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Bankruptcy trustee: Mets owners reaped $300 million in phony Madoff profits

Feb 4, 2011, 1:05 PM EDT

Fred Wilpon, Jeff Wilpon

The bluff has been called, the documents have been unsealed and the allegations of just how deeply the Wilpons, Saul Katz and the Mets were in with Bernie Madoff is fairly staggering.  The entire lawsuit can be read here.

Among the allegations: the Wilpons, Katz, their families and their business reaped $300 million in fictitious profits. The team itself had 16 separate Madoff accounts, from which $90 million was withdrawn and used to help fund the team’s “day-to-day operations.”  And then there’s this, with “the Sterling Partners” referring to the Wilpon/Katz business:

“The Sterling partners were simply in too deep—having substantially supported their businesses with Madoff money—to do anything but ignore the gathering clouds,” the suit said. “Despite being on notice and having every resource at their disposal to investigate the litany of legitimate questions surrounding Madoff, the Sterling partners chose to do nothing.”

Not surprisingly, the Wilpons slammed the allegations today, calling them lies and strong-arm tactics and characterizing the trustee’s entire suit as “an abuse of power.”  Their statement:

“The conclusions in the complaint are not supported by the facts. While they may make for good headlines, they are abusive, unfair and untrue. We categorically reject them. We should not be made victims twice over—the first time by Madoff, and again by the Trustee’s actions.”

In other news, non-Mets related allegations suggest that at least one bank — J.P. Morgan — knew that Madoff’s whole operation was a Ponzi scheme.

Yes, they are just allegations.  But many of them — specifically those related to just how much money the Mets and the Wilpons lost to Madoff — are pretty darn specific.  And they can certainly be true even if the ultimate conclusion the trustee makes — that the Wilpons knew or should have known it was all a scam — is shown to be false.

We’ve played some back and forth here about what the Wilpons knew and that’s all fun and worth watching, but this is most  relevant for our purposes for the practical effect it will have on the Wilpons and the baseball team.  Given the thermonuclear nature of the allegations and the sheer amount of money involved, it’s hard to sit here today and say that the Wilpons will simply be able to sell off a quarter of it, cut a check to the trustee and continue on their merry way.  Indeed, such an assumption is now bordering on the naive.

  1. BC - Feb 4, 2011 at 1:08 PM

    Sell the team already!!!

  2. billtpa - Feb 4, 2011 at 1:13 PM

    The weird thing is (having spent way too much time on Ponzi-related bankruptcy stuff recently and skimming the counts of this complaint) that it seems to me they’re both right: (a) the trustee is probably totally right, the estate should get a lot of that money back, but (b) the Wilpons are totally right, the rhetoric is unnecessarily inflammatory and unfair. There are some claims further down that would require the recipients of the transfers to be culpable in some way, but the meat of the complaint is plain old fraudulent transfer, and it doesn’t really matter what the Wilpons were thinking — they received fictitious profits, and it was part of Bernie’s fraudulent scheme, so the trustee can recover.

  3. lawnovel - Feb 4, 2011 at 1:16 PM

    I’ve done some work with court-appointed receivers in this area, and if they believe that an investor has taken more money out of a ponzi scheme than it put in, they will be relentless about getting that excess back for those investors who had a net loss. Even if that means forcing you to sell something.

    • billtpa - Feb 4, 2011 at 1:18 PM

      Also: it doesn’t really matter that they say they lost $500mm overall. The Wilpon side had 16 different accounts invested, and Madoff no doubt had different entities in which the money was invested. It’s about how the individual accounts came out ahead vis-a-vis the Madoff entities, not the total profit or loss.

      In short: hard (for me) to see this turning out well at all for the Sterling Partners folks.

  4. drunkenhooliganism - Feb 4, 2011 at 1:16 PM

    Before ChrisNY posts here, I’m wondering if he thinks the Wilpons are scumbags or if they’re historically stupid? I don’t see any other conclusion. I guess “all of the above” is also a possibility.

    • browngoat25 - Feb 4, 2011 at 1:24 PM

      Considering the Mets and the Wilpons overall, historically stupid fits

      • jkcalhoun - Feb 4, 2011 at 3:07 PM

        And here I thought M. Donald Grant was the king of the boneheads. Sorry, M. Donald, you were only ever a prince.

    • spudchukar - Feb 4, 2011 at 1:27 PM

      Yeah, I want to hear the rationale for the 16 separate accounts.

  5. ursus59 - Feb 4, 2011 at 1:21 PM

    A number of the Picard complaints feature such rhetoric. It’s a device to draw attention, especially in the “court of public opinion”.

    And it obviously works.

  6. nc1616 - Feb 4, 2011 at 1:45 PM

    “Yes, they are just allegations. But many of them — specifically those related to just how much money the Mets and the Wilpons lost to Madoff — are pretty darn specific.”

    Keep in mind that, due to the bankruptcy context, this complaint stands on somewhat different footing than ordinary civil complaints, which typically filed before discovery. This compliant was filed AFTER exensive evidence gathering, in the form of depositions and receipt of hundreds of thousands of documents. So while the complaint is still filled with just allegations – - one sided allegations at that – - the complaint is presumably backed up by evidence.

    • browngoat25 - Feb 4, 2011 at 1:55 PM

      Can you clarify something for me? Isnt there a suit by a former employee about the 401K money? Is this intertwined with the action by the trustee? Or are they totally separate matters?

      • Craig Calcaterra - Feb 4, 2011 at 1:59 PM

        I believe it’s a separate suit.

  7. henryd3rd - Feb 4, 2011 at 1:54 PM

    I have to wonder how good Sandy Alderson must be felling about now. Sweet cushy job in the Commish’s office. Access to all of baseball and now finding himself like the Captain on the Titanic as he watches the bow about to hit an iceberg. Think he would like a do over?

  8. Dan in Katonah - Feb 4, 2011 at 2:25 PM

    “such an assumption is now bordering on the naive”

    Craig, how can you continually show your anti-Mets, anti-Wilpon bias… nah, can’t do it. Sorry, just kidding.

  9. deathmonkey41 - Feb 4, 2011 at 2:41 PM

    Madoff did to the Mets what the Mets have done to their roster for the past 20 yrs.

  10. paperlions - Feb 4, 2011 at 3:45 PM

    I love the comment calling the law suit “an effort to strong arm a settlement”….well, yeah, it isn’t like the Wilpons are going to give back the $100s of millions of dollars of stolen money are they? When someone isn’t volunteering to give back what is not rightfully theirs, that someone is forcing the use of “strong arm” tactics.

  11. uyf1950 - Feb 4, 2011 at 4:53 PM

    I also like the Wilpons comment about “they were victims too”. He’s not going to get a lot of sympathy if that’s part of his defense.

    • drunkenhooliganism - Feb 4, 2011 at 8:45 PM

      Whenever I’m the victim of fraud, I don’t make a $300M profit. Some guys have all the luck.

  12. crashdog - Feb 5, 2011 at 1:27 AM

    They need to sell 100% of the team to Mark Cuban

  13. mrznyc - Feb 5, 2011 at 10:07 AM

    Sandy Alderson knew what the deal was before he took the job. Obviously he is Seleg’s hire, put there to shepherd New York’s NL franchise through the coming Wilpon fire sale. Feet on the ground, stable, uninspiring guy who’s going to keep the ship afloat until the next owner takes over. Can you imagine Minaya trying to deal with the coming fecal storm?

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