Wilpon and his brother in law, Saul Katz, had over 500 accounts with Madoff, according to one analysis. They were sued for $1 billion by the trustee for the victims who claimed they knew, or should have known, that Madoff’s returns were fraudulent.
The collapse of Madoff’s fund changed everything for Wilpon and Katz, depriving them of an automatic source of income that had helped plug the financial holes of their often struggling baseball team. Hundreds of millions of dollars — even some deferred payments owed to Mets players — had been invested with Madoff and his magical guaranteed 15 percent, or better, return.
As the Madoff scandal unfolded, and the broader Wilpon family empire was forced to pay a multimillion-dollar settlement by the trustee unwinding the fraud, the Wilpons struggled to maintain control of the Mets. The family resorted to taking out at least $65 million in loans just to meet payroll and other obligations, including $25 million from their fellow owners in Major League Baseball. After years of costly litigation, the Wilpons agreed to pay $61 million to the trustee.
Since the Madoff crisis, and as Fred Wilpon and his siblings and relatives approached their 80th birthdays, the decision for the family to relinquish control of the Mets seemed almost inevitable. Since 2011, the Wilpons have been seeking investors to help carry its financial burdens.
When the Wilpons first invested in the Mets, baseball was a mostly harmless dalliance for wealthy businessmen. Now it is an $10 billion-a-year business, with huge risks. People familiar with the team’s finances said the Mets have lost more than $60 million during each of the past two seasons, as the team struggled to attract fans, and they are at the limit of debt allowed by Major League Baseball rules.
In 2012, with the economy rebounding, the Mets sold 12 minority shares in the team, including one to Cohen, raising $240 million. That enabled them to pay back loans that were overdue.
Their two-thirds ownership of Sportsnet New York, the regional sports network, has helped cover financial shortfalls related to the team, which is now carrying hundreds of millions of dollars in debt, exacerbating tension between Jeff Wilpon and his relatives. In recent months, selling the franchise became the most equitable way to divide up the asset among the Wilpon family members.
When the deal with Cohen closes, however, the Wilpon family will be reduced to minority investors in the team. According to the deal, Fred and Jeff Wilpon will maintain what figure to be largely ceremonial roles during a transition period. And then the Wilpon clan will once more be just another New York real-estate family with a closely held company that, like all real-estate families, wins some and loses some.