New York Mets owner Fred Wilpon has said the team is "bleeding cash" and could lose $70 million this season, and he has revealed that the person that triggered the financial meltdown, Bernard Madoff, was once offered a stake in the club.
Wilpon also said in an interview for the May 30 edition of Sports Illustrated that he fears he could lose the Mets if the trustee for victims of Madoff's Ponzi scheme wins a $1 billion lawsuit against the team and the owner's other interests.
"I think the club became in jeopardy when he filed [for] this billion dollars," Wilpon said. "That's when I decided to sell part of the club and maintain control in our operations and share the partnership with somebody."
Wilpon said he is willing to settle based on the $295 million in fictitious profits he earned, but will not settle based on $700 million in principal he and his partners invested with Madoff.
Former New York Gov. Mario Cuomo has been mediating talks between Wilpon and the trustee, Irving Picard.
"Gov. Cuomo has not been able to at this stage convince them that the 700 is not going to be obtainable," Wilpon told the magazine.
Wilpon has been trying to sell a stake in the team to raise much needed cash. The magazine reported that if he can raise $200 million, $25 million will pay back an emergency loan to Major League Baseball; $75 million will be used to pay down team debt of $427 million; and $100 million will go to operating expenses.
Even though the Mets will have nearly $64 million in salaries coming off the books, they don't intend to put much, if any, of that back into the the team payroll next year, Wilpon told the magazine. That would mean their payroll would go from top 10 in the league to possibly the lower half.
Wilpon also said that in 2002 when he became sole owner of the Mets, he reached out to four or five "extrememly close friends" to invest in the team. Madoff turned him down.
"Bernie didn't want to be in the public eye, which I can now understand more," Wilpon said to the magazine.
But Madoff did play a role in the financial health of the team. According to the magazine, Madoff investments were supposed to offset debt owed to players. When the Mets wanted to get rid of Bobby Bonilla after the 1999 season, they would have owed him $5.9 million. Instead, they decided to invest that money with Madoff at a return of 10 percent to 12 percent.
They would pay Bonilla $1.2 million per year for 25 years, payments based on an annual interest rate of 8 percent. So in theory, had Madoff's schemes not tanked, a seemingly horrible financial decision would have in fact created a net profit.
Wilpon was asked if Madoff's rate of return raised any red flags.
"Not by Madoff's formula, if you believe his formula of what he did with puts and calls," Wilpon said. "Markets going this way and markets going that way didn't affect the basket of stocks he was allegedly buying. We had no feeling that that was unusual."
Picard, meanwhile, contends that Wilpon has not provided enough documentation outlining the relationship between the Mets and Madoff, according to the New York Times. The trustee claims that the club had 16 accounts with Madoff and invested tens of millions of dollars.
The Wilpon camp counters that it has provided more than 700,000 pages of documentation and there is no evidence that the Mets or any other Wilpon entity knew that Madoff was engaged in fraud.