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PORT ST. LUCIE, Fla. -- The New York Mets did not lose $83.3 million Monday, when U.S. District Court Judge Jed S. Rakoff ruled that the trustee recovering money for victims of Bernard Madoff's Ponzi scheme is entitled to the profits Fred Wilpon and family collected in the immediate two years before Madoff's arrest on Dec. 11, 2008.
In fact, of that $83.3 million figure, only about $1.7 million is related to Mets-specific accounts. The remainder of the eventual official judgment will be against individual Wilpon family members, their other businesses and charities.
Clearly, though, there is an impact greater than $1.7 million to the cash-strapped baseball club.
Big-market baseball owners often infuse money into their teams when they struggle, spending on free agents as a stimulus to break out of a downward cycle. Already, the Mets had slashed their payroll from $143 million to $91 million in one offseason because of existing debt and operating losses. Now, with Rakoff's decision, there soon should be even less money on hand within the family to try to weather the storm.
|Fred Wilpon said last week that he and his family "intend to own the franchise for a very long time."|
Make no mistake: An $83.3 million obligation likely is not catastrophic to the Wilpons. It should not compel them to sell the team. It probably tightens the austerity the Mets are under, though.
If the Wilpons are to get tripped up as owners, it may very well just be the existing mountain of debt they are under, from semi-annual bond interest payments on Citi Field, to the $25 million loan from Major League Baseball, to the $40 million bridge loan from Bank of America. It may have nothing directly to do with trustee Irving Picard's clawback lawsuit.
The Wilpons likely bought time in weathering their Mets debts and losses. Fred Wilpon announced last week that he already had money pledged and in escrow from seven minority investors at $20 million apiece -- even if there is an incestuous component to that cash infusion, with SportsNet New York buying four of the shares.
Of course, while $83 million might not be catastrophic to the Wilpons retaining ownership of the franchise, that was not the entirety of Rakoff's ruling.
Rakoff paved the way for a March 19 jury trial, with another $303 million at stake for Fred Wilpon, his family, businesses and charities.
Losing at trial and having to fork over that amount as well likely would put the Wilpons' ownership of the Mets in serious peril.
Yet there was good news for the Wilpons in Rakoff's ruling.
In order for Picard to recover the additional $303 million, Rakoff has determined that a jury must find the Mets' owners had been "willfully blind" to Madoff's fraud and acted in "bad faith."
The judge, even while allowing the trial to take place in two weeks, explicitly said in his ruling that he is "skeptical" Picard can prove that standard.
And while the case will be heard by a jury, which can be emotional and not as attentive to detail as a judge, even that is somewhat misleading in terms of its ramifications for the Wilpons.
Sure, it won't be a jury of the Wilpons' peers, unless random selection yields a jury of millionaires. But, one expert noted Monday, even if a jury finds against the Wilpons, the judge can decide the jury was wrong and immediately overturn the decision.
In essence, it's a trial by jury -- unless the judge thinks the jury is completely wrong.
And given what Rakoff wrote in Monday's ruling, clearly he thinks the Wilpons did not act in bad faith, at least based on evidence and testimony he has seen in the past several months.
"The Court remains skeptical that the trustee can ultimately rebut the defendants' showing of good faith, let alone impute bad faith to all the defendants," Rakoff wrote in Monday's decision. "Nevertheless, there remains a residue of disputed factual assertions from which a jury could infer either good or bad faith depending on which assertions are credited."
Said bankruptcy attorney Charles Tatelbaum of Hinshaw & Culbertson: "I would consider this a huge win for the defendant [Wilpons]. ... 'Now trustee, you've got to prove they had bad faith or have shown a blind eye.' It's not for the Wilpons to prove they're innocent or that they had good motives or anything. It's for the trustee to prove that they had bad faith. That's going to be a very tough burden to meet."
As for a judge, who already is on the record as being swayed by the Wilpons' side, potentially overturning a jury verdict when one is reached in a few weeks, Tatelbaum added: "That happens more than you think. It happens more today in business cases as opposed to car-accident cases, slips and falls, or something like that. Where a jury -- because of their lack of business acumen and sophistication -- decides to rule on emotion or the wrong standard, then the losing party gets the judge to look at it. And then the judge just takes it away from the jury."
So $83.3 million may be all the Wilpons eventually lose, at least before appeals. And that means the courtroom drama alone may not imperil their ownership of the team.