Every July 1st, the New York Mets have to pay Bobby Bonilla $1.19 million dollars!
Why do the Mets have to play a retired player that’s 57-yeards old and hasn’t played baseball since 2001 and hasn’t played for the Mets since 1999?
That’s an interesting story that includes good negotiating and bad luck.
Retired Bonilla, is often paid more than some young stars in the league, and with the COVID-19 shortened season (and prorated pay) he will rival some household names in terms of overall compensation.
In 2000, the Mets agreed to buy out the remaining $5.9 million on Bonilla’s contract.
Instead of doing a lump sum buyout, a deferment was reached with the Mets making annual payments of $1.2 million for 25 years starting July 1, 2011, at an 8% interest.
Why would the Mets agree to this? Well, at the time, Fred Wilpon, the Mets majority owner, had large portions of his holdings invested in a Bernie Madoff managed fund.
$5.9 Million dollars at Madoff’s return level meant a significant profit until it didn’t.
As we now know, Mr. Madoff operated the largest Ponzi scheme in world history and the largest financial fraud in U.S. history.
Prosecutors estimated the fraud to be worth $64.8 billion based on the amounts in the accounts of Madoff’s 4,800 clients as of November 30, 2008.
This made Bobby Bonilla buy-out a poor business decision, on the Mets and the Wilpon family are reminded of every July 1st.