Judge orders Mets to pay $83M in Madoff case
A judge Monday ordered the New York Mets' owners to pay up to $83 million to the trustee in the Bernard Madoff case and gave the go-ahead for a jury trial on claims that could cost them $300 million more.
Manhattan Federal Court Judge Jed Rakoff's ruling that Fred Wilpon and Saul Katz must give up their profits from Madoff's Ponzi scheme would tighten the financial squeeze on the team's owners. Their lawyers did not comment on whether an appeal is planned.
If Madoff trustee Irving Picard prevails in the trial set to begin March 19, the owners could lose control of the Mets, legal and sports business experts said. Wilpon said last week he is determined to hold onto the Mets.
Rakoff said in his ruling that, while he was "skeptical" of Picard's claim that Wilpon and Katz willfully ignored red flags on the Madoff fraud, he will allow that $300 million issue -- which represents the Mets owners' initial investment -- to go to trial and let a jury decide. The owners had asked him to throw out the case.
"We are preparing for trial. We look forward to demonstrating that we were not willfully blind to the Madoff fraud," said a spokesman for Sterling Partners, one of the owners' corporate entities.
Amanda Remus, a spokeswoman for Picard, said the trustee had no comment.
If they appeal Rakoff's $83 million decision, the Mets' owners will have to come up with enough collateral to secure a bond equal to 110 percent of the judgment, said Columbia University law professor John C. Coffee Jr.
That sum would exceed $91 million -- slightly more than their entire player payroll for the coming season. Rakoff has the discretion to lower the amount, Coffee said.
Court records show that Picard calculates the Mets Limited Partnership alone received $28 million in profits beyond what was originally invested.
Newsday has reported the Mets' ballpark-related revenue has dropped more than 30 percent since Citi Field opened in 2009, and premium-ticket sales have fallen almost 50 percent. General manager Sandy Alderson said the team lost $70 million last year.
The Mets have been seeking investors to purchase minority shares in the team. Wilpon said recently the Mets will soon close on the sale of seven of 12 shares that have been offered at $20 million apiece, and some of that will be used to repay the loans.
Rakoff indicated he would be demanding about deciding which evidence to allow at trial.
"The court is concerned that much of the 'evidence' that the parties proffered on summary judgment did not comport with the . . . [rules of evidence]," said Rakoff, who heard oral arguments two weeks ago.
"Conclusions are no substitute for facts, and too much of what the parties characterized as bombshells proved to be nothing but bombast," he said.
"Nevertheless, there remains a residue of disputed factual assertions from which a jury could infer either good or bad faither depending on which assertions are credited," he said.
Picard maintains that the Wilpon and his partners ignored warnings of Madoff's $50 billion fraud because they had become dependent on his earnings to finance team operations. The owners insist they knew nothing of the scheme until they became among its public victims.
Rakoff's decision was seen by some legal and business experts as increasing the incentive for a settlement in the case -- not just for Wilpon and Katz, but Picard, too.
"If you are the trustee, you can't withstand a loss, you can't withstand the adverse publicity or the scorn that will reached upon you if you lose this case," said Jerome Reisman, a Garden City securities lawyer who represents some Madoff investors.
Major League Baseball could decide at that point that the Mets are undercapitalized for the amount of debt they are carrying, said Ira Stolzenberg, an assistant professor of sport management at Farmingdale State College.
Wilpon said last week that the Mets "have to have a good team" to win back fans and customers.
"What happened today, and what happens at the trial, how does it impact the Mets' ability to field a competitive ballclub?," asked Ganis. "Mets fans are already feeling that pain."
With Jim Baumbach
and Steven Marcus