Wilpon’s Losses in Fraud Case May Affect Mets

By MICHAEL S. SCHMIDT

Fred Wilpon and Bernard L. Madoff grew up in the 1940s less than a dozen miles from each other in middle-class neighborhoods of New York City. Wilpon went on to become a wealthy real estate investor and the principal owner of the Mets, and Madoff one of the most successful traders on Wall Street.

Madoff and Wilpon have had a close personal and financial relationship for more than two decades, and Wilpon entrusted Madoff with hundreds of millions of dollars to invest, according to several people with knowledge of their relationship. But Madoff’s investment firm has collapsed in what federal authorities are describing as a $50 billion Ponzi scheme, and questions are being raised about whether the fraud could harm the Mets’ status as a big-payroll franchise.

Bob DuPuy, the president and chief operating officer of Major League Baseball, said Saturday that he and Commissioner Bud Selig had spoken with Wilpon on Friday. DuPuy said that all three believed that the fraud case would have no effect on the Mets’ operation.

But interviews Saturday with several people with knowledge of Wilpon’s business dealings revealed concern about significant problems that Wilpon and the Mets could encounter because of the reported fraud. Although it is unclear how much money Wilpon may recoup, any significant financial loss by a team owner raises questions about how those losses may affect the franchise.

“Any fraud that has been committed against Fred is something of deep distress to all of us and we feel very badly about the entire matter, but we all believe that this will not affect the team,” DuPuy said in a telephone interview.

Wilpon invested his own money and that of his investments firm, Sterling Equities, with Bernard L. Madoff Investment Securities. That company had a long track record of strong and steady returns, but Madoff was arrested Thursday morning by federal agents at his apartment in Manhattan and later charged with securities fraud for operating what the authorities were portraying as the biggest Ponzi scheme in financial history.

DuPuy said that the Mets were a separate entity from Sterling Equities and Wilpon’s other investments.

“The Mets are completely self-sufficient, and we have confidence that none of the other investments will affect the team,” DuPuy said. “They have been one of our most successful franchises on and off the field, and they are going into a magnificent ballpark next spring, and we expect it to be business as usual.”

Wilpon bought the Mets in 1980 in a partnership with Nelson Doubleday and became the team’s principal owner in 2002, when he bought Doubleday’s share of the team. The losses that Wilpon has sustained as a result of the Madoff fraud case could hamper his ability to pay back debt related to that buyout.

The losses could also hurt Wilpon’s ability to help the Mets weather the current economic downturn. Many sports leagues, including Major League Baseball, are bracing for lower revenue next season as consumers cut back on discretionary spending.

Perhaps most troubling is the possibility that losses incurred by Sterling Equities could put pressure on Wilpon to raise money by selling other assets. Because Sterling invested money directly with Madoff, Wilpon may have to come up with money to reimburse some of his own investors for losses. That may cause him to sell valuable assets, including a portion of his ownership in the Mets.

This year, Forbes magazine estimated the value of the Mets to be $824 million, making it the second-most valuable baseball franchise, behind only the Yankees.

After Wilpon became the Mets’ principal owner, the team had several down years. In recent years, Wilpon has made a concerted effort to put a more competitive team on the field. The payroll has surged as the team started its own television network, SportsNet New York, which broadcasts Mets games.

In 2008, the Mets had the second-highest payroll in baseball. Despite the current economy, the Mets have planned to keep their payroll at the same level in 2009. This week, the Mets signed Francisco Rodríguez to a three-year, $37 million contract to be the team’s new closer.

One person who has worked directly with Wilpon said that Wilpon and Saul Katz, the president of the Mets, who is a co-founder and president of Sterling Equities, were very close with Madoff.

“They were more than just business associates; they were friends and there was an enormous amount of trust,” the person said.

That friendship may or may not end up being something that Mets fans regret.

Eric Dash and Jack Styczynski contributed reporting.