Madoff v. the Mets, There is Still Plenty of Incentive to Settle
Over the last few days, we have seen how bruising the legal battle between the Madoff trustee, Irving Picard, and the Mets principal owner, Fred Wilpon can get. Picard has leveled somewhat unique allegations that, although the Mets ownership may not have been directly involved in the Ponzi scheme, they turned a blind eye at obvious fraud and continued to dump money into Madoff’s “unclean” hands (and remove millions in false profits). The Wilpons, for their part, argue that they are victims of Madoff and their good reputation is being destroyed by an over-zealous bankruptcy trustee who is going too far to try to financially ruin the Wilpons.
All of this is the recipe for a long legal fight. When reputations are at stake and coupled with the potential risk of a $1 billion claw back, the parties will dig in their legal heels. This type of protracted and personal litigation can take several years to unwind through the lower courts and the appellate level courts. The attorneys’ fees in a legal death match will be astronomical.
While the parties have broken off settlement negotiations, the incentive to talk and find a resolution to this quagmire still must way heavy. A prolonged battle does not serve the true interests of the Mets or Picard. Picard’s job is to get as much money back, as fast as possible, to liquidate the company and pay the victims some restitution. Likewise, the Mets and the Wilpons need this legal cloud to pass. All of the Mets player moves (or lack thereof) are being judged by this crisis and their fan base is growing more and more dejected. Moreover, any sale of a portion of the team to raise money must be severely hampered by the threat of full bankruptcy if the Wilpons lose this litigation.
We know that published reports state that the Mets received about $300 in false profits in the Madoff scandal. We also can conclude that a $1 billion litigation hit would cause the Mets to fall into bankruptcy liquidation which would mean there would be a lot more creditors (i.e. stadium financing bondholders) looking for a piece of pie besides Picard. Given this situation, it seems that a settlement of between $400 to $500 million might be a home run for the parties. If Mets know they can settle in this range, the Wilpons can likely raise these funds in a partial sale of team and its TV network. In addition, Picard could make a sizeable recovery for the victims and still extract some punishment against the Wilpons.
If not, the legal fight here could break everyone involved.
My name is Christopher Fusco. I am the managing partner of Callahan & Fusco, LLC with offices in New York, New Jersey, and Pennsylvania.