Fred Wilpon - Madoff Investment Scandal

Madoff Investment Scandal

Wilpon was one of the investors who invested a significant amount of money with Bernard Madoff which was lost when the Ponzi scheme collapsed in December 2008. It was reported that Wilpon had "lost" about $700 million because of Madoff, which has led to speculation that he may be forced to sell the team. Since then Wilpon has said that his losses were "substantially less" than that figure. Reports later surfaced that Wilpon and his family actually made about $300 million with Madoff and had not lost money as previously reported. As a result in December 2010, Wilpon was named in a lawsuit filed by Irving Picard on behalf of the victims of Madoff's investment scandal and on January 28, 2011 Wilpon issued a statement seeking “one or more strategic partners” interested in buying 20 to 25% interest in the Mets to offset pending losses due to litigation (which may total up to $1 billion). Wilpon and his partner and brother-in-law Saul Katz were involved in another Ponzi scheme which was orchestrated by Samuel Israel III and they were forced to pay $13 million to investors when Israel's hedge fund collapsed. It was revealed that Wilpon utilized Madoff in running the Mets' finances. It became a common practice to negotiate deferred money into players' contracts and then put that money with Madoff to invest because they were able to make money for themselves before paying players. The lawsuit also contends that Madoff funds were used to cover team expenses such as payroll and its minor league club in Brooklyn, as well as financing the creation of the cable network SportsNet New York and Citi Field. In an interview while in prison, Madoff claimed that Wilpon "knew nothing" about his Ponzi scheme. After it was reported that Major League Baseball loaned the Mets $25 million in November 2010 to shore up their finances, Wilpon is now willing to sell up to a 49% ownership stake of the team at a cost of $200 million. On May 26, 2011, it was reported that Wilpon has agreed to sell a minority share of the Mets to David Einhorn, president of the hedge fund Greenlight Capital, but ended negotiations on September 1. After the Mets received a $40 million loan from Bank of America in November 2011, Major League Baseball is monitoring the situation closely and is prepared to take control of the team from Wilpon if he defaults on the loan. On March 19, 2012, Wilpon agreed to settle Picard's lawsuit for $162 million.