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February 2011

Beltran Primed For A Big Rebound Season

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The 2011 seasons will be crossroads years for Carlos Beltran as he will be entering a contract year come 2012 and are coming off a series of injuries that has brought into question his durability to play a full season.  It would be wise not to count him out  because he is  extremely talented  and has an inner strength few fans realize he possesses.

Beltran is perhaps the most misunderstood and under appreciated player in all of New York.  When he has played the Mets have excelled as a team and when he has not, they have struggled.  Case in Point: the 2009 season when an injury ravaged Met team stayed in the race through June thanks mainly to the offensive exploits of Beltran playing hurt and the hot hotting David Wright.  In fact, that duo got to Mariano Rivera to almost pin a loss on the Yankee reliever until Luis Castillo fumbled away the game's final out.  They pulled into Philly in early July without Beltran and that was the exact moment the season went in the dumpster.

I have made the effort to get to know Beltran in the past few years and the last 2 seasons have hurt him deeply.  He loves to play and could not be on the field in the manner in which he was accustomed--every day.  He does not mind playing hurt as evidenced by his quick return to te lineup after his fateful collision with Mike Cameron in Year one of his contract and the fact he played with knee pain for most of the latter stages of the 2007 and 2008 seasons.

And then there is the night he took the third strike to end the Met season in 2006.  I said that then and I will say it now--nobody and I mean nobody--was hitting that pitch not even Adam Wainright's teammate Albert Pujols.  It was a terrific curve ball and Beltran's best shot was to hope the home plate umpire missed it too.  If the truth be told, Beltran had a great series--2 homers and along with Carlos Delgado, did most of the Met hitting in that NLCS.  Billy Wagner skated through the fire in that criticism but serving up a So Taguchi homer in Game 2 might have had a bigger impact in that series than any of Beltran's at-bats.

Met fans have never forgiven Beltran for that at-bat but he has told me he understands that is part of playing in New York.  Last year, Beltran returned and looked gimpy in the first month or so, but started to look better both at the plate and in the outfield once the calendar turned to September.  The type of surgery he had generally has a 12 month rehab or more so it is understandable he did not perform at his customary level.

This winter, Beltran got back to his normal routine--remember he did not even begin running drills until late April last year--and that will help him reside in a comfort zone he is accustomed to.  Beltran cares deeply about what his legacy is here in New York and do not let his quiet demeanor fool you.  He has a burning desire to compete and does more leading in the Met clubhouse than you might think.  Ask Angel Pagan--who talked to Beltran so much last year even when the Met star was rehabbing.  They talked about consistency and how only hard work with talent can breed success. 

It is quite possible that at some point this year Beltran and Pagan will swirch positions in the outfield but that will not deter Beltran from helping Pagan or any other young Met player.  He is not interested in making a big deal about it with the media--he just does it.  I am always more impressed with players who do things like this without desiring credit and that is the way Beltran is programmed.  If he were a piece of cake, he'd be no icing and all cake.

Of course, in New York the bottom line is results and the Met star outfielder will have to do that to earn a contract with the Mets or any other team in the game once the dust clears on the 2011 season.  I would not count Beltran out just yet--he has talent, desire, motivation, and a burning desire to win.  And that burning desire is something the fans or media have never really understood.  But trust me--it is as fervent as any player's desire to win in that clubhouse.

 
  
 


What Can Mets Expect From Jason Bay?

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For Jason Bay, 2010 was a year he'd like to forget.  In fact after crashing into the wall at Dodger Stadium and suffering post-concussion syndrome, he might have been forced to forget alot of it.  It was not supposed to be that way for Bay who signed a multi-year contract with the Mets amid speculation he really did not want to sign here.  That was a notion Bay later refuted but the sense was there the Mets were not his first choice.  And talking to Bay in spring training last year, he really felt there was talent on the Mets and thought the team could surprise.

And the team did surprise in the season's first half topping out at 11 games over .500 at one point before the second half meltdown after the All Star break.  But Bay never seemed to get untracked offensively while ironically proving to be a much better defensive player than advertised.  You also got the sense Bay got a little spooked by the dimensions of CitiField as his power numbers were not up to snuff.  He was starting to feel better at the plate by mid-season but then that fateful day in Los Angeles ended his season prematurely.

Bay spoke to me at the end of last season and expressed regret that he got to play so little alongside Carlos Beltran.  "We were like ships passing in the night this year-just when he got back I got hurt and so I do not think we ever got a chance to get things going.  I still feel in 2011 with myself, Beltran, and Pagan we have a real good trio of outfielders."

If the truth be told, there may not be a better trio in the league if they are all healthy and producing.  The back of Bay's baseball card indicates the Mets can expect big things from him in Year 2.  In fact, a middle of the lineup featuring Beltran, Wright, Bay and youngster Ike Davis could be pretty productive even in the spacious alleys of CitiField.

My thought is Bay will return to his 90-100 RBI efforts of seasons past and 2010 will just be a speed bump for him.  If that is the case, the Met offense could have a much different look than it did in 2010.

 

Tomorrow: Beltran and Reyes in Contract Years--Good Or Bad For The Mets?


Statement From Wilpons On Court Case

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Statement from Fred Wilpon, Co-Founder and Chairman, and Saul B. Katz, Co-Founder and President of Sterling Equities, on behalf of the Sterling Equities partners and their families


GREAT NECK, N.Y., February 4, 2011 -- Following days of leaks and press speculation, the Court - with the agreement of the Sterling partners - has released the complaint that was previously filed under seal.


The Trustee's lawsuit is an outrageous "strong arm" effort to try to force a settlement by threatening to ruin our reputations and businesses which we have built for over 50 years.  This is a flagrant abuse of the Trustee's authority and we will not succumb to his pressure. The conclusions in the complaint are not supported by the facts.  While they may make for good headlines, they are abusive, unfair and untrue.  We categorically reject them.  We should not be made victims twice over - the first time by Madoff, and again by the Trustee's actions.


The plain truth is that not one of the Sterling partners ever knew or suspected that Madoff ran a Ponzi scheme.  Because the Trustee has no evidence to support his claims even after a year-and-a-half review of over 700,000 pages of documents and many, many hours of depositions, he has created a claim that we "knew or should have known" that Madoff was a fraud.  Why should we "have known" when the SEC and other government agencies that had oversight responsibilities did not know?  In fact, the SEC reported that Madoff was above board and legitimate, even after it investigated him many times.  Madoff was not a hedge fund, but an SEC regulated broker dealer and like millions of other Americans, we trusted the brokerage statements we received.  The Trustee is suing not only for what he defines as "fictitious profits" but for monies that we deposited with Madoff over almost 25 years.  That is outrageous, unfounded and inconsistent with the law.  Let us be clear, the Trustee is attempting to seize money originally invested with Madoff, which was earned from the Sterling businesses.


The Trustee also alleges that we were blinded to Madoff's crimes because our businesses "depended" on the returns.  That is complete nonsense.  We have good, sound businesses that were successful years before we invested with Madoff, including both real estate and the New York Mets.  Those businesses never depended on returns from Madoff.

Our previous statements


All of the public statements we have issued to date have been accurate and true.  We said when the fraud was first disclosed that the losses we suffered in the Madoff scheme would have no impact on the operations of the New York Mets and that was true.  At the time, we could not have anticipated that a trustee would file a lawsuit seeking to recover hundreds of millions of dollars in addition to the substantial amounts that Madoff had stolen from us.


As we announced last Friday, we are now seeking one or more strategic partners in the New York Mets specifically because of the uncertainty created by the lawsuit filed by the Trustee in the Madoff bankruptcy.


We thought that Madoff was a friend for 25 years.  That is why his betrayal was so painful.  Each of the Sterling partners and their families invested with Madoff in good faith right up to the day his crime was exposed.  We were as shocked as the rest of the world when the money in our accounts vanished along with the billions he swindled from thousands of other innocent people.


In summary, we are proud of what we have built and achieved as a family.  We have worked very hard for our entire lives, always with character and integrity. We will not sit still while the Trustee or anyone else makes these outrageous and irresponsible allegations.  People who know us know the truth about who we are and what our life's work represents. 

 

Again, we have done nothing wrong.  We played by the rules.  We abided by the court order not to discuss the lawsuit.    Others did not.  We are confident we will win in court.

 

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Contact:           Dick Auletta

                        R.C. Auletta and Company

                        212-355-0400

                        rca@auletta.com

 

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STATEMENT BY ROBERT B. FISKE, JR., KAREN E. WAGNER, AND DAVID L. CAPLAN OF DAVIS POLK & WARDWELL LLP  ON BEHALF OF THE STERLING DEFENDANTS

 

NEW YORK, N.Y., February 4, 2011 -- Following days of leaks and press speculation, the Court, with the agreement of the Sterling partners, has released the complaint against our clients that was previously filed under seal.

 

While the heated rhetoric in the complaint may generate headlines, it is not supported by the facts, the law, or the extensive discovery record developed by the Trustee before he formulated the complaint - numerous depositions and over 700,000 pages of documents provided by the Sterling partners over the last year and a half.    

 

The bottom line is that the Sterling partners were innocent victims of the Madoff fraud, and the Trustee's massive discovery effort did not uncover one shred of evidence to the contrary.  Nevertheless, the complaint further victimizes the Sterling partners by arguing that they "knew or should have known" that Madoff was a fraud and therefore are somehow liable for amounts beyond their very substantial losses.  This suggestion is false. 

 

With regard to the complaint:

 

The complaint appears to contend that, because the Sterling partners are wealthy and successful individuals, they should have known Madoff was not trading any securities and was engaging in a Ponzi scheme.  Yet the Sterling partners had over $500 million in their Madoff accounts at the time of his failure - some put in only days before - and all of it lost.  Anyone who knows Fred Wilpon and Saul Katz knows that they would not have dealt for one minute with someone they thought might be engaged in fraud.  Moreover, as a matter of elementary common sense, no rational person who thinks his broker might be a fraud would leave such a substantial sum with him.    

 

Contrary to what the Trustee asserts, the returns on the Sterling-related brokerage accounts were not "staggering," "easy money," or "too good to be true."  The $300 million of profit alleged in the complaint, even if accurate, would not be "staggering" or extraordinary when viewed in the context of the amount of principal invested over the past 25 years.

 

In addition, the $300 million claimed in the complaint reflects only those accounts that the Trustee has selected for inclusion because they were profitable.  It ignores numerous accounts that, in the Trustee's parlance, were "net losers," which, according to our clients' analysis, total approximately $160 million. 

 

Madoff investments did not "fuel" our clients' operating businesses.  The Sterling partners' wealth was generated by their hard-earned success in real estate, sports, media, and other businesses - not by investments with Madoff.    

 

The complaint also ignores the fact that Madoff was viewed as a person of considerable stature in the financial community.  He had been the chairman of the board of directors of NASDAQ, a member of the NASD board of governors, and a member of the board of what now is SIFMA - an eminent figure in the investment world.  He also partnered with prominent financial institutions to create Primex, an electronic auction trading system that was approved by the SEC and adopted by NASDAQ.  Moreover, the Sterling partners knew, and relied upon, the fact that the SEC - the federal agency charged with uncovering and prosecuting fraud - had investigated Madoff and taken no action against him.

 

For 25 years the Sterling partners saw nothing to indicate that Madoff was not trading securities as he was reporting he did.  Moreover, the partners took legitimate comfort from the fact that numerous highly regarded and sophisticated lending institutions readily accepted their Madoff investments as security for multi-million dollar loans. 

 

The Sterling partners' dealings with their broker were entirely lawful.  While the Trustee calls payments made to them "fictitious profit," he ignores a large and consistent body of state and federal law that permits a customer of a registered broker dealer to rely on statements he receives from the broker - and which imposes no investigatory obligation upon a customer who in any event would have no way of confirming what the broker was doing.  Payments made in connection with those statements are lawful.  Our entire system of customer dealings with brokers is structured so that customers receive, and rely on, their account statements and confirmations.  Any suggestion to the contrary is simply incorrect. 

 

The complaint appears to argue that the partners should have known that Madoff was a fraud for three principal reasons: 

 

First, they were friendly with Madoff and could have asked him if he was engaging in a fraud.  Neither the law nor common sense supports such a proposition. 

 

Second, in 2002 the partners diversified their securities investments by establishing a new company to be run by Peter Stamos.  The Sterling partners were investors and had no role with respect to investment decisions.  Nonetheless, we understand the complaint to contend that, because two of the partners were involved in the selection of Mr. Stamos and the establishment of the fund, they became expert in market trading, hedge fund due diligence, and broker dealer regulation, and, therefore, if people said things to them like "I don't know how Madoff does it," the Sterling partners should have realized that Madoff was doing no trading and running a Ponzi scheme.  Thus, the theory of the complaint appears to be that comments of this type should have led the Sterling partners to reach a conclusion that the SEC, with the benefit of substantially more information, trained fraud investigators, and subpoena power, did not reach.   

 

Similarly, we understand the complaint to claim that, because Merrill Lynch, when it acquired part of the Stamos company in 2007, would not permit investment with managers employing "black box" or other similar strategies, the Sterling partners should have concluded that Madoff's registered brokerage operation was fraudulent.  In fact, many people invest with managers using such proprietary strategies, which are entirely lawful.  That Merrill Lynch decided not to means nothing. 

 

Third, the complaint suggests that, because Sterling Stamos had invested in the Bayou hedge fund, the Sterling partners should have realized that Madoff was a fraud.  Again, the proposition is wide of the mark - the partners had no involvement with the Bayou investment, and Bayou was a completely different situation.  Bayou was a hedge fund.  Madoff's brokerage entity, on the other hand, was a registered broker dealer, regulated by the SEC, that issued statements reflecting trading for customers.

 

The complaint is further undercut by another fundamental fact not mentioned by the Trustee:  if the Sterling partners had thought Madoff might be engaged in a fraud - a conclusion they never reached - their recourse would have been to go to the SEC, the watchdog that licensed Madoff and that is there to protect customers.  This would have been a futile exercise.  As we know now, the fraud would not have been uncovered.

 

The complaint, in our opinion, is an unwarranted reach by the Trustee.  The Sterling partners lost more than money in the Madoff fraud - they lost faith in someone they thought was a trusted friend.  But their faith in the legal system remains strong, and we are confident they will prevail.

 

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Contact:           Tom Orewyler

Davis Polk & Wardwell LLP

212 450-6039

tom.orewyler@davispolk.com

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Court Documents To Be Unsealed: Litigation Ahead For Mets?

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So, the next step in the Madoff scandal has begun to come into focus: Both sides have dug in and settlement talks are, at the least for the moment, done.  The defendants in the case have agreed to drop their motion to keep lawsuit documents sealed and so they may be unsealed as early as Friday morning. 

What does it all mean?  In the short term, not much as most of this stuff has likely been revealed with the apparent leaking of information to members of the media.  Rightfully so, the Wilpons felt what's the point since most of what is inside the documents have already been unveiled for the world to see? But now the real chess match begins as the sides seem destined to be embroiled in a long court case that could take years to litigate. 

My sources indicate that the Wilpons have cooperated fully with the Madoff investigation from jump and have provided hundreds of pages of documents to aid in the inquiry.  What you must remember here is the documents that will be unsealed are merely contentions of the plaintiff and should not be construed as evidence until they are presented in court just as the defendants refuting the claims are contentions as well.

Ok enough legal babble--what does this mean for the Met fans? Well, a couple of things.  First and foremost, this issue will not go away any time soon as a court case of this magnitude could drag on for 2 years or more.  Secondly, it makes the prospect of a minority owner a remote possibility because they will not need the money until this case is settled (unless of course they re-enter settlement talks) and more importantly, any minority owner will want this resolved before he jumps in. 

The biggest thing though is this will hang over the Mets like a dark cloud every single time they don't make a trade or not sign free agents or shy away from a top draft pick because he is represented by say, Scott Boras for instance.  The litmus test might very well be if the Mets are in contention by the All Star break are they buyers, sellers, or neither?  Whatever words are said, their actions will speak volumes as to where their finances are at that crucial point in the season.

Sandy Alderson's track record is to do more with less so he may desire to take that route anyway but the public perception will be that he may be hamstring by the organization's cash flow or lack of it.  The ironic thing is if the Mets are out of contention by July 31, the proper course would be to become sellers which will send flares up that the Mets are dropping salary to curb costs.

The moment these documents are unsealed, it will set into motion a series of events that could have this case linger in the minds of Met fans for years to come and that is why I think the Wilpons wanted to settle.  And the plaintiff in this case might have missed a window of opportunity because you get the feeling the Wilpons just wanted this to go away but with the contents of the lawsuit leaked, the repuation of Fred Wilpon is at stake making him more apt to take this to the finish line in court.

My question remains this: If the Mets made $ off the Madoff scandal, why would they hold salary this off-season and why would they be seeking a minority owner to bail them out?  Secondly, how could the Wilpons be held accountable to have known the true story behind the Ponzi scheme if the SEC, who is trained to spot these issues, missed it?  And the fact that the Mets fully cooperated with the authorities by providing over 700 pages of evidence would refute the statements that they knew what was going on? All good questions that will now be answered in court in the next 30 months or so. That is unless a settlement alternative can still be reached.


Are The Wilpons Getting A Fair Shake From The Media?

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I know all about the media in this town as I have both been a New Yorker all my life and have covered the Mets for over 20 years but it must be said the hatchet job being done on the Wilpons is both unfair and misguided.  I can not say I am surprised but enough is enough already.

Is it so hard to understand that a lawyer in a lawsuit brought against the Wilpons would try to exert pressure by leaking details of the lawsuit in order to either extract a settlement or a much richer one?  Yet, until this morning no one in the media even entertained that notion.  I know very little about the legalties of this case but it would be hard for me to believe that the Wilpons would get a fair shake in court if those sealed documents were released on February 9.  They are high profile public figures and as such, it would be hard to try this case in court after it has been litigated in the "court of public opinion."

So, the question remains why would Wilpons offer to settle here?  Simply put, these stories are damaging their ability to do business because of all the negative publicity.  It stands to reason this has hurt their ability to pursue players, sell tickets, and even generate revenue for advertising both inside the stadium and on SNY.  I am sure they want this resolved for those reasons and a variety of others including the care and concern for families affected by this.

The offer to pursue minority ownership is to defray the cost settling these cases might have on the Mets ability to conduct business in the way a New York franchise should.  While we are on that topic, lets be clear that the Met payroll is still one of the highest in baseball and while you may quibble on how they spent it, make no mistake their payroll levels are more than enough to win.  This notion that the Wilpons do not invest in their team is pure nonsense fabricated by people who never let facts get in the way of a good story or have an ax to grind with either the Wilpons or the past general manager who was treated very unfairly in many corners of the media as well.

My sense is the Mets tactic of letting a new general manager advocating a wait and see approach once he can truly evaluate his players is a sound strategy.  And more to the point, it is a strategy that would have been employed whether the Madoff case wreaked its ugly head or not.  But if you hear the media tell it, the case has been tried and completed before we even have all of the facts.

I wrote in this blog just a few days ago that we should all take a wait and see approach whichever side of the fence we sit on and let the evidence guide you once it comes out.  You can not do that when info about the case is leaked to the media by a lawyer who has a hidden agenda and because of that, so much is being assumed before we know all the facts.

And that is just flat out wrong.