As we've all heard by now, the New York Mets, specifically principal owner Fred Wilpon and his son-in-law, Saul Katz, are being sued by Irving H. Picard, the trustee for victims of Bernard Madoff's Ponzi scheme, which stole as much as $65 billion from investors.
According to reports published by the New York Times, the Mets invested as much as $523 million with Madoff, withdrawing $571 million, a net profit of $48 million.
Picard is trying to recover $300 million in what he calls, fictitious profits, from the Mets.
Lawyers for Fred Wilpon countered that the Mets still had $500 million invested with Madoff when his scheme collapsed, all of which was lost, and that Picard is only focused on accounts which made a profit, while others lost as much as $160 million.
The Mets invested with Madoff over a period of 25 years, and they have stated that a profit of $300 million, whether accurate or not, is not a lot considering the length of investment.
The thing about the lawsuit which makes no sense is the trustee is only focused on those accounts which netted a "profit," while others took heavy losses or were wiped out entirely when Madoff's scheme was discovered.
Also, one of the biggest contentions of Picard is the Mets "knew or should have known" what Madoff was doing. First of all, when did the Mets become members of the SEC, charged with enforcing federal securities laws? Second of all, Madoff was able to operate his Ponzi scheme for years without any one knowing, despite serious warnings.
A report by the SEC published in August 2009, says that between 1992 and 2008, the agency received "six substantive complaints that raised significant red flags concerning Madoff's hedge fund operations that led to questions about whether Madoff was actually engaged in trading."
But the Mets are at fault for not knowing? And if they did know, why would they invest so much with Madoff and put the team itself in jeopardy?
One reason people point out is the accounts the Mets had invested with Madoff regularly saw profits of 10-13 percent, but that wasn't anything to do back flips over at that time in the economy.
Another issue the media is focusing on is the Mets had invested deferred payments with Madoff, while the Mets contend that those payments had not been invested with Madoff for several years. Even so, Major League Baseball requires a record of all deferred payments to be surrendered every year in July, a requirement which the Mets have satisfied every year, according to the NY Post.
The Post also reported that it is not uncommon for teams to invest deferred compensation, which would allow them to make money while still making the payments.
Frank Cashen, the former general manager of the Mets, is one such person who had several million of his deferred dollars invested with Madoff by the Mets, yet he says he has always been paid. So what's the problem?
Almost as soon as Madoff was discovered and arrested in December of 2008, the Mets owners and their partners surrendered over 700,000 documents, including sworn statements, memos and depositions to Picard and his investigators, which the Mets say outline all of their dealings with Madoff, as well as demonstrate they had no knowledge of Madoff's scheme.
Yesterday, a lawyer for Picard said negotiations between the two sides to resolve the lawsuit have ended. It was reported the Mets were willing to settle the lawsuit as quickly as possible once the amount of money had been determined, yet Piicard and his lawyers are now unwilling to do so, instead opting to end talks and take the matter to court.
It seems Picard has a well-known sports team, in the biggest city in the world, over his knee and he's trying to wring them for every dollar he can. Picard has the ability to go after any and all ill-gotten gains, as well as additional amounts depending on what his investigation yields concerning the conduct of Madoff investors.
In other words, because Picard believes the Mets knew, or should have known, what Madoff was doing, he's entitled to recover much more money from them.
David Sheehan, a lawyer for Picard, has asked that the U.S. Bankruptcy Court in Manhattan unseal the suit, claiming the Mets have "...taken action to try this case in the press and in the court of public opinion."
Really? Every report coming from the NY Times has cited "two lawyers familiar with the litigation," and those two certainly aren't from the Mets.
The reporting on the Madoff situation has been poor at best. Each report has different numbers and different information. While the Mets were willing to pay to settle this matter quickly, Picard and his lawyers have decided to drag the Mets through the fires as if to make an example out of them.
Much more information will be available once the suit is unsealed on Feb. 9, but right now it seems as though the Mets are the only side willing to play ball in this scenario.