Mets and Madoff Victims’ Trustee Now Unlikely Allies

The settlement between the owners of the Mets and the trustee representing the victims of the fraud orchestrated by Bernard L. Madoff ends a rancorous legal fight between two parties that were willing to dig in their heels and openly point fingers.
But in a twist, the former adversaries are now on the same side. That is because the settlement calls for Fred Wilpon and Saul Katz, the Mets’ owners, to receive $178 million from the trustee for money they lost in some of their Madoff accounts. That money will be used to pay back the trustee to cover the $162 million in fictitious profits that Wilpon and Katz received in other accounts.

In essence, Wilpon and Katz need the trustee to recoup as much money as he can from so-called net winners and distribute it to net losers like themselves.

“In a sense, we’re now partners,” said David J. Sheehan, the chief counsel for Irving H. Picard, the trustee. “They have an interest in us getting 100 percent recovery and they should be supportive, and we will be supportive by trying to collect all those funds.”

The favorable settlement for Wilpon and Katz, though, will do little to immediately improve the fortunes of their largest asset, the Mets. The team lost $121 million the last two years and after slashing their player payroll by about $50 million this season and letting their best player, Jose Reyes, leave, the prospects for a quick turnaround on the field appear slim.

They owe about $400 million to a syndicate of banks. Finances were so tight that in November, the Mets laid off nearly 10 percent of their 180 front office employees. Those money pressures are not likely to disappear overnight.

“They’re basically in the same position they were in even though the Madoff ruling is a net neutral to them,” said Rob Tilliss, a partner at Inner Circle Sports, a sports advisory firm. “And if they have a slow start to the season, it could be even worse for them.”

Still, with the threat of having to pay hundreds of millions of dollars in penalties and legal fees now gone, the Mets may be better able to persuade fans to return the stadium. Wilpon, speaking outside the federal courthouse in downtown Manhattan after Monday’s settlement was announced, promised to “bring the Mets back to the prominence our fans deserve and the city of New York deserves.” He asked fans to “stick with us.”

With the Madoff case now behind them, the Mets appear to have sold all 12 minority stakes in the club for $20 million each that they have been marketing since September. Only five of the shares were purchased by outsiders; the Wilpon and Katz families bought three of the shares, and the two cable companies that own part of SNY, the Mets’ cable network, bought four others.

Still, the Mets are expected to announce as soon as Tuesday that they have repaid the $25 million they borrowed from Major League Baseball as well as a $40 million loan from the Bank of America, according to two people familiar with the team’s finances.

But how long fans may have to wait for signs that the Mets are finally clear of their woes remains to be seen. After all, the pressures that forced the Mets to seek new loans and new partners, and to slash the club’s payroll, all arose without one penny having been paid to the trustee.

Instead, the Mets found themselves under siege from a troubled economy, poor play on the field, a disgruntled fan base buying fewer tickets and the cessation of the robust, and fraudulent, returns they were getting on their Madoff investments. In effect, most of those issues still remain.

One of the most vexing is attendance, which fell again in 2011, even though the Mets have cut ticket prices several times in recent years. And in a bit of unfortunate timing, the three-year contracts for some of the luxury suites at Citi Field are up for renewal amid the negative environment in which the Mets have been forced to operate.

Those suites go for as much as $500,000 a season, significant money for the Mets, but what the renewal rate is at this point is not known. Money from the suite rentals, as well as revenue from concessions, parking and other sources, helps pay off the $695 million in bonds that were issued to cover the cost of building Citi Field.

In December, Standard & Poor’s, the credit rating agency, changed its near-term outlook on those bonds from stable to negative.

In its report, S.&P. said that overall revenue for the Mets fell 12 percent in 2011, led by a 22 percent drop in revenue from club seats and suites. Revenue from merchandise, food and beverages fell 20 percent last season, the report added.

Ultimately, the Mets have to put a better product on the field to win back fans, but when that will happen is anyone’s guess.

The Mets, though, will no longer have to wrestle with the possibility of sizable damages from the Madoff case.


“Change doesn’t happen instantly,” said Vince Gennaro, a consultant to several major league teams and the author of “Diamond Dollars: The Economics of Winning in Baseball.”

“The financial uncertainty has been eliminated so you have some good sense about clarity around the future,” he added. As for 2012, he said, do not expect much. “Wait till next year” was the old rallying cry in Brooklyn. Now it might be the new one in Queens.