Meet the debts; Wilpons' dire money woes hobble Mets' sale (insider deal with Madoff?)

NY Post ^ | JOSH KOSMAN

[Liz]

Mets owners are in a much tighter squeeze than they are letting on. Sterling Equities, which is controlled by Wilpon and son, Jeff, is supposedly worth some $750M and $1B. The Wilpons want to replace roughly $750M,...their losses with convicted Ponzi schemer Bernie Madoff.....and are now in settlement talks with the Madoff estate trustee, who claims they withdrew $48M more than they invested. They are opposing a move to unseal legal papers, saying the papers are attempted "character assassination"..... painting [Mets owners] as persons who should have known that Madoff did no trading".........

[Liz]

Madoff apparently made insider deals with many of his "investors." He would guarantee a certain return if they invested a certain amount. Federal authorities announced a $7.2B deal to settle the largest lawsuit with the estate of "philanthropist" Jeffry Picower---a big backer of Planned Parenthood. Mrs Picower claims her husband did not know Madoff was a crook (as she spent the fraudulent 900% profits). Mr Picower drowned after suffering a heart attack in his Florida swimming pool in 2009.

Keep in mind, Madoff was running simultaneous scams:

(1) a tax evasion scheme for wealthy businessmen ("losing" money is a tax write-off;

(2) a money laundering scam;

(3) a protection racket for affinity groups,

(4) aiding and abetting wealthy tax-exempt foundations to evade US banking laws and the IRS.

(5) hiding money for wealthy businessmen some of which was used for campaign donations (FEC fraud), and foundation fraud (IRS fraud)

THE MADOFF MO The trustee ID'ing his assets found Madoff used the time-tested Wall Street MO----creating a super-secret labyrinth of interrelated international funds, institutions and financial entities of almost unparalleled complexity and breadth......with assets and businesses in multiple places overseas that hid thievery, money laundering and tax evasion.

Keep in mind Bernie‘s investors were savvy, astute successful business people, accustomed to constructing, picking apart and analyzing financial statements. One investor who spoke to reporters was a stockbroker (her family invested with Bernie for generations---the family's patriarch founded the wildly successful Stop and Shop supermarket chain). Other inevstors gave Madoff $100-500 millions to "invest" for years and years.

WILPON ABIDED BY THE CONDONATION LEGAL PRINCIPLE The compelling legal principle of “condonation” is operating here---implied forgiveness for certain behavior. Meaning investors implicitly “condoned” Madoff’s actions over a period of time--sometimes decades.

His investors willingly acquiesced to Madoff's activities in several ways:

(1) Sending Madoff enormous sums of money, sums that were spread out over time (some families invested for generations), even AFTER they had the opportunity to assess their investments;

(2) Referring other investors to Madoff (if the investment was so bad, why did they bring in other investors?);

(3) Taking profits out of the investment, rolling it over, or putting more money in;

(4) Writing PERSONAL checks to Madoff's subrosa spinoff vehicle that was not listed on the Securities Exchange (tax evasion modus);

(5) Accepting, without question, Madoff’s obviously flawed monthly statements.

YEAH SURE---I BELIEVE THIS (/SNIX) The SEC did not have “the slightest clue” about Madoff's financial fraud. Until Madoff confessed.

[Above My Pay Grade]

>>>The Wilpons have been trying to replace roughly $750 million they lost by investing with convicted Ponzi schemer Bernie Madoff, a source said.

In addition, they are now in settlement talks with Irving Picard, the trustee for the Madoff estate, who claims Sterling is a “net winner” that withdrew $48 million more from two Madoff funds than it invested.<<<

So did the lose $750 million with Maddoff or make $48 million in profits? So much of the reporting on the Maddoff scandal has been sloppy and unclear from the beginning.

Did they really LOSE $750 million or was did they have $750 million in phony profits wiped out when the ponzi scheme collapsed?

[Liz]

Did the Wilpons really LOSE $750M or make $48M in profits?......or did they have $750M in phony profits wiped out when the Ponzi scheme collapsed?

Good questions----the crux of the matter is not how much they supposedly lost, but how much they took out.

Naturally, the Wilpons do not want details of their Madoff doings revealed----but we have read dribs and drabs. For instance their pal Larry King told GQ mag that the W’s lost almost a billion dollars with Madoff.

TO THE WILPONS anything---even if only on paper---is a loss to them.

[Wiggins]

Rumor also has it that the Wilpon’s also withdrew somewhere in the area of 550 mil to use for the CitiField construction. They also thought that they had over 500 mil still left in the investment after the large withdrawal.This is the second ponzi scheme the Wilpon’s have been involved in over the past few years. In 2009 Fred Wilpon and co-owner Saul Katz agreed to turn over 12.9 million after their firm, Sterling Securities withdrew 30 mil from a Hedge fund named Bayou Group which was a ponzi scheme.

[Above My Pay Grade]

Interesting information, thanks. Does the fact that the Wilpon’s were investors in two major ponzi schemes mean they were in on the schemes or are just really dumb? Given the manner in which they have run my Mets, I’m guessing dumb.

[Liz]

N-i-c-e input. Thanks.

[Liz]

Rumor has it that the Wilpon’s also withdrew some $550M for the CitiField ballpark construction. They thought that they had over $500Mleft after that large withdrawal. This is the second Ponzi scheme the Wilpon’s have been involved in. In 2009 Fred Wilpon and co-owner Saul Katz agreed to turn over 12.9M after their company Sterling Securities withdrew $30M from a Hedge fund named Bayou Group------ which was a Ponzi scheme.

Once again, we see how the rich stay rich------these people belong in jail. Their “investments” are classic tax evasion-money laundering schemes. The investors collude with the Ponzi schemer from the getgo-----even a so-called “loss” is a tax writeoff.

[Liz]

Here's another rich and successful Madoff investor (/snix).

Hamptons Mega Mansion of Ira Rennert, Founder of Renco Group.

This Sagaponack, NY, obscenely gargantuan mansion, dubbed Fairfield, is reportedly the largest occupied residential compound in America Square Feet: 66,000 / 110,000 (including outbuildings). It is situated on 63 prime acres and houses 29 bedrooms and 39 bathrooms. It also has a dining room that stretches 90 feet long, a bowling alley, two tennis courts, a squash court, a 164 seat movie theater, and a 200 car garage. This home also contains a rather rare item; its own power plant. Fairfield is currently valued at more than $185 million.

SOURCE hubpages.com/hub/Top-Ten-Mega-Mansions

MEGA MANSION HAS TAX EVASION WRITTEN ALL OVER IT Hamptonites complain this astoundingly palatial mega-mansion in the posh Hamptons is actually a "synagogue-residence-yeshiva" for Orthodox Judaism students. The complex---which rivals Versailles and Buckingham Palace----was built by Fifth Avenue Synagogue board chair, Ira Rennert---where Madoff and many of his investors also worshipped. Ira Rennert, was deeply invested w/ Madoff.

[Frantzie]

Bayou Fund was a famous hedge fund that turned into a scam.

Citi Field aka CitiCorp - the biggest business scam in US history. Bailed out to the tune of $380 billion - Rubin, Prince Al Waleed and many other criminals.

[Sawdring]

This could easily turn into a prophecy thread if the usual suspects find out that thing is a temple. It could easily be the rebuilt temple of Solomon.

[Liz]

CitiCorp Ballpark-----AKA CitiCorp headed by former Clinton Treasury Secy Robert Rubin-----the biggest business scam in US history. Bailed out to the tune of $380 billion.

Thanks for the reminder-----Rubin is notorious for calling the Treasury AFTER he was out of office----if it were his personal piggy-bank.

BACKSTORY: EXCERPT Rubin Shouldn't Escape Enron Investigation
Mark Weisbrot, Houston Chronicle, January 18, 2002
Knight-Ridder/Tribune Media Services, January 17, 2002 Columbus Dispatch (Columbus, OH), January 18, 2002

One of the leading political figures embroiled in the Enron scandal is being handed a "Get Out of Jail Free" card, and he doesn't deserve it. That is Robert Rubin, President Clinton's former Treasury Secretary.

A cover of Time magazine in 1999 displayed Rubin, Fed Chairman Alan Greenspan, and Larry Summers (number two at Treasury, later replacing Rubin) as "The Committee to Save the World." But more recently he has been caught peddling his influence for the financial giant Citigroup, where he left public office to become a top executive.

As Enron's accounting irregularities were being discovered and its fortunes rapidly sinking, Bob Rubin placed a call on November 8 to Peter R. Fisher, current undersecretary of the Treasury for domestic finance. According to Treasury, Rubin wanted to know if the Bush administration was going to intervene with the big credit rating agencies, who were about to lower their rating of Enron's debt. Since Rubin's Citigroup was holding hundreds of millions of dollars worth of Enron's debt, it had quite a large stake in the outcome of any such decision.

Treasury told the press that Fisher said no, and Rubin agreed with the decision -- as if this were just an informational call to discuss the pros and cons of political intervention to protect the credit rating on Enron's bonds. But this should not be allowed to drop. The public needs to know more about this phone call, and any others that Rubin may have made on Citigroup's behalf. Whether or not they are technically illegal, such actions are a blatant and corrupt abuse of one of the highest offices of our government.

Rubin and Summers did nothing to help Asian countries when they needed reserves to keep their currencies from falling, and we now know that Treasury's actions actually helped cause the crisis and made it much worse. They were not "saving the world." They were saving Citibank and others from losses due to their bad loans -- just as Rubin tried to do when he called Treasury about Enron's debt.

That is why it is so important that the current investigations pursue the political corruption involved in the Enron scandal. Rubin is holding one of the two biggest smoking guns so far discovered.  (The other is held by the Bush administration: According to former Federal Energy Commission Chairman Curtis Hebert, Jr., Enron CEO Kenneth Lay told him he would support him as Chairman if he changed his views on utility deregulation. Hebert said he refused. He was subsequently replaced by Pat Wood III, a friend of Ken Lay and George W. Bush).

Of course most of the political casualties of an independent investigation would be in GWB's camp.  After all, this is the Enron administration -- the list of officials with Enron ties is long and goes right to the top, including chief economic adviser Larry Lindsey (former Enron consultant); US Trade Representative Robert Zoellick (former Enron advisory board); chief political advisor Karl Rove (investor).

But the Democrats have been unsure about whether to pursue the investigation into the political realm....... they are undoubtedly afraid that some of their own luminaries, Rubin chief among them, might end up on the wrong side of a subpoena. It would be a shame if these fears, and the media's reluctance to pursue these issues independently, kept the public from learning the truth about the political corruption involved in Enron's rise and decline.

SOURCE http://www.cepr.net/index.php/op-eds-&-columns/op-eds-&-columns/rubin-shouldnt-escape-enron-investigation/\

Mark Weisbrot is co-director of the Center for Economic and Policy Research, in Washington, D.C. He is also president of Just Foreign Policy. 

[Wiggins]

Thanks for posting the article. As a long time Mets fan, I’ve been following this story closely. I feel sorry for the honest investors who lost everything. I always loved the game of Baseball and feel really bad about what it’s turned out to be.

[Sawdring]

I just read Ira Rennert’s wikipedia file. He is an interesting tycoon.

[Liz]

Temple of Solomon.

Hamptons Mega Mansion said to be a yeshiva.

[ken5050]

Hey Liz..great job as always..let me try and offer a possible explanation...

Let's assume that the Wilpon's actual investment ( cash put IN) with Madoff was say $100 mill, over time...THis is the missing number in the article..Further assume that they received fake statements over the years that their "investments" had grown to $750 mill, due to rolloing over and reinvesting the profits...and also, they had taken out, i.e. physically received checks for $48 mill..Thus they're claiming that they "lost" $750 mill.

Re the Mets, MLB has capital requirements for team owners. When the bought the team, and also, when the financed the new stadium, they obviously used the "value" of their Madoff accounts in their pwn financial statements. These are now as worthless as the Madoffs statements.

Also, whether or not investors roled over their profits or took them out as cash distributions, they had tax consequences, and will need to file amended returns. The IRS may have to reimburse some of the revenues collected, but they will fight that..and if, as you state, there were artificial losses generated to clean up the income, then many will have far bigger problems than just losing their money. They could face criminal prosecution for tax fraud. The trustee is attempting to treat ALL the experienced, knowledgeable BIG TICKET investors the same..IOW, assume that two different people each put in $100 mill over time..One let it grow, never took out anything, and had statements showing he was worth $750 mill, then was worth ZERO after the scam was exposed. The other put int he same amount, $100 million, let it grow, had statements showing he was worth $750 mill, but also, over time, had taken out $48 mill. The bankruptcy master is claiming, and IMHO, correctly, that the latter can't keep the $48 mill..since the whole thing was a sham...it must be clawed back..

[Liz]

Could you post some excerpt re Rennert’s activities?

[Liz]

Ken, many, many thanks for the incisive analysis. Great deconstruction of the crooked deal.

AS YOU POSTED: The bankruptcy master is claiming, and in your opinion, correctly, that the Wilpons can't keep the $48 mill. Since the whole thing was a sham...it must be clawed back.

I also think the legal principle of “condonation” looms larger here.

Many of Madoff’s wealthy investors implicitly “condoned” Madoff’s actions---sometimes over decades. They willingly acquiesced to Madoff's activities in several ways:

(1) Sending Madoff enormous sums of money, sums that were spread out over time (some families invested for generations), even AFTER they had the opportunity to assess their investments;

(2) Referring other investors to Madoff (if the investment was so bad, why did they bring in other investors?);

(3) Taking profits out of the investment, rolling it over, or putting more money in;

(4) Writing PERSONAL checks to Madoff's subrosa spinoff vehicle that was not listed on the Securities Exchange (tax evasion and money laundering);

(5) Accepting, without question, Madoff’s obviously flawed monthly statements.

Since the Wiplpons had already been nailed in another Ponzi, they clearly knew the ropes----and how things worked in a crooked scheme.

[Frantzie]

RINO idiot George Will who was bashing Palin said Bud Selig was the best commissioner in baseball history. Steroid Bud Selig.

The vermin buying ball teams today is pretty sickening.

The NFL smearing Rush as a racist. NBA and MBL just as bad.

The big whales who invested in Madoff knew what was going on. They could have driven to the CPA’s tiny srip mall office to check them out.

[Frantzie]

I think Picower was “drowned.” You play with crooks and you get burned.

[CutePuppy]

Did the Wilpons really LOSE $750M or make $48M in profits?......

Could be BOTH - made $48M on redeemed "real" taxable profits, AND lost $750M in unrealized "paper" loss.

Hypothetically, they could have invested $200M and has taken out, at any one time or over the years, $248M, realizing $48M in tangible profit, leaving the rest to grow to $1B, on paper (which was not worth the paper the Madoff statements were printed on).

That would leave them $1B - $248M or about $750M of "paper loss".

The $48M gain is the only thing that matters to Picard for clawback.

The problem for Wilpons could come if they tried to "monetize" their Madoff account, without withdrawing the funds from Maddoff - a typical strategy in corporate and wealth management to minimize taxes and increase leverage, using relatively cheap and tax-write-off debt.

If they took loans (let's say $500M) against their Madoff portfolio as a collateral, they would be on the hook for these loans, without enough liquid capital to pay back. Depending on how much they are in debt may decide how much of the Mets they may have to sell / collateralize.

As I've said before, this Madoff mess will go on for years. But it's nowhere near the damage that the Obama Pelosi Reid A--H---s network has done in recent years, for generations to come.