Fearing they could lose control of the Mets, the team owners called off a plan to sell a $200-million stake to hedge fund manager David Einhorn and will instead look to sign up smaller investors.
"Some other people who couldn't afford $200 million, but maybe could afford $20 million," said a person close to the organization's thinking. "The plan now going forward is [to sell] smaller units to friends and family," the person said.
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Those investors, the person emphasized, will have "no path to ownership."
After more than three months of negotiations, the Einhorn deal imploded over the Mets' refusal to sign off on a provision that would have enabled him to take over the money-losing team if owners Fred Wilpon and Saul Katz decided to -- or were forced to -- give up majority control.
"[Einhorn] tried to change the deal extensively," the person said.
Wilpon met Einhorn Thursday and told him the team would be, "going in a different direction," the person said.
Afterward, Einhorn, in a conference call, said it was the owners who sought unacceptable late changes to an agreement he thought was in place last week.
"I was surprised to see that many of the basic provisions of our deal, virtually all of which had been in place since May, had been changed," he said.
"After all," Einhorn said, "it wouldn't make sense to invest $200 million into a team and then be denied the ability to exercise a negotiated option down the road."
The Mets' financial difficulties broke into the open in January when the owners announced they would have to sell as much as 25 percent of the team to help cover their potential liability in a lawsuit arising from the Bernard Madoff fraud case. Wilpon and Katz invested millions with Madoff.
Madoff trustee Irving Picard is suing the owners to recover $1 billion -- an amount that includes $300 million in alleged fake profits, and $700 million based on claims that Wilpon and his partners knew or should have known it was a Ponzi scheme.
The Mets had been expected to use the proceeds from the partial sale for operating expenses, to reduce debt and pay back a $25-million loan from Major League Baseball. The team also has dipped deeply into a $52-million line of credit with MLB.
In May, Wilpon told Sports Illustrated that the team could lose up to $70 million this season.
The Mets released a statement Thursday saying ownership has provided additional capital to cover "all 2011 losses" and is moving forward with the "necessary resources to continue to operate the franchise."
Wilpon said in the statement, "We are very confident in the team's plans -- both on and off the field. He also said some prospective new partners "have been previously vetted by Major League Baseball."
Einhorn was named the team's "preferred partner" on May 26 and was confirmed by MLB at the All-Star break in July, when commissioner Bud Selig said his office had approved the billionaire founder of Greenlight Capital.
Einhorn, 42, said in meeting with Selig, that he was told the provision giving him an inside track to future majority ownership "would be no problem.
"At that point Mets agreed and we moved forward," Einhorn said. "I didn't hear another word until last week, when I heard [the Mets] lobbied MLB to remove this provision from our agreement. "
A source familiar with the negotiations said MLB disputes Einhorn's account. He did not get either explicit or implied approval for future majority control of the Mets, the source said.
MLB would not comment on Wilpon's decision to look for other partners.
The sale drama has played out against the legal battle with Picard and a losing season -- the team is three games under .500.
"We can't worry about it," Mets manager Terry Collins said of the scrapping of the Einhorn deal. The team has been under pressure to pare its payroll, but Collins said of the owners: "I think they'll do what they think is right and I'll try to win baseball games with the guys that we'll have."
The trustee's case was strengthened last month when a federal appeals court ruled that his method of calculating fake profits was correct.
Former New York Gov. Mario Cuomo, appointed by the bankruptcy judge to try to mediate the case, has described settlement negotiations as stalled. His office said he was not available for comment.With Hugo Kugiya
and David Lennon