Back in February, we learned that New York Mets principal owner Fred Wilpon was not only good friends with fraudster Bernie Madoff, but a huge investor in his now-defunct fund. A New Yorker article this week profiles Wilpon, explores this relationship with Madoff, and addresses what it means for the Mets. According to the article by Jeffrey Toobin, Wilpon may have to sell his stake.
Wilpon's real-estate development firm Sterling Equities was a Madoff investor since the mid-1980s. Through the methodology that bankruptcy trustee Irving Picard devised to pay back investors, Wilpon thought the $550 million dollars he and his partners had in the fund plus $160 million in cash distributions taken over the years would be their full loss. But Picard saw things differently:
Then, late in 2010, Picard's representatives informed Karen Wagner, one of Wilpon's lawyers at Davis Polk & Wardwell, that the trustee would be seeking a great deal more than a hundred and sixty million from the Sterling investors. Negotiations failed, and in December Picard filed a complaint against the Wilpon group that ultimately ran to more than three hundred and eighty pages. According to Picard, Wilpon and his partners "made so much easy money from Madoff for so long that despite the many objective indicia of fraud before them, the Sterling partners simply chose to look the other way." Picard claimed that the group "benefitted from Madoff's fraud with approximately $300 million of other people's money and withdrawals of over $700 million in principal during the six years" before Madoff was exposed.
Picard believes that Wilpon knew, or certainly should have known, that Madoff was engaged in fraud. The article goes on to say that a $1 billion court judgment would be "cataclysmic" for Wilpon, who is rich -- but not that rich. If the court case goes poorly for him, he may be forced to sell the Mets.
Read the full story at the New Yorker.