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Mets Will Pay $162 Million to Settle Madoff Suit

This article was written by in Investing. 7 comments.


As a Mets fan, though these days I try not admit being so, it’s bittersweet to see the organization settling its legal troubles relating to Bernie Madoff’s Ponzi scheme. On the one hand, if the owners of the Mets were found guilty of ignoring the possibility of fraud, it could have spelled the end of the baseball team. The prosecution was looking for a restitution of $1 billion from the Mets’ owners in order to compensate other investors who were swindled by Madoff. The lawyers reached a settlement agreement, wherein the charges will be dropped with the owners of the Mets paying $162 million.

Compare this $162 million to a player’s contract; CC Sabathia’s contract with the New York Yankees is $161 million for seven years. The Mets owners will likely have the benefit of paying the settlement, if approved by the court, over a number of years, but for the same expense, the team could have added high-quality players or kept José Reyes from defecting to Miami. Reyes signed a six-year, $108 million contact with the Miami Marlins; had the Mets avoided investment trouble, the team might have been able to offer Reyes a competitive deal.

The good news for the Mets gets even better. Not only do they avoid paying $1 billion in restitution, the owners are eligible to receive restitution from the trustee. As those found guilty of fraud pay into the fund to help those who were defrauded recover their losses, the owners of the Mets will receive their portion from these proceeds. Any money recovered can be used to pay the settlement. The owners of the team could receive as much as $178 million, more than they need to pay through the settlement.

Is it possible the team owners could come out ahead as a result of their involvement with the Madoff scheme?

While this is good news for the team, the investors who were truly swindled by Madoff — if you believe anyone was truly swindled, as it’s the investor’s job to ask questions and understand their underlying investments — will not be able to recover their losses to the extent they would have hoped.

The $1 billion originally sought from the Mets’ owners would have been a great benefit to others who suffered losses, those who might have invested at a farther distance from Madoff’s team, with more layers of investment professional in between, obscuring the relationship between the end investor and the man behind the curtain.

Photo: The US Army
New York Times

Published or updated March 19, 2012. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @ConsumerismComm on Twitter and visit our Facebook page for more updates.

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About the author

Luke Landes, also known as Flexo, is the founder of Consumerism Commentary. He has been blogging and writing for the internet since 1995 and has been building online communities since 1991. Find out more about him and follow Luke Landes on Twitter. View all articles by .

{ 7 comments… read them below or add one }

avatar krantcents

If the trust wanted $1 billion, why did they settle for so little? It sounds as though the Mets already won a big one.

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avatar Mike - Saving Money Today

Hey Flexo, I’m a Mets fan too….shhhh! Don’t tell anyone.

I’m just glad to have this ordeal over with so they can focus on improving the team. No matter how much they claimed that the litigation would not affect the baseball operations it was pretty obvious that it did.

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avatar Steve Dupree

Was the case against the Mets any stronger than against anyone else who was involved in the Madoff scheme?

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avatar SteveDH

Don’t overlook the fact that anyone who may have profited from the fraud can be held liable, whether they knew, or should have known, about the fraud or not. If you had bought into the Madoff scheme and for allocation purposes got out years later taking a profit, the trustee’s can sue you for those earnings, regardless of you’re level of involvement. This may be a situation wherein the case about the Met’s knowledge of the fraud wasn’t as strong, but the profits from the fraud are being recovered. Many an investor in the Enron off-balance-sheet SPE’s wound up returning money to the bankruptcy process. It’s a tough law if you’re just a uninvolved investor – but it does happen.

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avatar Ceecee ♦796 (Dime)

Wow, this makes my head spin. They pay in and then they get money back out. What a screwy mess this whole thing is.

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avatar qixx ♦1,825 (Half-Dollar)

Why does the court not just determine the Mets portion of the proceeds and deduct it from what they owe to the fund?

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avatar Luke Landes ♦127,387 (Platinum)

I would think that the court can’t do that at this point because it’s unclear how much they’ll be able to collect into the fund from those found guilty.

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