Bernie Madoff, the man behind the $64 billion dollar Ponzi Scheme– the largest financial crime in the history of the United States- happens to be long time associates with Fred Wilpon, the owner of the New York Mets baseball team.
After Madoff was arrested in 2008, questions surrounding his role with Wilpon and the team’s finances began to circulate. Using information from available media reports, we can get an idea of the extent to Bernie Madoff’s ties to the New York Mets.
Fred Wilpon and his brother-in-law, Saul Katz, co-founded a real-estate development company called Sterling Equites in 1972. In 1985, Wilpon invested 3 million dollars with Madoff. This investment, “anchored Sterling’s business empire” and served as the beginning of Wilpon’s business relationship with Madoff, a relationship that continued for decades. In fact, according to Crain’s New York Business, “Sterling has purchased or developed more than 23 million square feet of commercial property, 57,000 residential units, 8 million square feet of retail property and four sports complexes. Sterling was also responsible for developing Madoff’s office on 885 Third Ave.”
By the time Madoff was arrested, Sterling Equites had 483 different accounts with Madoff Wilpon also had 17 personal accounts with Madoff. According to The New York Times, more than 500 accounts can be tied to Wilpon and his brother-in-law (and Mets President) Saul Katz .
While we can clearly establish a significant business relationship between Wilpon and Madoff, there is evidence that suggests their relationship extended beyond business. Take for example the fact that Madoff and Wilpon both resided with their families in Roslyn, N.Y., a fact that allowed their sons to be childhood friends. The The New York Times even noted that when Fred Wilpon’s son Jeff was married at Fresh Meadow Country Club on Long Island, Bernie Madoff and his wife were there and when Mr. Madoff’s son Mark was married at the same country club, Mr. Wilpon was a guest.
The New York Times also noted that the Madoffs and the Wilpons often traveled together and that the three men — Mr. Wilpon, Mr. Katz and Mr. Madoff — “came to support and involve themselves in a number of the same philanthropic endeavors.”
In an article from The New Yorker on the same topic, it was noted that, “Fred and his wife, Judy, and Bernie and Ruth Madoff became friends, if not intimates, sharing occasional trips and dinners a few times a year. Both families had vacation houses in Palm Beach, and they enjoyed a landmark night at the movies there.”
According to ESPN, Dodgers legend Sandy Koufax is a childhood friend of Wilpon and also had an account with Madoff. Koufax is a regular attendee of Mets spring training in Port St. Lucie, Florida.
With all of this information in mind, as well as the fact that the two men would commute together from the same Long Island Railroad station, it can certainly be suggested that their relationship extended far beyond business. Wilpon and Madoff were intertwined geographically and socially, friends, and business partners.
So, how does this tie in with the New York Mets?
In 1980, Wilpon bought a one percent stake in the Mets from owner Charles Paysonand by 1986 owned half the team with Nelson Doubleday Jr (who is part of the family that owns Doubleday and Co. publishing firm). In 2002, Wilpon bought out Doubleday’s shares for $391 million to become the majority owner of the team. Madoff and Wilpon began their business relationship in 1985 when Wilpon owned one percent of the Mets and a year before Wilpon purchased half a stake in the Mets.
According to Josh Nathan-Kazis of The Forward, Madoff’s role in the Mets organization was that of, “a very rich uncle… whose season ticket seats were near those of Saul Katz and Fred Wilpon.” The Mets rich uncle had such an elite level of status within the Mets hierarchy that he had season tickets next to the owners of the team.
According to a former Mets employee, “Bernie was part of the business plan for the Mets.” While it does not rival the number of accounts Sterling had, the Mets as an organization had 16 accounts with Madoff.
The Forward noted, “Cash flow for day-to-day Mets operations was paid out of Madoff accounts. When the Mets signed big contracts that involved deferred compensation, Madoff held that money.” This implies that Madoff played a big role in the Mets financial construction of their roster.
The idea that Madoff impacted the finances behind free agent acquisitions was corroborated by The New York Times stated, “When the Mets negotiated their larger contracts with star players, they sometimes adopted the strategy of placing deferred money owed the players with Mr. Madoff’s investment firm. They would have to pay the player, but the owners of the club would be able to make money for themselves in the meantime.”
This proves that expensive free agents were only acquired by the Mets because Wilpon could make money off the contract by deferring money with Madoff’s investment firm. Madoff had a direct impact on the amount of money the Mets had to sign players, which had a direct impact on the quality of the players signed, which had a direct impact on the quality of the overall roster. We can assume that if Wilpon did not have the option to defer expensive player’s contracts and make money by paying it off later, he would not have offered expensive contracts to players at all.
We can establish that Madoff’s ties to the New York Mets day-to-day operations are extensive, with the owners financially dependent on Madoff accounts for all of their properties, which includes Sterling Equities, the regional sports network SportsNet New York (SNY), Citi Field, and the New York Mets organization. According to Crain’s New York Business, SNY is the nation’s second-largest regional sports network, with 9.2 million subscribers and estimated to be worth $1 billion (in 2011). Most Mets games are aired on SNY.
Since we can establish that Madoff and Wilpon had a financial and personal relationship, plus the fact that Madoff was tied to the Mets business operation, we can also establish that the two men’s businesses as a whole were extensively intertwined and dependent on one another. In fact, according to The New York Times, lawyer Jerry Reisman, who represented the commercial real estate investors who lost a total of $150 million to Madoff noted, “The relationship between Fred and Bernie became closer and closer because Bernie was returning more and more to Fred in terms of his investments, while Bernie is getting exposure from Fred and Saul. They both relied on one another. It was reciprocal, symbiotic. They both relied on each other for money, and Bernie also relied on Fred for contacts.”
Since Madoff and Wilpon’s financial success can largely be attributed to the relationship they had with each other, it’s fair to assume that if Wilpon lost access to Madoff’s business, then Wilpon’s business would have been negatively impacted from a financial perspective.
Bernie Madoff was arrested on December 11, 2008 for his $65 million dollar fraud. According to The New York Times, “Three days before Mr. Madoff’s arrest, there was a meeting of the board of the Gift of Life, a bone marrow donor registry. It was held in Mr. Madoff’s office, his former secretary said. Mr. Wilpon was there.”
In the days leading up to Madoff’s arrest, Wilpon was still an associate of his.
Following Madoff’s arrest in 2008, a bankruptcy trustee named Irving Picard was tasked with attempting to return money to the victims of the Ponzi Scheme. Picard went after Wilpon in a lawsuit. According to Crain’s New York Business, “Picard demanded that the Wilpons return $300 million in “fictitious profits,” paid out to their family, their associates, and businesses by Mr. Madoff ’s firm over many years.”
In regards to the lawsuit, The New York Times noted, “the lawsuit seeks to hold [Wilpon and Katz] responsible for the indirect benefits derived from the apparent success of their many investments in Mr. Madoff’s firm, which allowed them to flourish in other areas, including buying the Mets. Mr. Picard calculated those gains at about $700 million, beyond the $300 million in fictitious profits that he contends the two men collected over the years that he also wants to recover.”
Picard claims that Wilpon was able to indirectly benefit from investing with Madoff, and calculated those gains to be higher than the $300 million Picard was seeking. Picard wanted $1 billion dollars total from Wilpon because of the significance of his role in the Madoff scandal.
The New York Times also noted that “Picard was initially seeking an extra $700 million because he says, the Mets’ owners looked the other way while they benefited from Madoff’s fraud.” Knowing what we know about Wilpon’s relationship with Madoff, it’s easy to assume that he had a high enough status to know what Madoff was doing but did not use the power that came with that status to do anything about it.
In fact, according to The Forward, court filings showed that “Picard claimed that the Mets’ owners had been warned multiple times by financial professionals that Madoff’s investment returns were unrealistic. The owners denied those allegations.”
Clearly, Wilpon ignored the warnings because it benefitted him to do so. He did not go against Madoff and his fraud at any point because of how financially important it was to his business. Had it not benefited him, Wilpon most likely would have stopped investing with Madoff, as one should do after learning something was fraudulent.
According to The New York Times, although Wilpon and Katz “knew that Madoff’s returns were almost statistically impossible and sharply at odds with his split-strike conversion strategy, they willfully disregarded any criticisms of Madoff and simply buried their heads in the sand.” Wilpon was actively complicit in Madoff’s crimes and continued to let it happen since it profited Wilpon to do so.
Picard’s lawsuit against Wilpon did go to trial, but a settlement was eventually reached before the jury had a chance to rule. The New York Times found that the settlement noted that, “… Mr. Picard dropped the claims that the men had ignored warnings about Mr. Madoff; Mr. Wilpon and Mr. Katz agreed that they were obligated to pay back $162 million in so-called fictitious profits they had reaped from the net winner accounts from 2002 to ’08.”
In a huge win for Wilpon, he was not required to pay the initial $1 billion dollars that Picard was attempting to collect from him.
However, according to ESPN, “As part of the Wilpons’ settlement with the trustee, the sides stipulated that the Wilpons lost $178 million in certain Madoff funds, while making $162 million from other funds.” While the settlement implies that Wilpon overall had lost money with Madoff, that isn’t what Picard would say.
According to The New Yorker, Irving Picard wrote, “There were thousands of victims of Madoff’s massive Ponzi scheme, but Saul Katz is not one of them. Neither is Fred Wilpon.” Instead, according to Picard, Wilpon and Katz were enablers, virtually Madoff’s accomplices in the vast crime, who “willfully turned a blind eye to every objective indicia of fraud before them.”
The thousands of innocent people who lost their fortunes because of Madoff were victims. Wilpon did not have his fortune stolen from him, nor did investing with Madoff negatively impact his finances. Wilpon was not a victim of Madoff, his long time friend and business associate, as he was able to expand his fortunes and wealth as a result of his investment with Madoff.
While Wilpon himself was not a victim to Madoff, fans of the New York Mets are. When Madoff was arrested in 2008, the Mets had the second-highest payroll in baseball and had spent every season since 2003 as a top 5 payroll team. The Mets, who play in big ol’ New York, were being financially run like a large-market team throughout the 2000s with the help of Madoff. However, without Madoff, by 2014, the Mets ranked 22nd in payroll, a far drop off from the decade prior. Tens years later, the Mets have still not returned to the same level of spending that was seen in the 2000s.
Given Wilpon’s history with Madoff and the team’s decrease in spending, you would think that Major League Baseball would have concerns with who is running the Mets. However, in 2009, Commissioner Bud Selig said “I have enormous respect for Fred Wilpon and his family, and I have no evidence that the Mets have been negatively impacted at all. Fred has said it over and over again that they haven’t been, and I have no concerns about the Wilpons’ financial stability.”
After the Mets borrowed $25 million from the MLB in 2010, and took a year to repay the loan, Commissioner Bud Selig said in 2011, “We are doing fine with the Mets. I don’t have any concerns. I do have a lot of concerns but I am happy to say the Mets aren’t one of them.” Selig and the MLB supported Wilpon following Madoff’s arrest and allowed him to retain control of the team.
In 2015, Commissioner Rob Manfred called Wilpon a “victim” of Madoff’s scandal. When reminded of the Mets massive decrease in payroll, Manfred said, “Under the basic agreement, it’s really not the business of central baseball to second guess the payroll decisions by clubs. I am satisfied that the New York Mets have a very strong desire to be successful on the field and that they’re making decisions directed at being successful on the field. I’m also satisfied they have sufficient resources to be successful.” The Commissioner of the MLB believes that the Mets could simultaneously be victims of a huge financial crime while also still providing sufficient resources to be successful. Nothing about the behavior of the MLB would suggest that they have any problem with the Wilpons owning the New York Mets, and how they are being run.
Based on all of the information that is readily available from media reports, we can clearly see that Bernie Madoff had a personal and business relationship with Fred Wilpon, the owner of the New York Mets, a relationship that extended into the day-to-day operational finances of the team. We know that Wilpon was warned of Madoff’s fraudulence, and was complicit in his crimes because it was profitable for Wilpon to do so. We know that the extent of their ties are so strong that Wilpon was initially charged $1 billion dollars to the victims of Bernie Madoff. We know that the Mets have been unable to sustain themselves as a large market team without Bernie Madoff, as the Mets payroll has not returned to the pre-arrest level, leaving them a middle-market team in a large market city. And yet, Wilpon has never been questioned by the MLB.
The condition of the New York Mets after Bernie Madoff’s arrest is concerning and significant enough to warrant the attention of every single Mets fan. The ties between Fred Wilpon and Bernie Madoff are extensive, and that relationship has played a significant role in the success and abilities of the New York Mets baseball team, which has only had two winning seasons since Madoff’s arrest 10 years ago. Today, Madoff sits in jail serving his 150-year sentence. The Wilpons, who built their fortune off Madoff, remain in the Mets owner’s box, not going anywhere.
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