NEW YORK ( TheStreet) -- The New York Mets already got one "bailout" from Congress. Could they be in line for another? The Mets' first indirect bailout came via Citigroup ( C). When Congress approved the Troubled Asset Relief Program (TARP), it allowed the Mets to hang onto the $400 million in naming rights they got from the bailed-out banking giant for agreeing to call their new ballpark Citi Field. Now Rep. Gary Ackerman (D., N.Y.), whose Queens district includes Citi Field, has introduced legislation that would prevent trustees from clawing back money from investors in Ponzi schemes like the one conducted by Bernard Madoff that came apart when his sons reported him to federal authorities in 2008.
Clawbacks are a way of helping investors who lost money in a Ponzi scheme. Some investors with Madoff, whose fraud went undetected for years, withdrew more than they put in. While they may have thought what they were withdrawing was investment gains, it was actually just fresh money being added by other investors. Clawbacks would likely hit the Mets' owners pretty hard, because they actually netted $48 million from their dealings with Madoff, according to reports from The Wall Street Journal and the New York Daily News. Citing bankruptcy filings, the newspapers reported that the Mets Limited Partnership withdrew about $571 million from two accounts with Madoff, after having put in $523 million. Perhaps expecting to lose their legal battles over the Madoff money, the Mets signed just one free agent in the off-season, much to the dismay of their fans. The front page of The New York Times Friday noted that attendance at Citi Field is down nearly 7,000 fans per game compared to last year, the worst decline in Major League Baseball. Maybe the six members of New York's congressional delegation who are supporting Ackerman's bill are afraid the team will end up in New Jersey if they don't step in. Buck up, folks: At least you've got the Yankees. The Mets' political contributions couldn't possibly be a factor in the proposed legislation. After all, Sterling Equities, which owns the Mets, was only the 14th largest donor to Ackerman in the 2008 election cycle, giving him $9,812 -- barely enough for a cab ride from Queens to Washington, D.C. Ackerman told TheStreet that neither the Mets' owners nor their representatives communicated with him about the legislation. "I don't know how the Mets made out in the end," Ackerman says. "My recollection is, initially looking at this thing, they had lots of accounts in Madoff." The congressman conceded he is a Mets fan but says his wife is a far bigger one.
Several calls to Sterling Equities executives, including Fred and Richard Wilpon, and Saul Katz, were not returned, nor was a call to a Mets spokeswoman. An email message and phone call to Karen E. Wagner, an attorney who, according to this New York Times article, appeared in court to advocate for the Wilpon family in relation to the Madoff case, were not returned.
|Mr. Met, Mr. Met. Step right up and meet Mr. Met...|
|Mets owner Fred Wilpon|
Ackerman defends his legislation by telling anecdotes of elderly retired people who withdrew more than they invested with Madoff but are nonetheless destitute because they thought they had far more money in accounts that turned out to be fictitious. "These people are like 'The Ancient Mariner,' wandering the halls of Congress, telling their story to whoever and sought me out because I was pretty high-profile during the
Madoff hearings held in Congress in early 2009 for a couple of days," Ackerman says. Ackerman believes he may have more Madoff victims in his district than anyone in the country and he sounds like he has genuine concern for those people. Still, it is not clear that legislation is needed, particularly legislation that allows some people to keep millions in profits at others' expense. Irving Picard, the trustee assigned to liquidate Madoff's assets and redistribute the proceeds as equitably as possible, told me he is using discretion in some cases. "We recognize that there's a hardship issue for some people, especially a lot of older people, and when I say older, I mean 85 or 90," Picard says. "If people are basically only living on Social Security or have medical problems or houses are being foreclosed or have been foreclosed -- having to live with children and all that -- to the extent we know those facts, we'll certainly consider them." So far, Picard has filed 14 lawsuits seeking to recover nearly $15 billion from various parties he has determined to be beneficiaries of Madoff's fraud. He has until December to bring further lawsuits. He also has recovered about $500 million through legal settlements. If Picard's definition of older does not include 75-year-olds, I can see that it might make him some enemies and indeed his decisions are being challenged in court. Still, a blanket protection allowing all "innocent" investors in a Ponzi scheme to keep all their profits -- no matter how large, hardly sounds like a fair deal. Pressed on this point, Ackerman did not give in but noted that it will of course be possible to amend the legislation. He says that the main point of H.R. 5032 or The Ponzi Scheme Investor Protection Act of 2010, is to extend Securities Investor Protection Corp. (SIPC) coverage to those who invested in Madoff indirectly through an outside party.
This seems more reasonable. Ackerman says "the vast number of people" affected by the Madoff fraud are indirect investors who did not know Madoff. It also seems reasonable that people who withdrew more than they put in should be eligible for SIPC insurance if they can show genuine hardship. However, allowing the Mets' owners, or anyone else, to keep several million dollars above what they invested with Madoff while others are wiped out completely seems to be difficult to justify. That's why I found it surprising that the Ponzi Act has attracted support from 12 other members of Congress, including the six of New Yorkers I mentioned earlier. These include some high-profile legislators, including Anthony Weiner (D., N.Y.), who ran unsuccessfully for mayor in New York last year, and Carolyn Maloney (D., N.Y.), a long-serving congresswoman who represents Manhattan's East Side and part of western Queens. Maloney flirted with a run for the Senate seat vacated by Hillary Clinton in 2009. A spokesman for Weiner did not respond to questions about why he supported the legislation. When it comes to politics, of course, you never know who owes what to whom. Maloney needs all the help she can get to get re-elected. She is locked in a tough battle for her seat with Reshma Saujani, a 34-year old former hedge fund executive. Saujani's supporters include Morgan Stanley ( MS) Chairman John Mack, Goldman Sachs ( GS) President Gary Cohn, and Mayor Bloomberg's girlfriend Diana Taylor, as The Wall Street Journal reported last week. "Mrs. Maloney represents scores of those who lost tens of millions at the hands of Mr. Madoff," spokesman Jon Houston wrote via e-mail to TheStreet. "Many of the victims have expressed overwhelming support for Mr. Ackerman's legislation, and that's why she co-sponsored the bill." When I pressed him about the Mets example, he told me he had nothing further to say on the legislation. For the Ponzi Scheme Investor Protection Act to go any further, it will need a hearing in the House Financial Services Subcommittee on Capital Markets, Insurance and Government Sponsored Enterprises, Ackerman told me. A spokeswoman for Paul Kanjorski (D., Pa.) who chairs the subcommittee, did not respond to a call or an email message. As I think about it, you could actually say that the Mets already have received more than one bailout, because the standard $25 billion that went to healthier big banks like Wells Fargo ( WFC) and JPMorgan Chase ( JPM) wasn't enough for Citigroup. Citigroup, and by extension the Mets, were in that elite category of extra-special bailout recipients along with Bank of America ( BAC), AIG ( AIG), Fannie Mae ( FNM) and Freddie Mac ( FRE). At some point, though, Mets fans, you're on your own. -- Written by Dan Freed in New York.