owners. They are in their positions only because their fathers own the teams, having done nothing to earn their jobs and exhibiting a lack of baseball knowledge. There are exceptions, but Jeff Wilpon is not one of them.

Fred Wilpon, however, has a greater concern than his son’s future as the Mets’ chief executive officer. The senior Wilpon has his own future to worry about. He has no guarantee what it holds for him.

The Picard lawsuit is critical. Not only is Picard seeking hundreds of millions of dollars, but according to the Times report, he has also alleged that Wilpon knew or should have known that Madoff was running a crooked scam. That’s why the trustee seeks many millions more than the $571 million he said the Wilpon companies withdrew.

“The really troublesome thing for Wilpon is Picard alleges that Wilpon knew or should have known,” the lawyer said. “That goes to Wilpon’s integrity and reputation. Wilpon is very vulnerable. He can’t let that suit go forward because the risk that he was culpable is too great.

“Picard has Wilpon by the tail and Wilpon knows it. Picard knows Wilpon can’t run the risk of a jury or a court decision against him.”

It’s the possibility that Wilpon knew or should have known that Madoff was running a Ponzi scheme that has prompted the trustee to seek more money from the Wilpon entities than they gained from their investments.

If Wilpon knew something wasn’t right about the Madoff operation and failed to alert authorities, he could be held liable for losses suffered by other investors Madoff swindled.

“That’s a devastating allegation,” the lawyer said. Noting that the trustee’s lawsuit was filed under seal at the request of Wilpon’s lawyers, he added, “The seal is another reason why Wilpon has to settle. The reason we want to see what is sealed is the same reason Wilpon wanted it sealed. There must be serious allegations that Wilpon did some bad things.”

As for the Wilpon investments themselves, Picard is operating on a “net winners” and “net losers” basis. He argues that this case is about what people invested and what they took out.

Wilpon is in the quandary he’s in because he was a net winner. Had he not withdrawn any money and therefore been a net loser, he might have escaped investigation.

However, because he withdrew money, he might have raised the question of why he took the money. Did he know something that prompted him to withdraw the money? That might be one of the reasons Picard is going after him.

Picard says anyone who withdrew money can’t keep that money because it was stolen money. There were no profits. Every dollar anyone received came from someone who was defrauded. That’s how a Ponzi scheme works. The operator of the scheme takes money he gets from investors and pays off previous investors with it – if he is paying off at all.

As the trustee, Picard has the right to get the money back. It’s called clawback money.Irving Picard 225

Madoff obviously paid back some investors, though how he determined who they would be is not known. Wilpon was one of those investors who withdrew more than they invested, and they are the ones Picard is pursuing in his lawsuit to get them to return the money.

Some people have settled, including a Florida woman, who agreed to give Picard and the U.S. government $7.2 billion.

Wilpon’s lawyers have held settlement talks with Picard, but they have not reached an agreement. That’s why Wilpon went public with his attempt to find a partner or two. “Wilpon is trying to settle but hold onto as much as he can,” the lawyer said.

I had hoped to speak to Wilpon about the various facets of his case, but his spokesman said he had done a conference call with reporters Friday and was not available for a one-on-one interview.

I had an idea for Wilpon to try, but it won’t fly. I was thinking that Wilpon could offer shares to Mets fans at, say, $100 a share. It would take 2 million shares to get Wilpon to $200 million, if that is his desired goal, but would very likely be doable.

However, Wilpon would never go for the idea because it would be like an IPO – an initial public offering – and the Mets would have to disclose much more financial information than they would want to and that Major League Baseball would want them to.

Furthermore, the fan investors would constantly be looking over the Wilpons’ shoulders, and they are too secretive to tolerate that.



A reader who is a Mets fan chose to put his frustration with them into verse and was kind enough to send the result to me. I figured a change of pace would not hurt. Here is the work of Edward Nadel:

It should be a Yiddish curse
Now that Madoff has
Replaced Ponzi as the biggest
Scammer of them all
Of course this is not adjusted
For the price index
But with many stories
Of wrecked nest eggs
I’m focused on the NY Mets
Their ownership trusted the
Philanthropic Madoff with
A chunk of their assets
Only to appear as victims
And now to be sued by
The trustee for recovery
Of Madoff loot
Appearing parsimonious
After the scandal broke
Allowing the Mets to
Sink deeper and deeper
In the standings
And changing the gm and mgr.
From Hispanic and Black reps
To a waspy contingent
While still appearing
As bankrupt to their fans
They now must cower
In the concourse as
Trustee Picard applies the pressure
Comments? Please send email to comments@murraychass.com.