mad

*Note* This was written and published in 2014

On December 11th 2008 Bernie Madoff was arrested for conducting an elaborate multi-billion dollar Ponzi scheme. The scheme essentially made 20+ billion dollars vanish from his victims. Fred Wilpon, the owner of the New York Mets and Sterling Equities invested a significant amount of money with Bernie Madoff. Much of the invested money helped fund the Mets payroll. In the weeks following Madoffs arrest it was reported that Wilpon may have lost up to 700 million dollars in the Ponzi scheme. It was later reported that Wilpon may have made as much as 300 million dollars off of the phony interest rates. Soon after, in 2011 the Wilpon family was hit with a 1 Billion dollar lawsuit for false profits. Irving Picard, the lawyer representing the Madoff victims stated the Wilpons ignored warning signs that Madoffs high returns might not be real. By March 2012, the Wilpons would reach a 162 million dollar settlement with Madoff victims. Payments reached in the settlement are not due until 2016 and 2017.

Back in late 2008, the Mets primary sponsor, Citi Bank was going through bankruptcy and needed a 45 billion dollar bailout from the government. Less than a year earlier Citigroup had agreed to a 20 year 400 million dollar deal for Citi Field naming rights. So even prior to the Madoff Ponzi scheme, there were financial concerns regarding the new stadium. Less than a week after Madoffs arrest, the Wilpon’s stated that the substantial losses will not affect the finances of the new stadium and the future finances of the organization. At first this seemed to be the case, as the Mets would sign premier closer Francisco Rodriguez to a 3 year, 37 million dollar deal in December 2008. And the following December the Mets would sign Jason Bay to a 4 year, 66 million dollar contract. But soon after this, the Mets financial problems would be revealed and the day to day operations of the team would be affected. By early 2010 the Wilpon family was strapped for cash and was forced to borrow 65 million dollars from Major League Baseball and Bank of America. In early 2011, the Wilpons were close to selling a minority stake in the team for 200 million dollars to David Einhorn. But talks soon broke down after the deal allowed him the option to buy a majority stake in the Mets, if he wasn’t paid back in 3-5 years. But by 2012 the Wilpons were forced to sell 40% of the team (minority stake) for a total of 240 million dollars.

Fred Wilpon, the owner of the Mets, left, with Bernard L. Madoff at Shea Stadium in 1995

Fred Wilpon, the owner of the Mets, left, with Bernard L. Madoff, right, at Shea Stadium in 1995

On the field in 2008, the Mets were considered one of the largest spenders in all of baseball and had a payroll of 137+ million dollars. In 2008 the Mets had the largest payroll in the national league. They also boasted the highest attendance in the national league, as over 4 million fans entered the gates in Shea Stadiums final year. In the first season at Citi (2009), the Mets payroll continued to rise as they signed Jason Bay to a long-term contract. But after an unsuccessful 2009 season and the Wilpons strapped for cash the Mets would start to cut payroll. After the Jason Bay signing in late 2009, the Mets would not spend a significant amount of money on a free agent player until December 2013 when they signed Curtis Granderson. During that 4 year span, the largest free agent contract handed out was a 2 year 12 million dollar contract to reliever Frank Francisco. The Mets would also let fan favorite Jose Reyes sign with the Miami Marlins for 6 years 106 million dollars in December 2011. By 2013 the Mets would have the 18th highest payroll in baseball and a discouraged fan base. The five straight losing seasons, and lack of added talent forced fans away from Citi Field. After the 2013 season the Mets had the 3rd worst attendance in the National League at 2.1 million fans. In a 5 year span the Mets had cut its attendance rate in half. And even in a year when the Mets hosted the 2013 All Star Game, the Wilpons lost 10 million dollars.

Backtrack to 1999, the Mets were fed up with the struggling Outfielder, Bobby Bonilla. In 1999 Bonilla contributed very little to the Mets and posted a .160 batting average. The problem was the Mets still owed Bonilla 5.9 million for the 2000 season. Bonilla would approach the Mets and offered them a deal consisting of deferred payments. The Mets wouldn’t have to pay Bonilla any money until July 1st 2011. The Mets agreed to pay Bonilla 1.192 million dollars a year from 2011 to 2035. The Mets did this because they believed they would make money. The Mets invested that original 5.9 million dollars with Bernie Madoff and expected to make 60 million dollars off of his high interest rates. All was lost and now the Mets are stuck paying Bobby Bonilla 1.192 million dollars every July 1st. During the 2013 season Bobby Bonilla would make more money than any other outfielder on the Mets roster.

As the Mets payroll continued to dwindle, other teams signed television contracts, which allowed them to increase payroll. There are currently 17 Major League teams with payrolls of 90+ million and the Mets are not one of them. With other teams increasing their payroll and the Mets decreasing their payroll, many believe Major League Baseball should force the Mets to increase payroll. If the Wilpons financial woes continue, baseball could step in and force them to sell the team. Back in 2011, baseball stepped in and forced Dodgers owner, Frank McCourt to sell the team after he filed for bankruptcy. Personally I believe Bud Selig and the league will not step in and take control of the Mets due to his friendly relationship with the Wilpons. Frank McCourt was generally disliked by most owners and league officials, while the Wilpons are in good standing with league officials.

During 2012, reports would surface about how much the day to day operations of the Mets were determined by the Madoff Ponzi scheme. Over a 15 year period, the Wilpon family was getting a minimum 10% return on investment from Madoff. In many years such as 2002, the Mets wouldn’t have made a profit if it were not for the Madoff returns. Sterling Equities would even take out private loans at 5%, just to invest it with Madoff and get a 10-14% return. At the time of Madoffs arrest, Fred Wilpon had 17 accounts open with Madoff.

From 2011 to 2013 the Wilpons lost a significant amount of money by maintaining majority ownership over the Mets. In the 2011 season alone the Wilpons lost 70 million dollars. Even with a payroll drop they still lost 25 million and 10 million in 2012 and 2013. In recent years the team has tried to boost attendance to gain more revenue by offering student discounts, cheaper ticket packages, and by allowing fans the opportunity to buy 2013 All Star Game tickets if they have a season plan. This has failed as Citi Field’s attendance was down for the 5th consecutive season in 2013. As the Wilpon’s continue to lose money, one must wonder, under the current ownership will the Mets remain a small budget team in a large market.

 

 

 

the7line company's "sell the team shirt in 2012 (Left picture) Fans cover their faces with paper bags after 2007-2008 collapses(middle and right picture)

The7line company’s t-shirt in 2011, (right), & Sad Mets fans wearing bags over their heads after a disappointing 2007 and 2008 season,(left).

 

In my opinion the Wilpons should have been forced to sell the team, when they were hit with the 1 billion dollar lawsuit. In the years since the Madoff Ponzi scheme, we have seen that the Wilpons have failed to turn a profit in one of the largest sports markets in the world. Major League Baseball should have stepped in and taken control of the day to day operations of the Mets. Although Sandy Alderson has done a good job developing minor league players, the current ownership will not able to afford them once they become free agents. In a New York market, teams should be operating as a big market team and should put a premise on retaining/signing (star players. With loan payments due in 2016 and 2017, the only hope for the Wilpon family to turn a profit anytime soon is to hope that the Mets young pitching can make the team playoff contenders in the near future.

 

 

 

jeff

Jeff Wilpon, son of Fred Wilpon, chugging down a bottle of Champagne after the Mets won the 2015 pennant.

Today (2/19/16)

A lot has changed since I wrote this article in 2014 for my Sports Economics class. Although the Mets spent like a small market team in 2015, they made a big splash by trading for Yoenis Cespedes at the deadline. No one would have predicted in the beginning of the season that they would make it to the World Series. During this off season, they made an even bigger and shocking splash when they resigned him. This signing made it clear that the Mets are willing to open their pockets for the right price. Their current payroll since signing Cespedes has jumped to $125 million dollars.  Hopefully all the Madoff troubles are now behind them and they can turn this team into a World Series winning team and a dynasty.

 

 

 

 

 

Sources:
http://www.nydailynews.com/sports/baseball/mets/jeff-wilpon-bernard-madoff-scandal-won-affect-mets-bottom-line-article-1.357283, Bernard Madoff scandal won’t affect Mets bottom line
http://finance.fortune.cnn.com/2013/09/10/government-citigroup-bailout/, Government banks 15 billion on Citigroup bailout
http://espn.go.com/blog/new-york/mets/post/_/id/40344/rapid-reaction-wilpons-settle-for-162-million, Wilpons settle for 162 million
http://espn.go.com/new-york/mlb/story/_/id/6916366/david-einhorn-deal-buy-minority-stake-new-york-mets-dead, David einhorn, Mets fail to reach deal
http://www.baseballprospectus.com/compensation/cots/national-league/new-york-mets/, Mets payroll by year
http://www.celebritynetworth.com/articles/entertainment-articles/bobby-bonilla-baseball-contract/, How Bobby Bonilla landed the luckiest baseball contract ever
http://nypost.com/2014/01/30/new-loan-could-end-mets-money-problems/, New loan could end Mets money problems
http://deadspin.com/5886867/how-bernie-madoffs-money-ran-the-mets, How Bernie Madoffs money ran the Mets.

 

About The Author

Hey guys! My name is Breanna and I am a die hard Mets fan from Long Island. My favorite Mets pitcher is Noah Syndergaard. My favorite outfielder is Juan Lagares. My favorite infielder is David Wright! My all-time favorite Met player is Jose Reyes! Jose Jose Jose Jose!!!! The best mets gave I went to was on June 1st 2012 when Johan Santana threw the Mets first no hitter! Cant wait to see you all at Citi Field in 2016.