Saturday Seasons: The shadow of Bernie Madoff looms over 2011

It’s hard to determine who had a greater impact on the Met’s 2011 season: Sandy Alderson, the newly-hired general manager, or Irving H. Picard, the trustee appointed by a federal judge to recoup money lost by victims of Bernard Madoff’s financial fraud.

               That’s because overshadowing whatever Alderson accomplished or tried to accomplish with the Mets on the field – changing the culture, changing the players – was the Sword of Damocles lawsuit seeking $1 billion from Mets owners Fred Wilpon and Saul Katz, who were net winners in the Madoff scheme while others lost billions. So as the Mets stumbled their way to a 77-85 record, the continuing story over the course of the season was Wilpon and Katz’ efforts to sell a portion of the team to hedge fund billionaire David Einhorn, an effort that, like the Mets’ on-field efforts, fell flat.

               Alderson would later admit that he was unaware of the depth of the Mets’ financial problems when, in late October 2010, he agreed to accept the general manager’s post. His selection was, by most accounts, well received in and around baseball and by the beat writers, who viewed his arrival, in the words of Newsday baseball columnist Ken Davidoff, as “the dawn of a new era.”

               Alderson certainly had the right pedigree, having put together championship teams in Oakland (where he also learned to deal with tight budgets) and worked in different divisions of the commissioner’s office. In fact, a suggestion was raised that baseball commissioner Bud Selig had personally recommended Alderson for the job to his good friend, Wilpon.

               This is what Alderson said at his introductory press conference: “Baseball, it’s not always the result that defines the best effort. It’s about probabilities. Sometimes it’s bad luck. Sometimes there are other things that come into play. But our goal is to constantly improve the probabilities of success to the point where we will have success on a consistent basis.”  

               The one-word synthesis describing that would not become popular until years later, when it would be mouthed by David Stearns, standing behind a similar podium accepting, essentially the same job: sustainability.

Alderson’s first task was hiring a manager, and he methodically put together a list of 10 names, whittling them to four finalists, including Bob Melvin (who apparently finished second) and Mets CEO Jeff Wilpon’s favorite, former Mets second baseman Wally Backman, before making what at the time was viewed as a surprising choice: the team’s minor league field coordinator, Terry Collins

               The choice was surprising because, in the words of Ricky Ricardo (Lucy’s husband, not the Yankee radio announcer), Collins had some ‘splaining’ to do about how he had failed in three previous managerial jobs, two in MLB and one in Japan. In particular, Collins had to convince Alderson he had learned from his flameout as the Califonia Angels’ skipper, when he resigned after a player mutiny. “I did a bad job in managing the clubhouse, no question about it,” Collins said at his introductory press conference. “I learned from it. I guarantee it will not happen here.”

               Alderson buttressed that statement. “We’re confident that Terry is a different person. How different? What exactly is different? I don’t think anybody will know until we get into the season.”

               But just as things seemed to be looking up for the Mets, with a new general manager who had a plan and a field manager who could rein in a wayward clubhouse, Picard filed his suit on behalf of the Madoff victims, litigation that threatened to take a chunk from the Wilpon family’s personal wealth and threaten the financial stability of their baseball team.

               The suit claimed that Wilpon and Katz profited early on from investing with Madoff and continued to do so, even after they should have had suspicions about the legality of Madoff’s modus operandi. Wilpon and Katz claimed, in response, that they were innocent dupes like the rest of Madoff’s victims

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               While the friendship between Wilpon and Madoff was well known – they were guests at each other’s sons’ weddings— newspaper stories began appearing detailing the financial dealings between the Madoff and the baseball team. A New York Times story on Feb. 1, 2011, noted that when the Mets signed contracts that provided deferred money to players, the Mets invested that deferred money with Madoff’s firm. As an unnamed former Mets employee told the Times, “Bernie was part of the business plan for the Mets."

Another unnamed executive was quoted in the story: “ I remember vividly Madoff’s name being brought up a lot when” the team “would negotiate contracts, particularly with deferments… That money would be turned over to Madoff. And as part of friends and family of the Mets, they offered people the opportunity to invest in Bernie. There was talk about Bernie averaging like 15 percent for the Wilpons. It just seemed too good to be true, but then you think the owner has vetted it.”

When the costs of disability insurance spiked, the Mets began to self-insure, the former Mets employee was quoted as saying in the Times story that they did it by investing premiums with Madoff.

So dire was the threat posed by the Picard suit that the Wilpons announced they were putting 25 percent of the team up for sale. Fred and Jeff Wilpon said at the time that they were looking to raise cash “to address the air of uncertainty created by this lawsuit, and to provide additional assurance that the New York Mets will continue to have the necessary resources to fully compete and win. “We will continue to operate the franchise in a first-class manner,” they said.

While attempting to be calming, the disclosure reverberated throughout baseball, beginning with Alderson, who noted in a news conference a few days after the Wilpons announced the search for a buyer that he was not aware of the severity of the club’s financial problems when he interviewed for the general manager’s job three months previously. “When I interviewed and took this position, I of course was aware of the pre-existing involvement of the Wilpons and the Mets with Bernie Madoff,” Alderson said. “I wasn’t privy to the detail, not am I…..You’re right to say that some of the circumstances have changed. Would it have changed my position? I don’t think so.”

Selig summoned the Wilpons to MLB’s offices to talk about the team’s finances, a concern especially since MLB had advanced the Mets’ $25 million in late 2010 to help with their cash flow.

A few months later, a potential buyer emerged: David Einhorn, a hedge fund manager behind the firm Greenlight Capital. He offered to pay $200 million for a one-third stake in  the team, with an option to increase the stake to 60 percent after three to five years unless the Wilpon family returned the $200 million and allowed him to keep a smaller stake.

The negotiations would eventually collapse, with one of the main sticking points being the Wilpons’ unwillingness to give Einhorn majority control. Instead the Wilpons said they would seek to raise cash by selling smaller shares the team -- $20 million each for a small ownership percentage.

While all of this was going on, the Mets did actually play baseball. Alderson managed to create some payroll flexibility by releasing Oliver Perez and Luis Castillo. But again, injuries took their toll. The Mets began the season with Jason Bay and Johan Santana on the disabled list – Santana would be out for the season, recovering from shoulder surgery – and after a good opening series, the team hit a skid in April from which it never really recovered. Not helping was David Wright’s stress fracture in his back, for which he spent two months on the DL. At the All-Star break, the team was one game over .500, and Alderson decided to do some payroll – and player—shedding.

First was Francisco Rodriqguez, the closer the Mets really didn’t want to return after his blowup outside the family lounge the year before that sent his children’s grandfather to the hospital and the reliever to criminal court to face assault charges as well as to the disabled list with a torn thumb ligament. What the Mets really didn’t want was for Rodriguez to finish enough games to trigger a $17.5 million 2012 vesting option, but failing to use him risked facing a Players Association grievance. Alderson found a taker – the Milwaukee Brewers, receiving two minor leaguers in return.

“It gives us a chance to look at how we’ll allocate salary for next year,” Alderson was quoted as saying. “Some of the savings that we will achieve this year on his salary have been and will be invested in new talent acquisitions, amateur talent.”

Next came Carlos Beltran, whose relationship with management had become strained over the previous two years over treatment of his knee injuries. Alderson shipped Beltran, who waived his no-trade clause, to the San Francisco Giants, receiving in return the Giants’ top pitching prospect, a right-handed named Zach Wheeler.

               (A curious footnote: This is what Newsday’s Davidoff wrote about the trade: “The tense relationship between Beltran and the Mets – can’t wait until the conversations start on what logo should be on Beltran’s Hall of Fame plaque – at least concluded on a note that left everyone happy.” Time does heal a lot of wounds….)

               And as the season wound to a close the Mets did have one positive: Jose Reyes’ pursuit of a batting title, even as speculation mounted over whether he would return in 2012 or leave as a free agent. Reyes told manager Collins that if he got a hit in his first at-bat, he wanted to be removed from the lineup to ensure the title. When Reyes beat out a bunt in his first at-bat, he touched first and headed toward the dugout as Justin Turner emerged as a pinch runner. The fans booed, and even the SNY broadcasting crew were taken aback. “I’m stunned,” Gary Cohen said. “I don’t know what to say,” Ron Darling chimed in. And Keith Hernandez added, “To be honest with you, I am not going to agree with this at all. But it is what it is.

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               Two and a half months later, Reyes signed a six-year, $106 million contract with the Miami Marlins – right about the time the Mets were finalizing a $40 million “bridge” loan with Bank of America to tide the team over while it sought new investors

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               Three months after that – just before the 2012 season began -- Katz and Wilpon settled Picard’s suit, agreeing to pay $162 million over five years to settle the claim that they willfully ignored what should have been bells that Madoff’s returns were too good to be true.