Thursday, February 24, 2011

REPUTATION ON THE EDGE

Here is another example of how rough stories in the media can wreck the reputation of a leading institution and the man at the helm. I am not blaming the press; I am blaming the actions of the man at the helm, who inspired the negative coverage. The story this time is about the New York Mets — one of New York's two baseball teams — and its owner, Fred Wilpon.

What happened? Years ago, Fred Wilpon selected record-setting Ponzi-scheme ace, Bernard Madoff (who, about a year ago, was sentenced to life in prison), to manage the lion's share of his and the Met's investments.

Wilpon claims he was victimized like many others, but Irving Piccard, the trustee attempting to recover funds for the real victims of this fraud, is suing Wilpon for $300 million in fictitious profits and other items that could bring the total to $1 billion. Why is Wilpon a target? Because, as a power-player, the Mets owner had the ability to influence other high-profile individuals with deep pockets to invest with Madoff as well, increasing Madoff's pool of money and the size of Wilpon's own returns. The Mets owner even started a "private club," inviting only certain wealthy individuals to become Madoff investors, as long as all investments were made through Wilpon's company, Sterling Equities, and the actual investors promised they would have no contact with Madoff directly. I'd call this a red flag, wouldn't you?

In his defense, Wilpon has said, “We lost over half a billion dollars… We put in money — I personally put in money within three weeks of [Madoff’s] going under. I know, you look at me like I have a third head, but I’m not stupid. I wouldn’t do that, I wouldn’t risk my family’s money if I thought there was anything wrong.”

Yet there were several other red flags. Leaders in the Mets organization marveled at Wilpon's returns from Madoff and wondered how he did it.

Word has it that Wilpon tried to settle with Piccard out of court, but when the two men could not agree, it hit the press. As I see it, once it hit the press, the Wilpons were doomed. The headlines have been ragged and accusatory -- with good reason. If the Wilpons try to fight this in court, the case will go on for years, totally sullying the reputation of the team, which has already been badly hurt. If they give in to Piccard's demands, they will be financially finished and devoid of any credibility. They are already seeking a 25 percent buyer of the Mets to help sustain their ownership. And despite Wilpon's protestations that this will not affect the business of the team, the Mets have been quiet in the off-season, with no major player acquisitions of note. And indeed there are needs.

Bottom line? There is a very dark cloud over the team. No matter what the Wilpon family does, they are dead meat. New York cannot afford to have a tainted owner of one of its flagship institutions — the fan base will not allow it — and Wilpon is tainted no matter how this turns out. I predict that the Wilpons will be forced to sell the team in order to rev up the organization's credibility... which is the only way it can sustain itself in New York.

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1 Comments:

Blogger Gene said...

Ken,

You can always root for a good team as there is another option in New York...

A Boy from the Bronx

Friday, February 25, 2011 4:17:00 PM  

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