As the old saying goes, you steal a loaf of bread and you get 10 years in jail. You steal a railroad and you get your name in the Social Register.
That saying should probably be revised on the North Shore to say that if you or your company commits financial misdeeds, you get to own the New York Mets. Or at least be the money man for the team.
The story of two men with strong North Shore ties explains why.
One of those two men, Bernie Madoff, died last week at 82 while serving a 150-year sentence for defrauding clients of more than $19 billion in history’s largest Ponzi scheme.
The second, Steven Cohen, a Great Neck native, has become the toast of the town for at least Mets fans after his purchase of the team from Fred Wilpon despite failing to prevent insider trading at his firm, SAC Capital Advisors, that cost him a record $1.8 billion fine in 2013.
The story of the two men is different and similar in many ways with both raising comparisons to tales from stage and screen.
In Madoff’s case, think Shakespearean tragedies. In Cohen’s case think the movie “Wall Street” or the Showtime series “Billions,” the story of a hedge fund manager who does not color between the lines.
Both stories say much about wealth, the North Shore and the Mets.
Madoff began his fraud while living in Roslyn, targeting supposed friends and country club acquaintances on Long Island and in Manhattan, many of whom shared his professed interest in Jewish philanthropy.
Those who invested were lured by returns that seemed too good to be true, which as it turns out is exactly what they were.
Madoff’s reach ultimately grew to encompass major charities like Hadassah, universities like Tufts and Yeshiva, institutional investors and wealthy families in Europe, Latin America and Asia.
“The victims of his fraud, some of whom went overnight from comfortable wealth to frantic desperation, numbered in the thousands and were scattered from Palm Beach, Fla., to the Persian Gulf,” The New York Times reported. “The paper losses totaled $64.8 billion, including the fictional profits he had credited to customer accounts over at least two decades.”
One of those victims was Fred Wilpon, the owner of the New York Mets.
Wilpon and his brother-in-law, Saul Katz, had invested personally and through their real estate company, Great Neck-based Sterling Equities, with Madoff. This included money from the Mets’ pre-season sales, money Mets employees put in their 401(k)s and money for the team’s day-to-day operations.
In 2008, when the Ponzi scheme was revealed, Wilpon and Katz had invested more than $500 million in various Madoff accounts, according to the trustees for the Madoff bankruptcy that followed his conviction.
The Wilpon and Madoff families had become good friends after Bernie’s son Mark connected with Wilpon’s son Jeff while attending school in Roslyn. Jeff graduated from Roslyn High School in 1980 and Mark graduated two years later.
Bernie Madoff would be arrested a day after he confessed his crimes to Jeff and his younger son Mark – both of whom worked for him.
Mark committed suicide in his Manhattan apartment on Dec. 11, 2010, the second anniversary of his father’s arrest. Andrew died of cancer at age 48 on Sept. 3, 2014. He blamed the stress of the scandal for the return of a cancer he had fought off in 2003.
Wilpon’s suffering was merely financial, the cost of which was passed on to the Mets and their fans.
In 2008, the year the Madoff fraud was exposed, the Mets had the second-highest payroll in baseball. By 2013, the Mets payroll ranked 23rd and was less than a third of their crosstown rivals, the Yankees. The Mets payroll had climbed back to fifth place in 2020. But time and again, the team failed to bid for prominent – and expensive – free agents.
That ended when Cohen purchased the team in 2020 for the astonishing amount of $2.42 billion – the largest amount ever paid for a sports franchise in the United States. Particularly astonishing when the team was losing money and Wilpon had purchased control of the Mets 18 years earlier for, relatively speaking, a mere $400 million.
But perhaps not so surprising when you consider that Cohen was still worth $11 billion after paying his $1.8 billion fine. And Cohen grew up in Great Neck a Mets fan and had his reputation tarnished during a 10-year insider-trading investigation into him and his hedge fund.
The Securities and Exchange Commission had charged Cohen with failing to supervise a former SAC Capital Advisors portfolio manager and another SAC executive who they said had traded on insider information.
The executive, Michael Steinberg, had graduated from Great Neck North High School a number of years after Cohen, who served as his mentor. Think Charlie Sheen in “Wall Street.”
Steinberg was sentenced to 3 1/2 years in prison for insider trading, only to have his conviction overturned by a federal appeals court in 2014.
Following the decision and the Supreme Court’s refusal to take up the case – a move said to have weakened the federal government’s ability to root out insider trading – federal prosecutors dismissed Steinberg’s conviction.
The second employee, Matthew Martoma, is serving a nine-year sentence in prison.
In a settlement with Cohen, the SEC blamed Cohen for ignoring red flags about Martoma that should have prompted Cohen to question whether he was engaging in insider trading.
Think of the series “Billions” here.
In its 2016 settlement, the SEC barred Cohen from managing money for outside investors for the next two years – after it had initially sought a lifetime ban.
The cost of the illegal trades by SAC Capital – merely hundreds of millions – pales in the amount of money that Madoff cost investors.
But it is worth keeping in mind that insider trading provides financial gains to people with inside information at the expense of investors who don’t and undermines confidence in the stock market.
Like Madoff, Cohen has used philanthropy to burnish his image, although in Cohen’s case the money has been real.
The Steven and Alexandra Cohen Children’s Medical Center of New York in New Hyde Park, which is part of Northwell Health, and a center at Mt. Sinai Hospital in New York City are among the buildings named after Cohen based on his giving.
We welcome Cohen’s contribution to these good causes. But we would feel more comfortable if we knew that some of the money he donated to get his name on the buildings didn’t rightfully belong to investors his firm used an unfair advantage to take.
Cohen’s contributions to places like Northwell also don’t appear to compare with the goodwill he has generated by buying the Mets, talking about building a winning team and spending the money to back it up.
The team’s recent signing of shortstop Francisco Lindor for $341 million over 10 years was enough for most Met fans to forgive any previous misdeeds by Cohen in the stock market.
This and Madoff’s story offer several lessons for people living on the North Shore and beyond.
They include: be careful with whom you trust your money and, as Michael Douglas said in “Wall Street,” greed is apparently good – if you are willing to spend top dollar on a superstar shortstop.
