Mets settle Madoff suit, repay 2 loans

Updated: March 20, 2012, 3:35 AM ET
ESPN.com news services

NEW YORK -- The New York Mets' owners scored an early season victory Monday, stabilizing the club's financial future in a deal with a trustee for Bernard Madoff's fraud victims that requires them to pay millions less than they might have -- and lifts a dark cloud from a team whose dismal play seemed to mirror its misfortune in the owners box.

Mets CEO Fred Wilpon and team president Saul Katz, co-majority owners, emerged smiling from a Manhattan federal courthouse after a judge announced the agreement, which makes it likely they'll pay much less than the agreed-upon $162 million, if any at all; guarantees they will owe nothing until the end of four years; and averts a high-profile civil trial.

"Now I guess I can smile, maybe I can take a day off, but I can't wait to get back to our businesses, which I love," Wilpon, sporting dark sunglasses, said outside court as he pledged to rejoin the Mets on Tuesday at spring training in Florida. He stood with Katz, who rested his hand on Wilpon's shoulder under a sunny sky.

The Mets' owners had a pair of other positive developments become public Monday.

Fresh off their favorable settlement in federal court, a team official confirmed the organization has completed the sale of 12 minority ownership shares of the team at $20 million apiece, infusing $240 million into the organization.

Those funds immediately went, in part, toward settling a pair of debts. Wilpon and family have repaid a $40 million bridge loan to Bank of America as well as a $25 million emergency loan from Major League Baseball.

The Wilpons have large debts still remaining against the team, but the cash infusion should help the family withstand any operating losses in the near term without jeopardizing their ownership.

General manager Sandy Alderson said the team lost $70 million last year, and the Mets' payroll has dropped from $142 million at the end of last season to about $95 million following the departures of All-Stars Jose Reyes, Carlos Beltran and Francisco Rodriguez, the largest one-year drop in baseball history. Star third baseman David Wright is entering the final guaranteed year of his contract, and the Mets could listen to trade offers this summer.

After speaking, Wilpon gave a nod to the sagging faith some have had in recent years with owners who seemed mired in accusations that they knew Madoff was up to no good but kept silent because they were making lots of money on their investment.

"Stick with us," he said.

In a lawsuit that demanded $1 billion from the Mets' owners, trustee Irving Picard said Wilpon and Katz had meetings with Madoff in his office at least once a year, a privilege few investors enjoyed, and that Katz at times spoke directly with Madoff at least once a day.

Madoff is serving a 150-year prison sentence after revealing in December 2008 that he cheated thousands of investors of roughly $20 billion for years.

The judge noted the end of acrimony as he read a document that promised neither side will disparage the other or the agreement and that Picard will no longer accuse the Mets' owners of being "willfully blind," a legal term central to the civil trial the deal eliminated. The litigation could have forced the team's owners to pay up to $383 million.

"All I have to say is, love is wonderful," Judge Jed S. Rakoff said smiling.

The deal was shaped so that the team's owners could owe much less than the $162 million they received in fictitious profits in the six years before Madoff's fraud was revealed.

The agreement calls for the sum to be reduced by money that would otherwise be paid for $178 million in losses claimed on behalf of dozens of accounts held in the name of defendants in the action against Sterling Partners, a business entity that includes the Mets' owners, along with real estate, sports media and private equity interests.

David J. Sheehan, the lawyer for Picard, told the judge that $10 million in losses by Sterling Partners that was recovered by the trustee was already set for disbursement, an amount that would reduce the Mets owners' debt to $152 million.

The trustee says he has recovered 52 percent, or $9 billion, of claimed principal losses by all Madoff investors. More than $6 billion more has been identified but not yet secured.

"In a sense, we're now partners," Sheehan said outside court of the trustee and the defendants, whom Picard's lawyers had once criticized as men who turned a blind eye to every red flag of fraud before them as they withdrew $90 million of "other people's money" from the accounts of Ponzi schemer Madoff to cover day-to-day operations of the team.

The team's on-field future, however, remains murky.

The Mets have finished with a losing record for three straight seasons, and attendance at Citi Field declined from 3.15 million when it opened in 2009 to 2.35 million last year, the team's lowest home total since 2004.

Still, the deal announced Monday left Wilpon and Katz, who together personally promised to guarantee $29 million for the trustee, speaking confidently of the team's future.

Katz said outside the courthouse that the Mets were on secure financial footing. "Always was," he said.

Wilpon said: "As we've said from the very beginning when this lawsuit started, we are not willfully blind, we never was, we acted in good faith, and we're very pleased that this settlement bears that out. That's very important to us."

As he stepped into a car, Wilpon declined to discuss how the settlement might affect the club's efforts to raise additional cash. Earlier, he said he was resuming work at "trying to bring the New York Mets back to prominence."

The road to a settlement may have been paved weeks ago when Rakoff ruled Picard could try to recoup only $386 million from the Mets' owners.

Former New York Gov. Mario Cuomo, who acted as mediator, said the settlement lets Picard focus on 800 pending lawsuits against those who profited from their investment with Madoff.

He said Picard and the Mets' owners "avoided the risks and uncertainty of ... a long, bitter and expensive trial" in a deal that was fair and reasonable.

"Nobody gets everything they want in a settlement. But both sides helped their causes," Cuomo said.

"The closer you get to trial the closer you get to the reality of trial," Cuomo said.

Cuomo said the settlement allows Wilpon and Katz to return to normal with their reputations intact as honest business people. He also said that his firm looked into the Mets' finances and found they weren't "broke."

"First of all we have to understand that litigation is negative energy so we are very pleased to have this behind us," Katz said. "As we've said all along, the fact is we have never done anything but we've done everything in good faith."

Dodgers Hall of Fame pitcher Sandy Koufax had been scheduled to testify in the trial about the intentions of Wilpon, who encouraged him to invest with Madoff.

The settlement was agreed to Friday, Rakoff said in court, and the parties involved successfully kept it under wraps over the weekend until it was announced Monday morning.

Wilpon said that the group was not accustomed to the courts, and the process took a toll.

"This was something unusual for us," Wilpon said.

Cuomo had a front seat for the morning proceedings directly behind attorneys for both parties. At one point Rakoff pointed out his help in mediating the dispute and Cuomo slowly stood in acknowledgement.

Cuomo walked out of the front door of the courthouse before Wilpon and Katz and spoke in a soft voice. Clearly, Cuomo had the respect of both sides, who thanked him for his part in the process.

The 14th-floor courtroom was at capacity, and extra chairs were brought in to accommodate the lawyers and media assembled. Four court-sketch artists jockeyed for the best view, and two complained as they were moved to the back row.

Outside, Pearl Street was lined with news trucks, their satellite receivers jutting through the roof like telephone poles. Once word of the settlement got out, the cameras took their position just outside the door behind a metal barricade.

Sheehan, the trustee's lawyer, said he thought the outcome was fair.

"Whenever you have the settlement it's the result of a very businesslike -- and that's what this was -- negotiation taking into account both sides' interests," Sheehan said. "I think this has all the hallmarks of a good settlement in the sense that nobody came away absolutely happy with how it came out. But I think ultimately the most important thing is that the victims will receive the benefit of $162 million. Ultimately that's the goal of all the litigation brought by the trustee is to enhance the fund for the victims. This does that."

A reporter noted that the $162 million was far less than the original $1 billion being sought.

"I understand that," Sheehan said. "But on balance, taking into account all the various factors in the case, this is a very fair and reasonable outcome."

Information from The Associated Press and ESPNNewYork.com reporters Adam Rubin and Jane McManus was used in this report.

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