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“Some Schmuck in New York”: Wilpon’s Woeful Week
Posted By Alex Remington On May 26, 2011 @ 4:30 pm In Daily Graphings | 70 Comments
New York Mets owner Fred Wilpon has had a hell of a week. First, he gave two eye-raising interviews that appeared in the last few days (both are dated to print magazines that will appear on May 30): one with the New Yorker’s Jeffrey Toobin and one with Sports Illustrated’s Tom Verducci. The Toobin interview painted Wilpon as a kind, trusting, earthy guy who got suckered by Bernie Madoff and dearly loved baseball, yet who wasn’t above criticizing his own players, calling himself a “schmuck” for overpaying Carlos Beltran, or telling former GM Omar Minaya he was “full of shit.” Then, just today, he announced that he was selling a $200 million stake in the team to David Einhorn, a hedge fund manager.
The Toobin interview had more colorful language, but Sports Illustrated had the real bombshells: Wilpon admitted that the Mets could lose up to $70 million this year and that the team will likely be shedding a lot of salary, with $64 million coming off the books this offseason. Writes Verducci: “They will not put much, if any, of that money back into the major league payroll.” When Wilpon’s comments came to light, as the New York Daily News reported, Mets manager Terry Collins tried to clear the air with the team: “Don’t get (bleeping) distracted. We’ve got to (bleeping) focus on winning (bleeping) games.”
The Madoff issue casts a pall over everything, but that’s a matter for Irving Picard, the trustee of Madoff’s investments who is suing Wilpon, and for the courts. (There is no dispute that Wilpon did not know that Madoff was a scam artist. The dispute is whether Wilpon ought to have known, and just how culpable that ignorance makes him. Picard has sued Wilpon not just for the money that Madoff made him, but for everything he originally invested, the principal — Wilpon’s personal money, mostly real estate and the New York Mets. Hence the billion-dollar lawsuit.) Toobin seems to think that Wilpon is blameless, while sportswriter (and self-nominated former Mets GM candidate) Howard Megdal sharply disagrees. But whatever Wilpon’s culpability, he has seen hundreds of millions of dollars vanish as ignominiously as the Mets’ playoff hopes in 2007 and 2008, and as he’s seen his losses rise, and the value of the team fall, he upped the share of the team that he was willing to sell. It’s unclear just what percentage Einhorn will literally control — it’s somewhere south of 49 percent, but the actual number could be hammered out over the next month.
Wilpon got the most press for comments he made to Toobin that were unexpectedly critical of his team.
Of Jose Reyes: “He thinks he’s going to get Carl Crawford money… He’s had everything wrong with him. He won’t get it.”
Of David Wright: “A really good kid. A very good player. Not a superstar.”
Of Carlos Beltran: “We had some schmuck in New York who paid him based on that one series [Wilpon is referring to himself]… He’s sixty-five to seventy per cent of what he was.”
Of Ike Davis: “Shitty team—good hitter.”
Frankly, my first thought was that they were pretty much on the money. Jose Reyes has “had everything wrong with him,” a speedster who early in his career had injuries to his hamstring, ankle, and fibula, and who in the last two years has missed significant time with injuries to his calf and oblique, as well as a thyroid condition. Moreover, David Wright certainly was a superstar from 2005 to 2008, but his performance has fallen off significantly in the last two years, both in the field and at the plate, and he’s batting .226 this year; right now, calling him a very good player but not a superstar sounds entirely accurate. And now that Carlos Beltran is an average right fielder rather than a stellar center fielder, he probably is “sixty-five to seventy per cent of what he was” — though, of course, 70 percent of a seven-win player is still a five-win player, and the way he’s hitting that seems eminently possible. And, yeah, it isn’t a very good team.
The problem is, the Toobin interview basically just devalued the franchise, while the Verducci interview confirmed that the money situation was more dire than he was previously willing to admit. As Megdal writes, Wilpon probably talked to the New Yorker because he wanted to seem like “an approachable and unpretentious guy.” And he genuinely does seem like a good guy, a working-class kid who grew up in Brooklyn and rooted for the Dodgers — his best friend growing up was Sandy Koufax, whom Wilpon convinced to switch from basketball to baseball — whose dream to own his hometown baseball team came true. In both articles, people are quoted as saying that he is loyal to a fault, and not only to Bernie Madoff. As Steve Phillips told Verducci: “Because of his loyalties, he probably kept me around longer, hoping things would turn around, than others would have.”
Still, as much as Wilpon loves baseball, he has had the capacity to make remarkably poor decisions, including his decision to trust Bernie Madoff and his unwillingness to fire Steve Phillips, and the Toobin interview is one of them. No one likes to hear the boss describe his club as a “shitty team,” even when it’s accurate, especially when the boss is trying to sell nearly half of it. The Einhorn deal is expected to be finalized next month, and while most details have yet to emerge, the 74-year old Fred Wilpon is still expected to be the day-to-day decisionmaker, while the 42-year old Einhorn announced: “The Wilpons remain in control of the team… I’m just looking forward to the overall experience this investment will lead to.” Hopefully, Einhorn will bring a measure of financial stability to the team and help Wilpon curb his worst tendencies, because most of the worst scandals of Wilpon’s ownership have come to light since Wilpon bought out his former partner, Nelson Doubleday, in 2002.
To me, the most remarkable revelation of the week was the fact that Bernie Madoff essentially provided the inspiration for arguably the stupidest and worst sports contract of all time: the Bobby Bonilla deferral. The Mets wanted to release Bonilla in 2000, but they didn’t want to pay him the remaining $5.9 million on his contract. So, instead, they agreed to defer payment for more than a decade, and then pay him $29.8 million — around $1.2 million a year for 25 years, from 2011 to 2035, starting in about a month. The Mets based the deal on an interest rate of 8 percent, just below the prime rate, and chuckled all their way to the bank because they planned to invest the money they saved with Madoff, expecting his usual 10 to 12 percent returns each year. As Verducci writes, the move helped them win the pennant:
By deferring the money to Bonilla, the Mets freed cash to fortify their roster for the 2000 season. On Dec. 23, 1999, they traded for pitcher Mike Hampton and outfielder Derek Bell in a deal that added $8.1 million to the payroll. Eleven days later they officially released Bonilla. The 2000 Mets would win the NL pennant. The Madoff fund made the roster moves possible.
The Mets, Wilpon says, used Madoff investments to fund deferred payments “several times,” making them to pitchers Bret Saberhagen and Tom Glavine, among others.
Wilpon agreed to pay Bonilla five times as much money as he owed him, simply because he thought that Madoff’s returns would continue forever. He may not have been aware that it was a scam, but putting that much money on the line for a quarter-century of expected market-beating returns is almost criminal stupidity, and that’s essentially the argument that Irving Picard is using: Wilpon’s company “turned a blind eye and continued to take money from an enterprise it should have known might be a fraud.”
That blind eye has already cost Fred Wilpon a great deal of money, and a piece of the Mets as well. He will have to hope that he does not lose even more.
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