The Price of Loyalty
In spring training 2004, when news leaked that the Mets were considering trade proposals for Jose Reyes, principal owner Fred Wilpon walked onto the field where Reyes was taking ground balls, threw an arm around the 20-year-old shortstop and whispered in his ear, "You're not going anywhere." The gesture was vintage Wilpon, for whom loyalty has always been a defining trait. It now seems a costly one as well.
When Bernie Madoff's $65 billion Ponzi scheme was exposed more than two years ago, Wilpon came off as an unwitting victim who lost $500 million on the day the enterprise collapsed. But a lawsuit unsealed last Friday in New York City alleges that Wilpon actually profited from his long relationship with Madoff and ignored repeated warning signs that the sky-high investment returns offered by his friend and frequent business associate were too good to be true.
The suit was filed in December by Irving Picard, the trustee representing Madoff's victims, who has already won approximately $10 billion from other investors who profited from the scheme. Picard is seeking to recover the $322 million he says Wilpon and his business partners, including Mets minority owner Saul Katz, made from Madoff. He also could seek hundreds of millions more in damages. Wilpon announced on Jan. 28 that he was seeking investors to buy between 20% and 25% of the Mets, presumably to raise cash to cover his liabilities in the Madoff case. But in the face of a long legal battle (settlement talks with Picard broke down last week) and potentially astronomical losses, Wilpon's ability to spend on his team may be limited—or he may be forced to sell much more of the club.
Wilpon and his partners called the lawsuit's accusations "abusive, unfair and untrue" in a statement, adding, "We categorically reject them. We should not be made victims twice over—the first time by Madoff, and again by the Trustee's actions." But Picard claims that Wilpon and his partners used their Madoff profits to operate the Mets. He also alleges that Wilpon was cautioned about Madoff by multiple investment firms, including Merrill Lynch. Fernando Bohorquez, a lawyer representing Picard, said in a statement that Wilpon and his partners were "one of the largest beneficiaries of Madoff's fraud, reaping hundreds of millions in fictitious profits."
Wilpon and Madoff go back further than most fans knew. According to The New York Times they were friends for more than 20 years and their families socialized. Wilpon and Madoff traveled together and supported many of the same charities, and Wilpon suggested to his employees that they invest with Madoff. He now insists he was betrayed by a friend. In this case his loyalty ran too deep.
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JOHN MUNSON/THE STAR-LEDGER/US PRESSWIRE
IN TOO DEEP The lawsuit says Wilpon (far left, with, from left, G.M. Sandy Alderson, manager Terry Collins, Jeff Wilpon and Katz) should pay dearly for profiting from the scam run by Madoff (inset).
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LUCAS JACKSON/REUTERS (MADOFF)
[See caption above]