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"I just couldn't believe it," Wilpon says. "It felt like a dagger—you know one of those serrated daggers, when you pull it out, you pull your guts out a little bit? I totally trusted this man. And I was so fond of him, and so appreciative for what he was doing, not only for our family, but we had relatives and friends whose lives changed. Many ... who begged us to get into [business with] Bernie.
"I put myself together. I told Judy. About 10 after five [Kimberly] called and she was off-the-charts happy. She got into her school of choice. I took them all to dinner. I didn't say anything to anybody other than Judy. We celebrated her getting in. And the next day, of course, the s--- hit the fan."
For Wilpon, there is a life before that phone call and a life after it. His wealth, his stellar reputation and his 31-year ownership of the Mets—he is the longest-tenured owner in baseball—are all under siege because of his relationship with Madoff. Not long after the dagger struck, Wilpon and his son Jeff, the chief operating officer of the Mets, held a news conference to assure the public that Madoff's scheme would not impact the operations of the club. "At that moment," Wilpon says, "that was absolutely true—because we didn't dream that the trustee would sue us for a billion dollars."
One billion dollars. Another dagger. Two years after Madoff's arrest, Irving Picard, the trustee for the liquidation of Madoff's investments, sued the Wilpons and Katzes for $1 billion—the $295 million they made in fictitious profits, plus approximately $700 million of principal they had invested with Madoff in the six years before his arrest. Picard has filed hundreds of such "clawback" lawsuits to recover money to distribute to net losers from Madoff's scheme. Picard contends Wilpon and his partners must pay $1 billion under the theory that, according to the suit Picard filed last December, they "should have known" Madoff was a fraud and essentially enabled his scheme by continuing to invest with him. Picard bases that claim on the bankruptcy-law tenet of good faith. In a statement last week Picard said that "a defendant did not act in good faith if what it knew about [Madoff's investments] gave it a reason to inquire further, but instead it turned a blind eye and continued to take money from an enterprise it should have known might be a fraud."
"You have to feel for Fred going through this," says one of his friends, "because in the best-case scenario for him, he's admitting guilt in public to a massive case of stupidity."
Asked if he understood that characterization, Wilpon responded, "I do. Someone might have said, Well, you should have had more stock portfolios, whatever... . I don't know s--- from shinola. I never bought a stock in my life. That's not what we're good at. You can say, You should have had the money in U.S. Trust or Citibank or whatever. In retrospect, you can say yeah. And call that stupid or lack of judgment."
Until now Wilpon largely has confined his explanations and responses to Madoff and Picard to court filings and press releases in which the Sterling partners disavow any knowledge of a fraud. "There were no red flags and they received no warnings," the partners reiterated in a statement last Thursday, responding to a claim by Picard that they shopped for, but did not purchase, fraud insurance in 2001.
In an interview with SPORTS ILLUSTRATED, the 74-year-old Wilpon offered his most detailed and personal accounts of the Madoff scandal and the Picard lawsuit, which he acknowledged could cost him his ownership of the Mets if he and his partners are forced to pay the $1 billion.
"We were shocked," Wilpon says of Picard's suit. "Because there are two pieces of this situation. What he is saying is, 'In our definition of winners and losers, you were a winner. Therefore, we're going to claw back those winnings.' That's a legitimate legal issue. Then when you say, 'We want your principal. We want the money you made with real estate, the money you made with the Mets.' ... That's crazy."
Former New York governor Mario Cuomo is serving as mediator between Picard and Wilpon, who says he is willing to discuss a settlement regarding the fictitious profits, which his lawyers believe by statute should be narrowed to six years, representing about $160 million. "Governor Cuomo," Wilpon said, "has not been able to at this stage convince [Picard] that the 700 is not going to be obtainable.