Hours after winning a major settlement with the trustee for Bernard Madoff’s fraud victims, the owners of the New York Mets scored another huge win after reports emerged that they’ve sold 12 minority stakes in the team, raising $240 million. The twin victories bolster the team’s perilous finances and remove a serious legal challenge just two weeks before the start of the baseball season.
Mets co-owners Fred Wilpon and Saul Katz aren’t out of the financial woods yet: they still carry over $500 million in debt on the team, and the SNY sports TV network, that comes due in 2014, according to The Wall Street Journal. But the $240 million cash infusion from the minority stakes allows them to repay loans of $40 million from Bank of America and $25 million from Major League Baseball — and the owners are expected to use the rest to help fund the cash-strapped team during the 2012 season. The new minority owners include hedge fund billionaire Steve Cohen, founder of SAC Capital and a die-hard Mets fan.
Earlier Monday, a federal judge announced that Wilpon and Katz had reached a $162 million settlement with Irving Picard, the trustee for Bernard Madoff’s victims, after months of legal wrangling. Picard had earlier sued the pair for $1 billion after accusing them of willfully turning a blind eye to the Madoff’s multi-billion-dollar ponzi scheme during their many lucrative years as clients of the convicted fraudster.
Although Wilpon and Katz have agreed to pay $162 million in “fictitious” Madoff profits back into the victim’s fund, they don’t have to pay a dime for three years, according to the deal, and even then the pair might be off the hook entirely. That’s because Wilpon and Katz say they were also Madoff victims, and aim to recoup $178 million they claim was lost after his scam was exposed. Wilpon and Katz had previously been ordered to fork over the $83.3 million they withdrew from Madoff accounts in the years before the fraud was uncovered, an amount that will now be included in the $162 million.
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Picard, meanwhile, has agreed to drop all claims that the two men turned a blind eye to Madoff’s fraud. It’s a major relief — and a vindication — for Wilpon and Katz, who faced the prospect of defending themselves during a high-profile trial just as the major league baseball season is set to begin. All along, the two men insisted they were unaware of Madoff’s fraud — and in fact, were victims themselves.
“As we’ve said from the very beginning when this lawsuit started, we are not willfully blind, we never were, we acted in good faith, and we’re very pleased that this settlement bears that out,” Wilpon said in a statement. “The first order of business and the first priority will be getting down to Florida tomorrow, getting to the spring training camp, and trying to bring the New York Mets back to the prominence that our fans deserve and the City of New York deserves.”
Short of an outright dismissal, it’s hard to imagine a much more favorable outcome for Wilpon and Katz, given that Picard had originally sought $1 billion from the pair, claiming they had ignored numerous warnings about Madoff. But the trustee recently suffered a blow to his case when the judge in the case, Jed Rakoff, ruled that he could only try to recover $386 million from the pair. So far, Picard has recouped about $11 billion of $17 billion thought to be lost in the Madoff scandal.
In addition to the Mets owners’ legal woes, the team has faced struggles on the diamond, declining attendance figures, and waning revenue — losing a reported $120 million over the last two years. There has been speculation that if Wilpon and Katz lost the case and faced a major penalty, they might have had to sell the team. In the end, Picard seems to have blinked, and agreed to a deal, rather than facing the possibility of losing a high-profile Madoff case in federal court. “I certainly consider this a capitulation by the trustee,” Bradley D. Simon, a former federal prosecutor at Simon & Partners told The New York Times. “It seems quite one-sided.”
For his part, Judge Rakoff struck a Solomonic note in comments from the bench: “Although this is something of an anticlimax, it is always helpful and positive when the parties are mutually able to resolve their dispute.”