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
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