Did fraud aid the New York Mets?
The lawsuit against Fred Wilpon and the team's ownership group is serious business
Fictitious profits. Triple damages. Libel. Sure signs of spring! Won't be long now. Pitchers and catchers report next week, and that includes the pitchers and catchers who work for the New York Mets. In the view from our Courtside Seat, that should make for a particularly interesting Grapefruit League season. Why? Well, read on, because today we start with
Unweaving the Mets' tangled web
The magnitude of Fred Wilpon's entanglement with Bernie Madoff defies measurement. But here are some metrics that might help.
In the mammoth lawsuit filed by Madoff trustee Irving H. Picard on Dec. 7, 2010, and unsealed on Feb. 4, the description of the relationships between the Ponzi scheme known as Bernard L. Madoff Investment Securities and Wilpon's baffling maze of companies, partnerships, trusts, and subsidiaries consumes 377 pages, with another 423 pages of appendixes and exhibits. That's a total of 800 pages of dense legal prose.
The Mets alone had 16 accounts with Madoff; and, according to trustee Irving H. Picard, the Mets withdrew at least $90 million in "fictitious profits" from these accounts and used "other people's money" to "help fund their day-to-day operations."
In addition to the team accounts, Wilpon and his various entities and partners opened no fewer than 483 accounts with Madoff.
Eleven different Wilpons are specifically named as defendants in the lawsuit, along with another 88 Wilpon-related entities.
Included among the total of 99 defendants are six partnerships and corporations that use the word "Mets" in their names, including such entities as Mets One LLC and Mets Partners Inc.
Picard and his lead attorney, David Sheehan of Baker & Hostetler, accuse Wilpon, his family and his partners of at least four kinds of fraud, asserting that "with every withdrawal from their [Madoff] accounts they reaped the benefits of a fraud."
The detail and the specificity of the allegations against the Wilpons and the Mets are impressive, reflecting deep analysis of the Wilpon empire. As Picard and Sheehan describe them in the lawsuit, the Wilpon accounting statements and balance sheets became instruments of deceit.
The Wilpons insist that they are victims of Madoff's fraud, but there is no doubt that they have some explaining to do. Will their explanations be believed and accepted? Can they preserve their control over the Mets in the face of Picard's claim that their ownership leverage is based on fictitious Madoff profits and "other people's money"? Will the Wilpon empire, when it's all over, join the ranks of Enron and AIG and other massive business frauds?
The lawsuit against the Wilpons is only the opening salvo in what will be a long battle. With an enormous load of debt on their myriad enterprises and the downturn in the real estate market, the Wilpons and the word "insolvency" can now be used in the same sentence. Their ownership of the Mets is in jeopardy. The family is searching for an investor who, in return for ownership of 25 percent of the team, will help it out from under the threat of a potentially enormous loss in the Madoff litigation.
Will the ownership instability affect the team? As the pitchers and catchers report on Thursday of next week, Mets fans will be watching what happens both in Port St. Lucie, Fla., and in the U.S. Courthouse downtown in New York City as former Gov. Mario Cuomo attempts to mediate a settlement between Picard and the Wilpons.
Nothin' but zeros (so far) for the 'Big O'
A trading card set offers pictures of Oscar Robertson, the only player ever to average a triple-double for an entire NBA season (30.8 points, 12.5 rebounds and 11.4 assists per game in 1961-62). The photo shows Robertson flying to the rim in his playing days at the University of Cincinnati. Another merchandising scheme features tiny pieces of one of Robertson's college uniforms.
A clip of former Connecticut star Tate George's 15-foot jumper at the buzzer to beat Clemson in a Sweet 16 game in 1990 (ranked by ESPN as one of the top five college basketball shots of all time) has been featured in an ad for McDonald's Egg McMuffin and in ads for vitaminwater, Burger King, Buick, Chrysler and Cadillac.
What do Robertson and George receive for the use of their images? Nothing.
What are they doing about it? Both have joined a class action lawsuit against the NCAA and IMG's Collegiate Licensing Co. (CLC), demanding payment for what they say is the unauthorized and profitable use of their identities, their exploits and their images.
Robertson and George are the latest additions to an impressive array of college basketball and football stars who seek to force the NCAA and CLC, its for-profit partner, to pay them for decades of use of their likenesses. It's an antitrust case, so,if the players and their attorneys are successful, their reimbursement for use of their names would be tripled. In that event, using testimony from expert witnesses to describe the market for iconic sports images, the jury that decides the case would determine how much Robertson and the others should have been paid. If, for example, the NCAA and IMG should have paid Robertson $50,000 per year for 10 years of trading cards, the award to Robertson would be $1.5 million (10 x $50,000 x 3). The award potentially could include dozens if not hundreds of college basketball and football stars whose likenesses have been used over the years.
"What troubles me the most is the arrogance of the NCAA when it says it has the right to do this," Robertson said two weeks ago in an interview with Yahoo! Sports. "The University of Cincinnati gets a fee each time my picture is used on a card. I don't. When I played there, there was nothing like this ever agreed to."
The case could easily become a major humiliation for the NCAA and IMG -- and a major financial loss, as well. On its website, CLC asserts that there is a "$4 billion annual market for collegiate licensed merchandise." And that doesn't include ads, videos, trading cards and other profitable exploitations of the players.
The players' biggest problem in the litigation is a form the NCAA requires its "student-athletes" to sign before they play in their first game. Known as Form 08-3a, it requires the players to surrender all rights to their images. The NCAA contends that the players give up their rights "in perpetuity," but Stanley Chesley, the highly regarded antitrust lawyer who represents the players, claims the form is "purposefully misleading, incomplete and ambiguous on its face." In court papers, he has added that the NCAA schools force their athletes to sign it "under duress" and "without informed consent."
The NCAA's biggest problem in the litigation is the admission by its then-president, Myles Brand, in a September 2008 letter that "the right of publicity is held by the student-athletes, not by the NCAA."
In addition to the damaging statement by Brand, who died a year later, the NCAA could have to confront some other thick language its own officers have offered on the record. In a "State of the Association" speech in 2009, NCAA vice president Wallace Renfro, attempting to explain the issue, stated, "There are several orthogonal parameters that must be understood in order to find the balance point in commercial activity."
In a further attempt at explanation, Renfro added, "Exploiting student-athletes for commercial purposes is as contrary to the collegiate model as paying them."
Does that mean that the NCAA will return the profits it receives from its sale of the images of Robertson and the others? That's as likely as the NCAA deciding to pay its athletes.
Robertson, the master of the triple-double, is leading an effort that could produce triple damages in amounts that certainly would get the full attention of the NCAA and IMG.
Hurtful words and high-powered lawyers
For the nearly three months since the Washington City Paper published an encyclopedic and critical history of his ownership of the Washington Redskins, Dan Snyder's life has been one of "shame, mortification, hurt feelings, embarrassment, and humiliation."
It has been so difficult for Snyder that he was forced to file a libel suit against the weekly paper, claiming money damages of at least $2 million for the pain and suffering inside those quotes.
In his catalog of Snyder's "hilarious and/or heinous deeds," the City Paper's Dave McKenna barely mentions the embarrassing contracts Snyder made with Jeff George, Bruce Smith, Deion Sanders and Albert Haynesworth. The writer was more interested in Snyder selling peanuts from a bankrupt airline long after the peanuts' shelf-life had expired, in Snyder litigating a pay dispute with a former nanny, and in Snyder viewing cancer and diabetes patients as "market segments" for one of his many businesses.
It's those personal and business criticisms that anger Snyder and, he says, forced him to file suit even though he "accepts the right of the public and the press to criticize him or to express personal dislike, whether or not such expressions are justified by the facts."
Snyder is particularly annoyed with McKenna's assertions that Snyder was "caught forging names as a telemarketer," used "Agent Orange to destroy trees" that interfered with the view of the Potomac River from his home and was "thrown off the Six Flags board of directors" after a bumpy few years.
McKenna, according to Snyder, has devoted "50 columns" to his criticisms of Snyder over the years, and Snyder is clearly tired of it. To pursue his claim against the weekly paper, Snyder has hired Patricia Glaser of Los Angeles, one of America's top trial lawyers.
In an odd way, the filing of the lawsuit has multiplied the impact of the City Paper's look at Snyder, as news organizations across the nation have described a column they had previously ignored.
Although Snyder promises to give anything he collects in the lawsuit to the homeless, it seems clear from a letter his staff lawyer sent to the City Paper that he's more interested in intimidating or even destroying the paper. In the letter, first reported by David Carr in The New York Times, the Redskins' general counsel, David P. Donovan, explains, "Mr. Snyder has more than sufficient means to protect his reputation and [to] defend himself and his wife against your paper's concerted attempt at character assassination. The cost of litigation would presumably quickly outstrip the asset value of the [paper]."
The paper has responded by hiring Floyd Abrams, one of the top First Amendment and libel lawyers anywhere.
The litigation will take its course in the next year or so, but here's the more important issue: What will the City Paper do in its next story on Snyder? The guess here is that the Redskins' owner might soon be suffering from even more "shame, mortification, hurt feelings, embarrassment, and humiliation."
Lester Munson, a Chicago lawyer and journalist who reports on investigative and legal issues in the sports industry, is a senior writer for ESPN.com.
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