Madoff and the Mets
Feb 11, 2011
Posted by Jody Eisenman | Filed under Uncategorized
In a document that was unsealed last week, it seems that Bernie Madoff may be the first Ponzi scheme to bring down a sports franchise. It is by now well known that the owners of the New York Mets (Katz and Wilpon) had a substantial amount of money invested with Madoff. According to Irving Picard, the attorney for the Madoff bankruptcy, the Wilpons and their partners took out roughly $300 million in fictitious profits. Not only does Picard want that back, but he also is claiming more; actually, a lot more. Picard is claiming that since the Met owners were so integrated into the Madoff mix, they ignored all the warning signs and proceeded to open almost 500 separate accounts with Madoff. In addition, he is claiming that the fictitious profits from Madoff actually helped fund the Mets’ operations, and therefore, the trustee is entitled to a cut of those profits as well. All in all, this could add up to one billion dollars! The owners attempted to settle the case out of court, but they are apparently quite far apart.
There are a number of issues at play here. Firstly, Picard is claiming money back under the “claw back” rule. What this means is that if there were several investors involved in a Ponzi scheme, and some people managed to take their profits out, these profits should be returned to the other investors that lost under the theory that everyone should be treated equally. In other words, since there were no real profits, why should investors who were lucky enough to get their funds out profit at the expense of everyone else?
