21
2012
The End of the Madoff Era – Finally
An article by 
I remember when the whole Madoff fiasco started to carpet-bomb its way into the mainstream sports media. Well before it all started to make headlines and evolve into the sports blogs fodder du-jour, mercilessly mocking the team, its owners and even fans, I had a conversation with an old family friend with ties to the organization. During our chat the Madoff situation came up.
Basically he said that the Mets wouldn’t be spending money on free agents anytime soon and that the Madoff situation was partly the reason. Little did I expect that less than two years later the team would go into full out slash and burn mode cutting nearly $50 million in payroll, eliminating 10% of their workforce and eventually eliminating one of its minor league affiliates.
I wrestled with the idea of writing about what I was told. You have to understand my conversation was well before Bernie Madoff and his relationship with the Wilpons became news. I certainly didn’t have an ax to grind with anyone and in fact, truth be told, after having done research for an article about the Welcome Back Veterans program, I learned just how instrumental Fred Wilpon was in the creation of that honorable effort. It gave me a new found respect for the man. But I had/have faith in my source and Joe D echoed that faith in both my source and myself and thus started the ball rolling regarding Madoff and the Mets, at least partly here on MMO.
I took some heat for it from fans and writers alike. I understood that. I’m not a credentialed journalist, who incidentally are far more protected legally for what they write than a blogger is but, to me, it was newsworthy insofar that it was going to effect the team, most likely for years to come. Now with yesterday’s news that the Trustee, Irving Picard and the Wilpons, settled the claw back lawsuit, with the Wilpons agreeing to pay $162 million – spread out over the next 3 years – finally we can see some light at the end of this tunnel. As this saga unfolded over time, so much information and misinformation made it’s way into our thought processes it was difficult to discern what was true and what was opinion draped in the guise of fact. To some degree we will probably never know the entire truth about this situation.
Some of the best reporting on this has been by Richard Sandomir of the New York Times. When I reiterate Joe D’s praise of Sandomirs’ objective reporting it’s difficult for me not to mention Howard Megdal who in his book, Wilpon’s Folly, did lay out a great deal of information regarding the situation. Whether he formed biased conclusions or not based on what he discovered, I’d leave for his readers to discern.
In the end, as most civil litigations play out, this lawsuit never made it to trial even though the process of seating jurors was underway. So it does beg the question of who won this high profile showdown? It’s hard to say that either side is walking away unscathed. Picard was originally seeking a billion dollars from this only to have it pared down to $383 million and then finally to settle on $162 million. The Wilpons insisted that they were never “willfully blind” to Madoff’s treachery, as they were never accused of anything illegal in Federal criminal court; if they were we would have seen them in orange jumpsuits along with Madoff a long time ago.
However they recently had a setback in court when Judge Rakoff ruled that it was the Wilpons who had the burden to prove that they weren’t “willfully blind” to Madoff’s actions. Apparently in the end it came down to neither side not wanting to roll the dice on having a jury decide this. The media tends to self-generate its own momentum on certain stories and this was no exception. I for one still have mixed feelings about the entire case. The Wilpons for years funded this team with as much fervor as a politician does with their favorite Government program. And just like some government programs, the results haven’t been much to brag about. But, the Wilpons do spend when they have it as history has shown. Unlike many owners who simply choose not to which is their right. It’s the “how” and the “who” the Wilpons spend it on that needs to be recalculated – as it seems to have begun under Alderson’s tenure as General Manager.
None of us can predict the future as the team still has a mountain of debt to pay off along with the lawsuit but having this saga finally come to an end should please even the most jaded of Mets fans. Perhaps some day down the road we will look back on these times as the culminating moment when the Wilpons and the Mets evolved from desperately wanting to be relevant in a city that has been owned by the team in the Bronx since the mid-90’s, to actually setting the relevance in this town. As a Met fan I want to see this team succeed and if this ownership can rise again, with a winning formula and team, I don’t think there’s one Met fan out there that would care less who’s cutting the player’s checks.
About the Author: Joe Spector
I'm just your regular Joe. Staff writer @ Metsmerizedonline.com. Happily married and a father to a baby girl. I attended my first Met game at the ripe old age of 3 where my father scored a foul ball and had it signed by Lee Mazzilli, Joe Torre and Joe Pignataro. It was my Holy Grail - 'till I buried it in the backyard. I have my own website where you can read my drivel at your leisure @ www.thespectorsector.net
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I just want to stop hearing about it. This season really needs to start so there is daily activity to discuss. Thankfully the stories should be winding down soon since there really isn’t anything else to talk about.
Good riddance to the entire debacle.
Let’s Play Ball.
PLAY BALL!
Nice article.
You wrote: “Some of the best reporting on this has been by Richard Sandomir of the New York Times. When I reiterate Joe D’s praise of Sandomirs’ objective reporting…”
Some people, particularly Lupica with the News, have complained often during the scandal that Picard’s people were spreading mis-information through the NY Times. It could be partly sour grapes on the part of the Daily Snews – however, who knows what the true ‘objective reporting’ really was.
It was in Picard’s best interest to frighten and shame the Mets owners into a hefty settlement – thus leaking information to Sandomir and the Times. In my opinion, the information that was leaked was one-sided and biased.
As you wrote – no one will probably know what really happened and how much the ownership knew about Madoff. Was Fred blindly greedy or hoodwinked – or both?
Either way – he and Saul brought this mess into our Mets organization and that alone is reason enough to be a bit ticked off at them over gutting the team.
Thanks tlagee. I never thought Picard had much of a case since the Feds never charged the Wilpons with anything in criminal court and you’re right he shamed them and created doubt in the minds of the potential jury pool. But it wasn’t until Rakoff made his judgment that the Wilpons had to essentially prove their innocence that this was going to get wrapped up fast. I echo everyone when I say it’s a new day and time to move on.
Hi Joe,
Have to disagree with your feeling that we can now go forward a bit for I believe the settlement is good news for the Wilpons but not good news for the Mets.
If it was just the civil suit hanging over their heads, I doubt the drastic steps taken throughout the organization (not just roster payroll) would have occured. That had to do with the overall financial instability of the parent corporation, not the New York Mets. Sterling equities lost a half-billion dollars invested with Madoff and suddenly found itself unable to count on the approximate 16% in returns it had been receiving. Not to mention being in bad finanical shape due to the bust in real-estate, the debt to payback the City for Citi Field and other debts still looming on the horizon.
No, too many things have occurred to think the settlement would help remedy some of the financial problems facing the Mets.
But even if we do look at the Mets as a separate business in and of itself, Sandy has said the $70 million loss had to be addressed and was irrelevant of the suit or the Madoff losses. He stated he team just cannot go out and sign expensive players when losing money like that. And he admitted the team will continue to lose money until they can get their fan base to return.
Now I will not hide the fact that I do not trust Sandy as far as his public statements are concerned, but to me that indicates not to think the settlement will have anything to do with resolving the Mets problem since the causes of that suit had nothing to do with the team’s own financial problems to begin with.
I truly believe that $70 million loss is only on paper and is being used as a smokescreen for Sterling Equities is more than compensated for that loss in the revenue that the Mets generate through the selling of television rights to SNY (of which they hold a majority ownership as well) and merchandising. Most all owners say the real money is made not in the club but through television rights, as YES and NESN have proved.
The hard times befallen Sterling Equities goes way beyond the civil suit for the threat of being liable for up to a billion dollars went away months ago and yet not one more dime has since been spent on the team and, more importantly, we are told that less expenditures will still be necessary in the future. As Ralph Kramden might have said, the settlement in itself is just a mere bag of shells.
Hard times are still with us.
Great article! Let’s Go Mets. It’s time to cheer on our beloved team.
Well has anyone heard Sandy’s comments on the spending situation in the last two days?
Seems he is not going to be spending anytime soon regardless of the outcome of this…
Which begs the question how valid was it as a reason in the first place?
I’m glad it’s over…
Now it’s all about the attendance!
Gone is the blaming of the Wilpons for the state of the team.
No where to hide!
True but we still don’t know what the budget given by the Wilpons actually is or will be going forward. With Omar we basically new the budget because he made sure to spend right up to the threshold of it each year and would comment that they didn’t have a lot of money for mid-season acquisitions.
Is it safe to assume that Sandy is spending within 10M of the budge that they gave him? 20M? Every penny? Hell if I know.
we do know what the budget is though….It is based on whatever attendance can afford!
Thats what it has always been!
The only exceptions where it was NOT based on Attendance was in 93 with the WTMCB and when Omar first got hired but in that case attendance was the reason for the investment as the investment was to bring more people out to the stadium while Omar rebuilt the Minors.
In that case when the question was asked how the mets could afford to do that Wilpon said (in 2005) that he allowed the budget to increase to the point that they would break even if they just made the playoffs, knowing making the playoffs would lead to more profits the next year.
And he was right that is what happened!
The budget for every team starts off at what attendance can support!
Only in rare circumstances does an owner step in and say spend less or go ahead spend more.
Those are the exceptions…Attendance is the RULE!
Again, I am not so sure about that. The Wilpons could be looking to make some lost income back or they may look to invest a little of the investment money into the team to try to get a return.
Each team has a budget and you can’t really determine that amount unless they come out and tell you. What is the budget for this year
Please feel free to let us know when you ARE SURE and not just speculating!
Even if what you ASSUME may be possible is true Sandy still has to manage to make money first before it’s possible so the ATTENDANCE is still setting the budget and the budget is going DOWN not UP because we only cut 55 Mil off a payroll that you think cost us 70 Mil in losses last year PLS we lost attedance thanks to reyes, Beltran and K-Rod not being here.
Did that budget include the minor league team that was cut? Did that budget include renting out their one of their complexes?
Ironic how you tell others to post when they are SURE, yet, have yet to ever see you back up an opinion with a fact. Perhaps because you don’t realize there is a difference.
Thats cause you all run for the hills when the evidence IS posted and ignore the subject for two weeks when you try to start it agin hoping the link I posted is long forgotten!
Funny how I am the only one who gets goaded to show proof but when I do and a request is made by me you all go running and complaining that I’m not fair!
Sorry but I hold you to the standard you wish to hold me and when you don’t meet those standards I pretty much ignore your attempts to schedule my day for proof you can’t provide yourself!
Well it’s only been 2 days and they were not expecting a settlement. Also, there are not many trades or acquisitions this time of year. Teams want to move forward with what they have first and make adjustments once they have had a adequate sample size.
If he doesn’t spend this coming off-season, then I’ll be screaming right with ya. The financial issues are still there, there is just less uncertainty. Wilpon’s spent money before and they will again.
Again, I think it depends on how much the budget is, what the needs are and who is available to fill them.
Spending 36 million on Oliver Perez just because you need a mid-rotation starter and he’s out there is not a good strategy. See Jason Bay.
I think Omar’s problem was that each year he spent right up to the threshold without thinking about the consequences the following year. Perhaps because he always felt like his job was on the line. I think Sandy’s goal is when he DOES have money to not spend it all at one time and then you still have flexibility year to year to get what you need instead of being stuck like the Mets are now.
Not saying he should run out and go on a shoppping spree Gary…
But if the whole attendance thing is as poor as it is you don’t go telling the fans Oh yeah there are no more madoff issues but we are going to play it like there are…
Is he wrong for not spending money this week? NO!
But he is dead wrong for even approaching the subject of spending to the public!
There are just some things better left UNSAID!
He could have addressed the question quite simply…
Who’s out there TOP buy?
Thats would have been enough to get the message accross and stop the dumb questions about spending!
If he talks about spending he shouldn’t and if he doesn’t talk about spending he’s not telling us everything and if he does tell us he’s just spinning and if he doesn’t his hiding something and if he does then he’s lying.
When have I ever complained about Sandy not opening his mouth?
Or is this just another fishing expedition like the Wilpons want to take money out of the mets which is why they set the budget below was attendance can supoort despite not actually setting the budget below what attendacne could support, They are still about 15 Mil over!
CMON you know that the anti-Sandy crew would be tearing him up if he lowered payroll, the Madoff case closed and then he didn’t address what the current strategy is. Hell with the ant-Sandy crew, if payroll was reduced by 50m, now half the team is injured and he just sat there saying “Who’s out there TO buy?” most fans would be going nuts. He has to address it and his style is to not shy from where he feels the truth is.
Again if he isn’t spending next FA period and not trying to be creative at the trade deadline, I will mock up some eff-Sandy shirts, we will rent a van and drive it through the gate and demand answers.
Well which truth is he speaking gary?
The truth that Madoff stopped him from spending or the truth that now that madoff hasn’t hurt us in the least we are still not going to spend!
Which truth is truth here?
He should have just said until attendance picks up we are still in save money mode!
And he should have said it from the get go and not hide behind Madoff in the first place!
Then maybe the Anti-Sandy would have to deal with the fact that their lack of ticket buying is the cause of their issues not Sandy!
Something I have said quite often here and got into arguments over because people want their Boycott AND 175 Million dollar payroll!
It is my understanding that Alderson has always used team revenue as a function of payroll and not Madoff. It was us the fans that keep saying Madoff is the primary issue and he has always pushed back against that. I understand that he first said payroll would only go down to 120 and changed the tune a couple times but the overall plan was always reduce payroll and slowly build it back up as the team performs better and to not devout large percentages of payroll to singular players. Right?
Yes gary and I have asserted that Madoff had very little to do with the Cuts as well!
But everyone else blamed them and while I didn’t check every quote ever attributed to him a quick search does show there were occassions where he used it as an excuse.
(but note MOST of the quotes about cuts confirm what you just said and I have been saying that it was NOT the wilpons who forced this budget on Sandy but Sandy’s own philosophy that forced it…)
In regards to quotes he did cite the madoff situation, Early he said it was a non factor and then he said…
“On that call, Alderson cited “intervening events” as the cause of the dramatic in-season drop in expected payroll, even though he’d mentioned earlier in the call that revenues and expenditures generally stay pretty static in-season.
He presumably wasn’t just referring to the financial problems frequently attached to a drop in attendance or to the lawsuit filed against Fred Wilpon and his partners by the trustee for the Madoff victims, but also to the fact that the Mets’ problems are the result of loans taken out to cover disappeared Madoff assets.
”
http://www.capitalnewyork.com/article/null/2011/12/4408000/victimization-straight-shooting-mets-gm-sandy-alderson
I wasn’t on that call and couldn’t find a transcript but thats what was reported on that site…
Most other quotes put all the cuts on Sandy himself!
“”First of all, I want to emphasize that the plan that we have pursued the last couple of months was limited by only one fact, and that was the level of the existing payroll. Our payroll going into the season will be somewhere between $140 million and $150 million. I think that is significantly higher than we’d like to be on an annual basis”
“”From my standpoint, when I took this position, when I interviewed and took this position, I was of course aware of the pre-existing involvement of the Wilpons and the Mets with Bernie Madoff. I wasn’t privy to all of the detail, nor am I or most of us at this point privy to all that detail. And I wouldn’t expect to be. At the same time, none of that has affected what I have done over the last two months. I don’t expect that it will have any impact on what I do over the next several months, including into the 2012 offseason.”
http://espn.go.com/blog/new-york/mets/post/_/id/13812/alderson-on-madoff-wilpons
I have said quite often the cuts and lack of spending have all been because Sandy does not believe in big payroll!
Not because the Wilpons forced him to play moneyball,
Not because Madoff needed to take money from him,
it’s what he BELIEVES is good.
My contention is that the money he is spending is not getting that job done!
And if there is any factor FORCING Sandy to make cuts the only thing it COULD be is lack of attendance…
Which his letting reyes, beltran and K-Rod go when he did is not helping to solve that problem!
As for what he says I would prefer he just said nothing and got the job done than to make excuses for a plan he believes in but isn’t convincing a large portion of the fans!
Thanks for the interesting links, Metsi. I still assert that the cuts stem from the overall financial instability of Sterling Equties rather than just the Met ledger book as Sandy has ascerted for wouldn’t it have been less expensive to Sterlng Equities then loan out the money to the Mets if nothing else then to save on the accrued interest on at least that bridge loan? Sterling didn’t have the money to temporarily transfer from one holding to another, either.
So regardless of whether the Mets have to financially operate as an individual unit rather than just part of an overall bigger corporation, we both agree that the Madoff resolution will do little to change the situation in Flushing for it wasn’t the main source of the problem to begin with.
However, of the point being raised that it was Sandy more than the Wilpons who went on this cost-cutting craze, according to the author of that Capital New York story:
“Alderson confirmed Thursday what has long been obvious to anyone paying close attention to the Mets, which is that the new austerity isn’t a function of any new “Moneyball”-type philosophy of quality-through-thrift. The payroll is being reduced because the owners said it had to be.
“In fact, it is Fred Wilpon, the Mets’ C.E.O. and president, who has been responsible for Alderson’s embarrassing, repeated need to revise his 2012 payroll estimates—$130-150 million in February, $120 million in late May, $110-120 million in early September, and currently, under $100 million.”
Again, I can’t see the Wilpons letting Alderson bring the house down like he has unless they had no choice.
And getting back to the Mets itself losing $70 million this past year, is that after the approximate $70 million the club gets in revenue from the selling of televison rights to SNY?
Again, to make my case that while the Mets might be broke on paper, their sister company (SNY) that is also owned by Sterling Equities, paints an entirely different picture by connecting the two. Attached is an article from the TIMES that I posted a few months back.
http://www.nytimes.com/2011/02/03/sports/baseball/03sny.html?_r=1
Know we still disagree on this point which is fine with me. The bottom line is that the Wilpons are hurting financially no matter which we way we look at it and to bring the civil suit settlement into the picture is really quite meaningless. All that decision did was to slow down the bleeding, not stop it.
Well Joey whatever the truth is ultimatly SOMEONE has lied about the reasons for the Cuts…What the lie is and what the motivation is depends on which story you want to believe…
All I’m showing here is Sandy has said that it’s his decision making the Wilpon haters wrong….
Or it was their decision and Sandy was lying the rest of the time!
In either case Salaries were cut and the story Sandy seems to have stuck to most often is “It was MY Idea!”
“I don’t like High Payroll!”
Maybe just maybe BOTH is true!
And that would mean all those excuse makers for Sandy regarding Madoff were wrong as were the guys who support Sandy by claiming he isn’t playing MONEYBALL!
And all the folks who blame the Wilpons were wrong too!
Whose left?
The few who have made comments based on the moves actually made not the inspiration or motivation behind them!
WOW METSI, A COMPROMISE?! NOW THAT PROVES THAT MIRACLES CAN INDEED HAPPEN!
Do think Sandy has the public spin by sticking with his $70 million loss claim.
But the path the Mets have taken under his direction certainly does not make the case for the sabremetrics and/or money ball supporters. Those citing one can put together a good ball club on low (by today’s baseball standards) payrolls using the economic principles of money ball have been proven wrong. Those who say one can obtain under appreciated players through computer analysis have also taken a hit. Now, of course, the argument can be made that one year proves nothing – and that is correct – however, these moves were also made by the unofficial leader of both departments with his hand picked front office staff, many from his Oakland days. OK,forget about team progress – since almost half the 2011 roster on opening day were new acquisitions, how many came through with at least decent performances? Byrdak and Hairston? That’s it? With the way Capuano pitched, without having the seventh highest run support to back him up Chris would have been close to a 20 game loser!
Now, if Sandy would come out and say that there are limits even for the best of money ballers and sabre people, then we wouldn’t even be having this discussion. For me personally, my vociferous stand came from just hearing too many times last winter hailing the signings of Young, Capuano, Carrasco, Boyer, Bucholz, Emus, Polino, etc. because they were fed up with Omar’s way of doing things (which they were justified to feel) and that Sandy knew how to uncover under-valued or under-appreciated talent by going outside the box, starting with these players.
As mentioned before, it might not be Alderson as it was though who adamant in telling us how much success he was going to instantly bring to the Mets.
Mind you, this has nothing to do with the minor leagues and his draft picks. That is not (and cannot) be at issue at this time.
“But the path the Mets have taken under his direction certainly does not make the case for the sabremetrics and/or money ball supporters”
On this I agree!
If it is moneyball it’s the kind where NO statistical analysis was used whatsoever!
One of the things I have complained about!
I was fine when he started to let him use this DEEP STATISTICAL ANALYSIS everyone touted was going to happen. I don’t care how much he pays to get good players as long as he gets them!
But I look at the stats and I see no statistical reason for any of the signings other than “They Were Cheap!” (and in some cases really weren’t all that cheap!) And that pretty much where all my criticism of Sandy comes from!
I don’t care how much he spends but when he spends as much on crap as he could have to keep an All Star for two years then I have to call him on it!
Especially when the crap has nothing to do with the long term view we were told he had from his cheerleaders!
Had it with the Wilpons? I mean when they were allegedly making “madoffs millions”, was the team really successful? Think its going to get better?
Like “Wilpons OUT” facebook page to show your contempt at the current Mets ownership!!!
Agreed Metsi,
My reaction to every one of last winter’s signings was that they were cheap and made to fill roster spots as inexpensively as possible.
Part of the rationale was that if these players could be signed so cheaply by the Mets, it meant that other teams were not interested in them. Of course, that’s when the opinion that Sandy had a keen eye for under-valued talent not recognized by other clubs. Note, of course, this was before the time I even considered there were general managers that did not have a professional eyeball for talent.
The other part, of course, was too many coming back from serious injuries. Yes, Young I thought was a good gamble until recognizing his signing wasn’t the exception but rather the rule.
Would Sandy’s people been able to recommend other players of better caliber via free agent signings or trades had there been more money at his disposal? I certainly hope so. If finances were different, would they have recommended to Sandy to stick with KRod and Beltran instead of throwing in the towel – I certainly hope so as well. Again, there is a valid point for getting a highly rated pitching prospect in exchange for an aging veteran still having a good season – but that does not apply to a team being just five games out in the loss column. Or a young team trying to make a statement about itself.
Many point out the Mets were only three games above .500 but being that close with such a low winning percentage also indicated that for the moment it appeared that no one was going to run away it. If the Mets continued at their pace after that 5-13 start, 85 or 86 wins would not be out of the question baring those unforeseen injuries. As we both have pointed out, financially the excitement of important games in August and early September would have brought the fans out and thus that revenue would have offset most of the contract and bonus money they avoided paying (sort of like the settlement they just got, pay now but eventually be compensated). In turn, the negative momentum of last season has spilled over onto this one with a lack of season ticket sales. Very short sighted financial planning on Sandy’s end. Very short sighted player development as well for as I have contended, a successful 2011 with just a good winning record would have done so much in gaining experience, confidence, character and blending together as a team. That’s part of the re-building process too.