Posted on: March 6, 2012 2:51 pm
Edited on: March 7, 2012 7:17 am
PORT ST. LUCIE, Fla. -- The Mets suffered their first loss of what could be a very long season when bankruptcy court Judge Rakoff ruled Monday that team owners Fred Wilpon and Saul Katz must pay back up to $83 million in Madoff profits. Further, he ruled that they must stand trial for another $303 million. So the drama and unrest continues, into the baseball season.
Madoff overreaching trustee, Irving Picard, originally sought $1 billion from the Mets owners, so from that standpoint, Wilpon and Katz are already ahead of the game. But to no one's surprise, people close to the case suggest a loss of even $386 million could put their ownership in peril.
Beyond the immediate loss of up to $83 million and upcoming trial, the other bad part for Wilpon and Katz is that the case of their baseball lives is going before a jury. One thing they say about jury trials, they are unpredictable. The other thing about this jury trial, the jury could be made up of angry Mets fans.
Seeing what's happening on the field, Mets backers aren't in a very good mood these days. Wilpon contended when the Madoff story broke that their investment in him wouldn't affect their beloved team, but Mets fans know by now that most of their money is going to the owners' lawyers, not their outfielders, infielders, pitchers and catchers.
Wilpon and Katz have taken the payroll down an unprecedented $50 million. What's left on the hole-filled roster are veterans who have been disappointments in recent years and a whole bunch of kids with varying degrees of promise. Their $90-million payroll and limited talent doesn't become any major market, much less New York.
One piece of positive news for the Mets owners is that Judge Rakoff, a brilliant veteran jurist, signaled that he doesn't believe Picard has much of a case here for the next $303 million. Rakoff even tweaked Picard for producing more "bombast'' than "bombshells'' (Rakoff apparently has a writing touch), and indeed it appears Picard's case for "willfull bilndness'' by the Mets owners appears woefully weak.
There is no smoking gun, no e-mail from Wilpon or Katz suggesting they knew a thing about what Madoff was up to. That Picard found one or two or even three employees who suggested they thought (but don't know) Madoff might not be on the up-and-up isn't nearly enough. The former employee Noreen Harrington, who said she warned Katz, appears to have been prescient. But even she said she admitted to Katz she couldn't prove what Madoff was up to. (Katz claims not to recall the conversation.)
Picard may think Wilpon and Katz were knowledgeable investors, but there is no evidence they were. Real estate (and baseball) is their game. They obviously know real estate. (As for baseball, I'll leave that up to you).
There is not a scintilla of evidence they knew more about securities than all the 4,000-plus folks who foolishly invested their money with an epic scam artist. Madoff was obviously a very good con man. He fooled all this people plus the banks plus the SEC. Obviously a few folks knew. The crook who wound up dead in his pool in Palm Beach obviously knew; he got a 900-percent return from Madoff one year. His widow fairly turned over several billion dollars to Picard.
The Wilpon-Katz gains were generally in the 10-to-15 percent range per year, which is exactly what the rest of the rubes got. There is no evidence Madoff was paying them extra to be silent partners. And just because they saw each other at the country club or on the Long Island Railroad doesn't mean anything. Neither does it if the Wilpon and Madoff families vacationed togethers. As Rakoff said, where's the bombshell?
There is nothing to prove Wilpon and Katz were any different from the rest of the 4,000-plus dupes who knew nothing about stocks, bonds or investing. As many people should know, there is ZERO chance a securities investor can make 10-15 percent every year for decades without a single down year or even very much variation. It just isn't possible, as Harrington told them. Even Warren Buffett has down years. Even if he averages a whopping 20-percent a year for decades, that includes significant variation and some down years.
To say Wilpon and Katz should have known is silly, and a waste of breath. They ALL should have known. The SEC should have known. They are paid to know such things. But they, too, were duped by Madoff, who was seen as a pillar of the community.
Wilpon and Katz made their money by being aggressive and tough. Katz has big stones. (In his famous quote in the New Yorker article by Jeffrey Toobin, he boasted of having "big balls," something he didn't dispute when I questioned him about that quote earlier this spring. Though he did say that this is why he doesn't talk much to the media, and the smoother Wilpon does). I have known these guys for years, and I find it easy to believe that they knew next to nothing about investing in stocks. Like the others, they were fools (though perhaps fools with bigger balls in one case). They probably got a bit greedy, like when they gave Bobby Bonilla deferred payments for decades because they saw Madoff as a sure thing. But being greedy and crooked are two different things.
There is nothing to suggest Wilpon and Katz are crooks. But unfortunately for them, a jury of Mets fans may not see it exactly that way.