Mets Sale Bails Out Owner Whose Mistakes, Including Madoff Dealings, Hurt The Team
Fred Wilpon and his brother-in-law, Saul Katz, made their first investment with Bernie Madoff in 1985. The amount was $3 million, which came from revenue from their real estate company, Sterling Equities. The next year, Wilpon, who was a minority shareholder in the New York Mets, raised his stake to 50% of the team. Then in 2002, he paid the Mets’s longtime owner, Nelson Doubleday, $135 million for the other 50% (along with the assumption of the team’s debt). The deal gave the team a valuation of $400 million. As Wilpon prepares to sell the team to hedge fund mogul Steve Cohen, keep that number in mind.
By the time Wilpon took control of the Mets, Sterling Equities had been putting money with Madoff for 17 years, and Bernard L. Madoff Investment Securities had become central to its business model. Wilpon did the same thing with the Mets. When money came in from preseason ticket sales, it was handed over to Madoff. He held the money Mets employees put in their 401(k)s. “Cash flow for day-to-day Mets operations was paid out of Madoff accounts,” the Forward wrote in 2015.
Because Madoff’s returns were so steady, year in and year out, Wilpon and Katz came to view him as akin to a bank: They would park money with him and pull some out whenever they needed cash. In 2008, when the Ponzi scheme was revealed, Wilpon and Katz had more than $500 million in their various Madoff accounts, according to the trustee for the Madoff bankruptcy.
The revelation that Madoff had been running a decades-long fraud was a disaster for Wilpon and Katz. The $500 million was gone, of course. And in 2011, the trustee, Irving Picard, sued the two men, demanding that they turn over $1 billion — $300 million in so-called fictitious profits and $700 million in principal, an amount the trustee said they had pulled out of Madoff’s firm since 2002. The trustee argued that the two men either knew that Madoff was a crook or should have known, given all the red flags. After a long, public — and, for the two men, humiliating — battle, Wilpon and Katz settled with the trustee in March 2012, agreeing to pay $162 million.