Winning By Giving Up

Photo: Kathy Kmonicek/AP Photo

As the 2012 baseball season approaches, Fred Wilpon and his Mets-owning partners in the Sterling Equities group are responsible for debts of more than $1.5 billion, the majority of which come due over the next three years. Meanwhile, their biggest potential source of cash flow—the Mets franchise itself—lost an estimated $70 million last year. But even those problems aren’t the biggest threat to Wilpon right now—Irving Picard is. On March 19, Picard, the trustee for the victims of Bernie Madoff, will square off against Wilpon in federal court. Depending on the jury’s estimate of how aware Wilpon should have been of Madoff’s scheme (in which Wilpon invested for years), Wilpon could end up owing the victims’ fund anywhere from $83 million to $386 million. No matter what happens, Picard can still appeal and ask for hundreds of millions more.

Wilpon may not be ready to accept reality—he says he knew nothing of Madoff’s misdeeds and will fight Picard as long as he can—but most observers believe it’s no longer feasible for him to hang on to the Mets; Picard’s suit all but ensures the hole will be too deep. But there is another way forward that could work for everyone involved: In return for an agreement to drop the claims against him, Wilpon should turn over 100 percent of ownership of the Mets to Madoff’s victims.

This solution was actually proposed by several attorneys I spoke to. For starters, Wilpon would save millions in legal fees and avoid further operating losses. He’d still have revenues from the SNY network (which broadcasts the team and which he owns a majority stake in) to provide cash flow, and freed of the financial uncertainty Picard’s lawsuits create, he might be able to renegotiate his impending Mets-related debts.

Picard, the Madoff claimants, and Mets boosters would win too. Instead of paying for further litigation and possibly having to fight for cents-on-the-dollar compensation if Wilpon goes bankrupt, the victims would receive a potentially lucrative property, which Picard would manage. The last time a Mets team changed ownership, in 1980, attendance jumped 34 percent in a season. It had nothing to do with on-field success—the team went from 63 wins to 67 the next year—and everything to do with the fans’ renewed optimism. Given the reported estimate that every 200,000 Mets fans are worth $25 million in revenue, a 34 percent attendance jump next season would push the team into the black, turning that $70 million loss into a $30 million gain. This is why Wilpon is so desperate to hold on to the team and why David Einhorn wanted to buy it: because the Mets could easily be a profitable entity, worth upwards of $1 billion, if things turn around. But what Einhorn understood, and Wilpon does not, is that a turnaround has to involve a change in ownership.

It’s certain that Wilpon didn’t imagine that his legacy might be merely to feel the reflected glow of a team he was forced to give up. But choosing to settle this way would not only mean a chance at financial survival—it could be what the Mets need to succeed at the level Wilpon dreams of. By admitting that his run is over, he could become a Mets hero.

The plan would also represent a departure from what Picard has done to date—i.e., seeking cash, not property. But with no end in sight for many of his other cases against Madoff beneficiaries, a revitalized Mets franchise may be the quickest way for him to get cash to the victims themselves. While no one can ever undo the suffering of those who lost money in Madoff’s scheme, this deal could produce a relatively happy ending for almost everyone involved—and at this date, when so much was thought to be irretrievably lost, that would be something of a Miracle.

Adapted from Wilpon’s Folly: The Story of a Man, His Fortune, and the New York Mets (Bloomsbury USA)

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Winning By Giving Up