Wednesday, 1 October 2014
Last updated 51 min ago
Feb 3 2011 | 11:09am ET
Two high-profile hedge fund managers turned down a chance to own a piece of the New York Mets, whose owners hope to sell a stake in the team amidst an ugly legal battle with the trustee in the Bernard Madoff case.
Fred Wilpon, who has co-owned the Mets since 1986 and has owned the team outright since 2002, recently approached SAC Capital Advisors’ Steven Cohen and Avenue Capital Partners’ Marc Lasry about becoming minority partners in the Mets, Forbes reports. Both men turned Wilpon down, insisting that they wouldn’t invest without getting some control over the franchise in return.
Wilpon, a longtime friend of Madoff’s, said last week that he was considering the sale of 20% to 25% of the Mets; the team is valued at about $850 million. But Cohen’s and Lasry’s refusal points to a bigger problem for Wilpon, who insists that the family—son Jeff and brother-in-law Saul Katz are at the top of the Mets’ hierarchy—will retain control of the team. And Wilpon is reportedly not offering pieces of either the Mets’ home stadium, Citi Field, or its lucrative cable television network, SportsNet New York, as part of the deal.
Wilpon met Tuesday with baseball commissioner Bud Selig in New York to discuss the Mets’ finances.
The Wilpons and other Mets-related entities had about $500 million invested with Madoff when the $65 billion Ponzi scheme fell apart in December 2009. There were some 500 Mets-related accounts at Bernard L. Madoff Securities, and the court-appointed trustee, Irving Picard, has sued about 100 Mets-related parties and individuals.
In that lawsuit, filed under seal in December, Picard alleges that the Wilpons knew or should have known that Madoff was up to no good. According to Picard, the Wilpons, who withdrew some $50 million more from their Madoff accounts than they put in during the decades-long relationship, ignored a number of red flags that should have alerted them to the fraud being perpetrated. That allegation could push the Wilpons’ liability in the case up to between $300 million and $1 billion.
Among the signs allegedly ignored by the Wilpons and Katz were those from Merrill Lynch and business partner Peter Stamos.
For their part, the Mets owners went to court this week decrying the “character assassination” they say they have been the victims of. The Wilpons and Katz asked the judge overseeing the Madoff bankruptcy to keep the case under seal.
“The Sterling Defendants”—referring to Sterling Equities, Wilpon’s main business—need time to assess their position as they consider the value of the continued sealing of the Sterling Complaint in the wake of significant leaks, and a blatant violation of this Court’s order, which have left the Sterling Defendants unable to respond publicly to the Trustee’s baseless allegations,” the Mets’ lawyers wrote. Picard’s accusations that the Wilpons “should have known that Madoff did no trading” is “attempted character assassination.”
Several news outlets have sought the lifting of the seal on the case. Picard is not opposing that motion, despite the fact that he filed the case under seal and said that he is engaged in good-faith negotiations with the Wilpons. A hearing on the matter is scheduled for Feb. 9.
“The leaking of this confidential information, in violation of court orders, must cease,” the Wilpons said. “Settlement talks must be given a chance.”
The Madoff and Wilpon families have been friends for decades; they were neighbors in the Long Island village of Roslyn while their children were growing up and Jeff Wilpon was among the closest friends of Mark Madoff, Madoff’s son, who committed suicide in December. After Madoff’s arrest, his box seats behind home plate at Citi Field were auctioned off. But, according to The New York Times, their business ties were much, much deeper than has previously been reported.
“Bernie was part of the business plan for the Mets,” a former team employee told the Times. Substantial parts of the Mets’ finances seemed to run through Madoff’s firm, with the team investing annuities, deferred pay and insurance premiums with Madoff.
“He was an investment vehicle that existed for Fred and the organization,” a former employee said.
Wilpon’s friendship may have been even more important to Madoff that the other way around.
“There was always Fred Wilpon,” former Madoff secretary Eleanor Squillari said, adding that Katz was an even more frequent visitor to BLMIS’s Manhattan offices. But, she said, “Bernie acted differently with Fred than he did with his closer circle of friends—the Shapiros, the Blumenfelds, the Picowers. They weren’t as chummy. Fred wasn’t part of that clique. Bernie was more businesslike with Fred and Saul.”
Madoff relied on Wilpon to put him in touch with potential investors, and the Mets owner did frequently suggest to friends and business associates that they give Madoff a call.
“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,” Jerry Reisman, a Long Island laywer representing several real estate investors who lost $150 million in the Madoff scam, told the Times. “The 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.”
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