The Mets’ 99-year lease of land from New York City for Citi Field contains a clause that Mayor Bill de Blasio could invoke to delay and possibly block the team’s pending sale to Steve Cohen. With MLB owners set to vote on Cohen’s bid on Friday, de Blasio has not yet publicly revealed how he and his attorneys will interpret the measure.
As first reported by Sportico, Cohen, who already owns 8% of the Mets, will retain 95% of the team should MLB approve the sale from the Katz and Wilpon families. And that’s not sitting well with de Blasio, who has been portrayed as opposing the billionaire hedge fund owner’s proposal.
The lease requires that a transfer of ownership must be made to a “permitted person.” A permitted person is one who meets certain conditions, including that he or she not be a “prohibited person.” A prohibited person includes any person who, among other criteria:
- Has been convicted of either a felony or a crime involving moral turpitude.
- Is an organized crime figure or is reputed to do business with such a figure.
- Directly or indirectly controls a person who: has been convicted of a felony; convicted of a crime involving moral turpitude; is an organized crime figure; or does business with an organized crime figure.
- Is under common control with a person who: has been convicted of a felony; convicted of a crime involving moral turpitude; is an organized crime figure; or does business with an organized crime figure.
Cohen—whom MLB already approved as a limited partner and who has the blessing of the league’s ownership committee—clearly doesn’t meet most of those categories. He has never been charged with a crime, let alone convicted of one. Also, there is no known evidence that he does business with organized crime.
However, Cohen’s record isn’t without blemish. A scrutinizing reading of the financier’s role at his former hedge fund, SAC Capital Advisors, raises questions about his compatibility with the lease.
In 2016, Cohen and the U.S. Securities and Exchange Commission negotiated an agreement that resolved an SEC administrative matter into the adequacy of his supervision over employees. Two years earlier, a federal jury had convicted SAC fund trader Mathew Martoma of securities fraud and conspiracy. Martoma was sentenced to nine years in prison. Seven other SAC employees were also convicted of or pleaded guilty to criminal acts. SAC paid a $1.8 billion penalty.
Under the SEC agreement, Cohen agreed to refrain from managing outside investors’ funds for a two-year period. He admitted to no wrongdoing, though his suspension of professional activities carries a negative inference. Cohen’s possible “control” of Martoma and other SAC employees who were convicted could also be interpreted to mean he is a prohibited person.
Still, there are factors that could help Cohen establish that he is not “prohibited.”
For starters, if his level of supervision over employees who engaged in criminal acts was minimal, he could plausibly insist that he lacked the requisite direct or indirect control. Likewise, Cohen could maintain that he and those employees never shared control relating to any wrongdoing. Cohen’s lack of admission also helps him—it could be inferred to mean the SEC’s evidence was insufficient to implicate Cohen. Then again, it could be read as merely a condition of a settlement.
De Blasio insists he has a legal responsibility under the lease to review the pending ownership change. To that point, Bill Neidhardt, a spokesperson for de Blasio, tweeted on Wednesday, “The NYC Law Dept is doing their due diligence of examining a new lease on incredibly valuable city-owned land. That’s what the call [between the mayor and MLB commissioner Rob Manfred] was about.”
If de Blasio concludes the transfer to Cohen would violate the lease, the mayor could warn MLB that the lease becomes subject to default should the transfer proceed. The Mets would arguably no longer be in compliance with a material term. Should a default then occur and withstand legal challenge, the Cohen-led Mets would presumably need to find a new ballpark. The city could also sue the Mets and MLB for breach of contract.
De Blasio’s formal ability to block the sale is debatable. The team is a private company and its transfer of equity is arguably beyond the reach of the mayor’s office or other government agency. However, the lease makes clear that a “permitted transaction”—including a sale—must meet requirements discussed above. Regardless, de Blasio could make the potential consequences of a sale so adverse to MLB that it doesn’t happen. At least 23 of the 30 ownership groups must approve Cohen.
MLB and Cohen could legally challenge de Blasio’s determination and seek a restraining order. However, as explained above, a plausible reading of the lease in relationship to Cohen’s record could justify a finding that he is a “prohibited person.”
While de Blasio may be on defensible legal grounds, the politics of blocking Cohen seem murky. Should de Blasio’s review lead to Cohen’s rejection, the mayor would presumably be blamed by Mets fans and team sponsors who are eager for the billionaire New York native to take over.