NEW YORK -- The first time I saw a picture of an Amway sign at Citi Field, I assumed it was a hoax.
After all, the difficulties faced by Fred Wilpon and his partners who own the New York Mets stem directly from their participation in what turned out to be the largest Ponzi scheme in United States history: Bernie Madoff.
Why would the Mets, who hadn't rented out space to anyone in front of Citi Field except for McFadden's, a bar, suddenly partner up with Amway, which vowed to "transform" the way they did business as part of settling a class-action suit brought by former Amway Independent Business Owners (I.B.O.s) accusing them of running a pyramid scheme, at a cost estimated by the attorneys for the plaintiffs of $155 million in 2010?
And what exactly did Amway, a business without any storefronts in the United States, want with one at Citi Field?
* * *
The answers were slow to come. Amway had opened a business center at Citi Field, complete with a grand opening featuring Miss America. But there hadn't been so much as a press release about it. They'd also signed up as a sponsor of the Mets, but the Mets hadn't told anyone, either.
I wrote a story about the partnership last Monday, and last Wednesday afternoon Amway's Jori Hartwig, vice president of marketing for their North American operations, filled in some details. The space is a pilot program. It is primarily a meeting space for Amway's I.B.O.s, but it also exists to recruit potential new I.B.O.s, according to Hartwig. The length of the lease for this pilot program ran for the duration of the baseball season, and the Mets' schedule is prominently featured on the center's website.
So beyond the current I.B.O.s, the test market for potential new Amway members consists of foot traffic in and around Citi Field. Since the area around Citi Field consists mostly of chop shops and is virtually deserted when the Mets aren't playing, that makes Mets fans the pilot program of potential I.B.O.s. That's what the Wilpons signed fans up for, at any rate. How you feel about that has a lot to do with how much you believe in Amway.
For their part, the Mets provided a one-sentence statement on Wednesday afternoon: "We designed the ballpark with approximately 40,000 square feet of retail along 126th Street and are pleased that Amway has joined McFadden's as a retail tenant at Citi Field." No amount of subsequent cajoling for additional information on the record, on background, anything to explain this decision, made any difference. The Mets declined to elaborate on their statement or comment further.
So the Mets weren't helping to explain a decision that had been called "strange" by The New York Times and "baffling" by New York Magazine. To really get a sense of just what this storefront was about, I needed to experience it myself. Give Amway credit: They threw their doors open to me and gave me the full experience.
I was escorted around the massive space by Nancy Rivera, manager of the new location, and Anna Bryce, who works in public relations with Amway. Bryce flew in from Michigan for the day especially for the tour.
* * *
To try to understand why the Mets might have brought Amway to Citi Field, we need to look at their current situation -- and how they got here.
The day Bernie Madoff was discovered to be a fraud, more than $500 million that Wilpon and his partners thought they had, $500 million they had repeatedly borrowed against to do things like buy out Nelson Doubleday, their former partner with the Mets, and create SNY, the television network that broadcasts Mets games, disappeared.
A panicked Wilpon borrowed against that team and that network, leveraging them, his real estate holdings and even personal wealth to hold onto the team. But the principal against those loans is coming due, first $320 million against the team in June 2014, then more than $600 million against the network in 2015.
He's managed to hold on so far, getting help from Major League Baseball, then a bridge loan from Bank of America in November 2011, then by selling minority shares in the team in March of 2012 to raise $240 million, then by borrowing additionally against SNY in December 2012 for another $160 million.
But the first infusion is all gone, $240 million accounted for, $110 million used to turn what was a $430 million debt against the team into a $320 million one, $65 million to pay off those past-due loans from Major League Baseball and Bank of America, the rest gone to cover the massive financing of those huge debts, along with more than $43 million annually in debt balloon payments against the bonds used to finance Citi Field, and of course, team losses.
Yes, that's correct: The debt that has forced the Mets to cut payroll from $143 million in 2011 to $91 million in 2012 wasn't the debt itself, but the financing of that debt. No one seems to know how the Mets will keep on doing that and come up with more than $900 million in principal over the next two years. The Mets certainly aren't talking; they've explained they don't have to, as a private company.
One person who didn't think they would be able to was Irving Picard, trustee for the Bernie Madoff victims. And the Mets had to talk to him. He'd determined that Wilpon and his partners knew or should have known that Madoff was a Ponzi scheme, and sued them for $1 billion. But shortly after pretrial rulings had set the floor for what Wilpon and his partners would pay at $83.3 million, he settled with them for, effectively, nothing.
So what happened? Picard determined, with full forensic evidence from Wilpon, both business and personal, that he simply didn't have the money to pay if Picard won at trial.
"Based upon financial information provided by Defendants since the [agreement], and on the advice of my counsel, we have become satisfied that Defendants' cash flow and lender covenants would not have enabled me to recover more for the BLMIS customer fund in the forseeable future by litigating to the point of judgement," Picard wrote in an affidavit filed with the settlement terms.
At the very moment Fred Wilpon was declaring himself vindicated publicly, he was busily proving to a skeptical Picard that, financially, he was about tapped out. Picard, who built a decades-long career working with bankruptcies, which is the reason he was appointed trustee in the Madoff case to begin with, believed him.
Little has happened since to argue against the trustee's judgment.
* * *
Upon entering the Amway storefront, one is immediately confronted with a massive array of colors, coming from various kinds of energy drinks at what looks like a juice bar, stools and all. Just step up and order a drink ... or don't, because that's not how this works. Amway's program involves I.B.O.s selling to you directly. Had it opened up a conventional store, Amway would be competing with its own customers. Even the vending machine, which had water and Mountain Dew, among other drinks, was completely empty of any XS, the Amway energy drink, or any other Amway beverage.
Instead, we moved on to one of three other stores within the store. First, I took off my shoes and socks and stepped onto what was described as a highly complicated scale, located within a walled-off part of the Amway operation beautifully decorated with Amway weight control, vitamins and other Nutrilite products.
The scale (it turned out to be a Tanita Body Composition Analyzer, available on Amazon.com) was kind to me; I am 33, but was judged, through a collection of data, to have a metabolic age of 18. As the woman who weighed me explained, "This is when we'd tell you which products you should buy based on your results." She was not an I.B.O., but someone hired to work at the store. And she couldn't, therefore, sell me any of those products. That would come when I was brought to the "retail room," I was told.
The same was true at the second store-within-a-store, designed to evaluate my skin through the F.A.C.E.S. Artistry Skincare Recommender. Anna later provided me with this description of the machine I was about to experience:
"Thanks to the largest, independent, global database of skin diagnostics, F.A.C.E.S., ARTISTRY scientists have been able to capture and evaluate actual biological data from real women using a combination of specialized photography and state-of-the-art image analysis. F.A.C.E.S. currently houses more than 10,000 entries. Starting with a questionnaire that provides insight into the subject's most pressing skincare concerns, ARTISTRY scientists then translate this data into clinically proven formulations that meet the diverse skincare needs of women around the globe."
I answered a series of questions about my primary skin concerns, choosing "expression lines" for the quizzical ones that formed on my forehead as I considered whether my cheeks ever felt tight or dry. Then, a camera took five rapid-fire photos. The screen displayed some science-y looking photos of my face. I was determined to have very little skin damage.
"My scan wouldn't look anything like that," Anna said.
As a result, the program determined I needed just six separate products. Why would a reading that had been so favorable recommend so much remedial work? What does the program recommend for people with a poor scan?
"Those people get more and different products," the woman taking the scan, another non-I.B.O., said. She described herself as a Mets fan, and she was extremely pleased David Wright was coming back.
(I was dismayed to discover the Artistry Skincare Recommender also functions on the Amway site, but without the picture-taking. Nevertheless, I was still assigned the same six products. It seems my pores had nothing to do with it.)
* * *
The Mets employed CRG Partners, a turnaround firm, to alter the business' trajectory between the 2011 and 2012 seasons. But the Mets' losses from 2011 to 2012 only dropped from $70 million to $23 million. That difference of $47 million is less than the amount cut from payroll; put another way, the Mets, independent of payroll, lost more money in 2012 than 2011.
That's what happens when attendance officially drops from 2.35 million to 2.24 million, and the latter figure is boosted by greater numbers of both ticket giveaways (to induce a sellout to Opening Day 2012, the Mets offered free tickets to their first weekend of games to those who purchased what is historically the toughest regular season ticket to get in any market) and virtual giveaways (such as celebrating the anniversary of 1962 by selling tickets to a number April games at 1962 prices of $2.50, or the buy-one-get-three-free promotions for people bringing children to the park in August and September).
Then the Mets took a team that won only 74 games in 2012 and traded R.A. Dickey, a Cy Young Award winner and fan favorite. They received ample talent in return, but talent unlikely to make the Mets nearly as good in 2013 as they were in 2012, when they weren't. Their general manager, Sandy Alderson, made multiple public jokes about his outfield, which had been poor in 2012. Then Alderson failed to re-sign Scott Hairston, by far his best 2012 outfielder, or add anyone else of note.
In fact, the Mets failed to sign a major league free agent until February, when they added Shaun Marcum for a base salary of $4 million, then Brandon Lyon for a base salary of $750,000. That's it.
David Wright was extended at $138 million over eight years, but it is worth noting that his 2013 salary was reduced from $16 million to $8 million. Not coincidentally, that actually reduced the amount of money Wilpon and his partners are spending on Wright in the period leading up to their June 2014 loan coming due against the team. Making sure no one jumped the line was a stipulation the lender made on a proposed deal with David Einhorn for minority shares back in the summer of 2011.
After spending much of the winter oddly disassociating from the Mets' failure to sign anyone, Alderson finally took responsibility for the choice, arguing at a skeptical season ticket holder event that sure, Fred Wilpon had plenty of money and was happy to spend it, Alderson just preferred not to do so.
You've got to hand it to Fred Wilpon, though. He managed to convince a city overflowing with Mets reporters that when the guy suing him stopped because he was out of money, that meant Wilpon and the Mets' money problems were over.
After a winter in which the Mets traded Dickey rather than sign him to a team-friendly offer like the one the Blue Jays inked him to approximately a second after trading for him, didn't bother to acquire even the rudiments of a major league outfield, deferred both part of David Wright's salary and nearly all of Jason Bay's and secured just $160 million more in capital from a sports network in the largest American market -- the same winter its Yankees counterpart, YES, was valued at greater than $3 billion -- Fred Wilpon decided to address the media during the first week of spring training last month.
His family's personal debt was gone, he said. It was both irrelevant -- the debt against the team, SNY and Citi Field have been crippling the Mets' operations, not family debt -- and also, not true.
A simple search of the Uniform Commercial Code database of debts turns up dozens of debts assigned to Wilpon, to his wife, to other family members as well. But other than a brief note well down in a New York Times story the following day pointing this out, none of the stories around the city bothered to put Fred Wilpon's assertion in any kind of context.
And maybe it is the new, more brazen Wilpon who decided: Screw it, let's partner with a company for which the biggest association in the public mind over the past few years is an accusation that it is a pyramid scheme.
* * *
The Amway tour continued onto the Legacy of Clean store, which was intended to recreate the look of a kitchen. Another non-I.B.O. was on hand to prove the effectiveness of Legacy of Clean over a leading brand (obviously, from the white "Leading Brand Cleaner" piece of paper taped over the Tide logo ... Tide), by washing a dollar bill that had been soaked in red wine.
Actual money laundering. Was this for real?
"Oh, that's going in the piece for sure," Anna said, laughing.
Legacy of Clean performed admirably, both with the dollar bill and a Sharpie-produced X. I even cleaned the X myself.
All of this seemed like quite a bit of space for potential I.B.O.s to be recruited. Where did the actual I.B.O.s meet? Behind all the stores-within-store, a narrower space with approximately 75-100 chairs sat at the ready, a podium up front for presentations, a large wall for slides and, in the back, three information kiosks around the size of an ATM.
How would I purchase these products? We headed to the retail room.
It was a study in white. There were a few products around for sale. Mostly, there were empty shelves. Nancy explained that this was a function of how busy they were this weekend. But even purchasing the inventory wasn't as simple as picking it up, bringing it to the register -- you know, like you do in a store. Three iPads sat along the far wall; a potential consumer had two choices. If I wanted one of the few products in the retail room, I could simply go onto Amway.com, fully fill out a form with all of my information and then make a purchase. Or, if the product wasn't in the retail room, I would still need to fill out all of my information, which would then be sent to an I.B.O., who would then complete the purchase. When I asked Nancy if anyone had purchased anything yet in the retail room (officially called the Product and Registration Room), I was told that no one had. Not a single product? No.
The presentation was quite good, however. Amway, it turns out, is awfully good at selling Amway. There was just this one thing.
On the phone the previous Wednesday, I'd asked Jori about the whole pyramid scheme thing. And she pointed out something that was absolutely true: The Federal Trade Commission had issued guidelines defining precisely what separated multi-level marketing from pyramid schemes (in response, by the way, to previous complaints about Amway dating back to the 1970s). Primarily, these are separated by a company selling its product to the general public, rather than overwhelmingly to other members of the company (as in, newly recruited sellers). Other signals are high turnover rates and when the overwhelming majority of those participating fail to turn a profit.
The plaintiffs in the lawsuit presented evidence that said Amway failed to meet any of these tests. (For instance, the plaintiffs had an expert witness alleging that more than 99 percent of Amway I.B.O.s failed to turn a profit.) The lavish settlement prevented any of it from being presented at trial, with a judgment in a civil case like that often a precursor to an FTC investigation.
Jori assured me that while this wasn't her area of expertise, she'd make sure those questions were answered during my tour. However, neither Anna nor Nancy had those answers for me. Anna promised she'd get as much as she could and sent me a lengthy email with primarily talking points. However, those specific data points were not forthcoming.
It had been explained to me, in response to one of those questions both on the phone with Jori and on my tour with Anna and Nancy that Amway, a private company, didn't have to turn that information over. Of course, that was true of everything they had told me, too, not to mention the tour itself. So it seems odd that the very evidence that would put those pyramid scheme rumors to bed for once wouldn't be forthcoming. They didn't even have to be true figures, as Fred Wilpon had proven.
* * *
Despite all of this, there hadn't been close to the same public outcry and media firestorm when Amway, back in 2011, became the presenting sponsor of the Detroit Red Wings. The NBA's Orlando Magic (owned by Amway co-founder Rich DeVos) play in the Amway Center.
Both Anna and Nancy were at a loss as to why this time was different. Anna even grimaced like a Mets fan in September 2007 when I asked about Joel Sherman's declaration of the Mets publicly trashing Johan Santana as an "Amway moment."
But I think I know why the connection has resonated so much.
Both the devotees of the New York Mets and Amway are being asked to believe in a product, a present, a future, without very much data to support it.
The 2013 New York Mets are, to listen to most baseball observers, not likely to win many games. Their own general manager has denigrated his outfield. Their manager, Terry Collins, has described his spring lineup this way: "I'm sure Sandy has gotten calls about, 'Hey, where's your starters?' And, little do they know, they're playing."
So the present doesn't offer much. The future relies on a farm system that is improving, but still ranks outside the top 10 of most rankings of all 30 teams, while the massive television money that is supplementing virtually every other major league team has been employed instead to keep Mets ownership afloat.
And the optimism about the Mets spending money next winter, based on the team breaking free of Johan Santana's $25.5 million contract and Jason Bay's $16 million contract, misses the point: Since the moment Bernie Madoff went bust, the calculations have never been about one player's pay or the long-term implications of signing Michael Bourn. This is about survival, and 2014 looms, with that $320 million debt against the team, as the diciest one yet. And 2015 looks even worse.
Better hope the prospects make it. They play for the league minimum.
So while single-game tickets for Opening Day for the Philadelphia Phillies are already sold out, despite an 81-win season, and while the Pittsburgh Pirates, fresh off of two decades of losing seasons, have already sold out Opening Day, the New York Mets have blocks of at least 12 tickets available together in every section on Opening Day but two.
Still, some people will show up. After the team let Jose Reyes get away for nothing, more than 2.2 million showed up in 2012. Without Dickey, or if they aren't as fortunate to start the season 46-40 as they did in 2012, that number might go down. Standard and Poor's thinks it will. But it won't be zero.
After all, the Mets' rallying cry isn't "Perhaps you should consider believing." It's "Ya gotta believe!" It's mandatory. Reason doesn't enter into it. Math has no meaning to those who still remain. A Mets fan doesn't root for the Mets because it makes sense. A Mets fan roots for the Mets because of an otherworldly ability to dream that things will be better than they seem, regardless of realities financial or outfield.
And an I.B.O. joins Amway hoping to make money, despite critics who charge that nearly everyone who joins Amway loses money. Amway doesn't present an alternative fact, but open the binder every new I.B.O. receives, one that was given to me, and written in five languages is a quote from co-founder Jay Van Andel: "You can't predict the future, but you can follow your dreams."
I exited the Amway storefront at Citi Field, an Amway business kit balanced between my arms in front of me, and began a walk up a largely deserted 126th Street toward my car. It felt strange to be at Citi Field on a blustery, windswept March day that owed more to February than April. As I neared the parking lot, a cheerful man in a tailored gray suit (but no coat, oddly) turned the corner, spotted my Amway material, and said cheerfully, "Congratulations!" emphasizing his smile with a thumbs-up while never breaking stride.
* * *
Howard Megdal is Writer-at-Large for Capital New York, covers the Mets and Knicks for The Journal News, and is the author of "The Baseball Talmud," "Taking the Field" and "Wilpon's Folly."