For the most part, it’s done. The legal cloud that has hung over the New York Mets at least sees a crack of light through it as a $162 million settlement was reached yesterday morning with the trustee looking to recoup what was seen as “net wins” by ownership of the Mets investing heavily with Bernie Madoff, the man behind the largest Ponzi scheme in US history.
And while the settlement eases the legal woes for the Mets, it really is nothing more than a zero net gain. Yes, no more money can be extracted through the legal case, but larger issues are what have placed the club in such a precarious state.
Some have said that $240 million in minority stakes in the club should help, but that’s not the case. The money that flows in will, for the most part, flow right back out. The Mets have now paid off the $25 million loan that MLB extended, a $40 million loan to Bank of America and an undisclosed amount of other club debt. The rest will be used to meet operational expenses. The non-Mets investors are said to be hedge-fund magnate Steven Cohen, who is bought a $20 million share and is considered to be one of two front-runners for the purchase of the Los Angeles Dodgers, and according to the Wall St. Journal, media executive Bob Pittman and venture capitalist Kenneth Lerer who combined to purchase one $20 million stake. Shares related to the Mets inclide four shares from their cable television rights partner, SNY, and two from Fred Wilpon and Saul Katz.
But, this money that is flowing in does nothing but really keep the club afloat. What most don’t realize is that the thing that has created animosity toward the Wilpons and Saul Katz was the very thing that had the club be one of the highest spenders in free agency: Bernie Madoff.
Indeed, the bloated contract structure came about by money that flowed in from Madoff investments. When he was arrested in 2008, that money dried up. When coupled with the dour economy, the poor showing in the standings, and with it all, a drop in attendance, without one penny going to fight the Madoff case, the Mets were losing money.
So, what is occurring now is a “truing up” of sorts. Reality meets player payroll. The bad thing is, fans will see the loss of spending as tied directly to the Madoff scandal, when in reality, the drop in spending is coming from the Madoff investments running dry.
This isn’t to say that Sterling doesn’t own some of the blame. Backloading contracts to the point of near obserdity is going to eventually bite you. The bigger problem is this: you can’t get revenues to increase until you get to winning on the field. The Mets weren’t exactly ripping up the standings before the money dried up (although, injuries haven’t helped), and until they do so, it’s going to be tough at the gate. To add, many of the Mets suites are up for renewal at a time when evey cent is needed.
Maybe the best way to look at it is that the Madoff revenues enabled poor decisions to be made. Blame that on Omar Minaya. Blame that on Wilpon and Katz. Whatever. The bottom line is the bottom line was elevated artificially outside of baseball revenues, and when headwinds hit, here we sit.
Maury Brown is the Founder and President of the Business of Sports Network, which includes The Biz of Baseball, The Biz of Football, The Biz of Basketball and The Biz of Hockey. He writes for Baseball Prospectus and is a contributor to Forbes SportsMoney blog.. He is available as a freelance writer. Brown's full bio is here. He looks forward to your comments via email and can be contacted through the Business of Sports Network (select his name in the dropdown provided).
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