The situation with the Mets is starting to look grim.
According to a lawsuit unsealed on Friday, the trustee representing the victims of Bernie Madoff’s ponzi scheme is suing Mets owners Saul Katz and Fred Wilpon for one billion dollars. Being sued for $1 billion is almost always a bad thing. Where does this big, bad, billion-dollar number come from?
Katz and Wilpon’s business empire contains hundreds of separate legal entities (many created to reduce tax liabilities, legally). These entities had hundreds of investment accounts with Bernie Madoff, and the trustee’s lawsuit alleges that over the years they withdrew $300 million dollars in what turned out to be “fictitious profits” from the Madoff accounts. The suit demands that Katz and Wilpon return that sum to the victim compensation fund.
Additionally, the lawsuit claims that the Mets owners were so heavily invested in Madoff, and were profiting so handsomely, that for years they ignored red flags regarding Madoff’s operations. The trustee argues that this willfull ignorance gave the Mets owners a degree of responsibility for Madoff’s continued defrauding of other investors, and therefore he is demanding an additional $700 million in damages from Katz and Wilpon.
Very possibly in response to this suit being filed, last week Fred Wilpon announced he was looking to sell 20-25% of the Mets, which could help pay a $300 million damages award to the Madoff compensation fund. However, a Forbes columnist notes that if the more speculative $700 million chunk of damages also came due, we could see the Mets sold outright.
For those not completely bored by this stuff (and if you’ve read this far I sure hope you aren’t), the New York Times has a great summary of the trustee’s lawsuit as it stands and has posted a PDF of the complaint.
However these business entanglements are resolved, Mets fans are probably just hoping the on-field product is affected as little as possible. A fire sale of the franchise could be seriously disruptive. If it’s any consolation, the Rangers went into bankruptcy last spring — right before winning the AL pennant.