Jim Stice

Jim Stice · 2022-06-23T23:04:00.631Z

Bobby Bonilla, the Mets, and Bernie Madoff - July 1, 2022 Among fans of professional baseball, July 1 is known as “Bobby Bonilla Day.” Each year, on July 1 the New York Mets pay Bobby Bonilla $1,193,248.20… even though he last played for the team 20 years ago. In the late 1980s, Bobby Bonilla, along with his teammate Barry Bonds, formed the nucleus of an impressive offense for the Pittsburgh Pirates -- Bonds and Bonilla were known as the Killer B’s. Bobby Bonilla leveraged this success with the Pirates to sign a free agent contract with the New York Mets. His $6.1 million salary in 1992 was the highest in the league by more than $2 million. Bobby Bonilla’s production in New York wasn’t what it had been in Pittsburgh, and over the next 7 years he bounced from one team to another: to the Orioles, then the Marlins, then the Dodgers, and finally back to the Mets for the 1999 season. Mr. Bonilla then signed a 2-year contract with the Mets, his second Mets contract. After one year, his production was poor enough that the Mets didn’t want him back … even though they still owed him $5.9 million whether he played for them or not. So, the Mets released Bobby Bonilla… and then the negotiating began. Mr. Bonilla’s agent had experience in the insurance industry, so he negotiated a deferred payment buyout contract that gives Bobby Bonilla $1.2 million on July 1 of each year from 2011 through 2035, a total of 25 payments. Now, if you add that up, the 25 payments total $29,831,205! So, Bobby Bonilla traded off the $5.9 million that he was entitled to immediately in exchange for $29,831,205 spread out for as much as 35 years in the future. The rate of return implicit in this tradeoff is 8% per year. Why were the Mets willing to guarantee such a high rate of return for Mr. Bonilla? Ahh, that is the rest of the story. The then-owner of the Mets, Fred Wilpon, was not worried about guaranteeing a return of 8% to Bobby Bonilla because he himself had found investments that guaranteed a return of 10%. Not bad… invest your money and earn 10%, pay 8% to Bobby Bonilla, and you still come out ahead 2% every year. Just one problem… Fred Wilpon was one of the overeager investors who believed the investment tales told by multi-billion dollar fraudster Bernie Madoff. Mr. Wilpon and his associates lost hundreds of millions of dollars in their bogus Bernie Madoff investments. Because of these losses, the Mets owners were strapped for cash for a number of years and so were not able to pay competitive salaries to attract great players to New York City to play for the Mets. In fact, in 2011, Bobby Bonilla was the highest-paid outfielder that the Mets had under contract… and Mr. Bonilla had been retired from baseball for 10 years. So, when July 1 comes around, tip your hat to the negotiating skills of Bobby Bonilla and his agent who turned $5.9 million into $30 million.

Provo, Utah, United States
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Brigham Young University

University of Washington - Michael G. Foster School of Business

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I am the Distinguished Teaching Professor in the Marriott School of Management at Brigham…

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University of Washington - Michael G. Foster School of Business

1984 - 1989
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Bobby Bonilla, the Mets, and Bernie Madoff - July 1, 2022 Among fans of professional baseball, July 1 is known as “Bobby Bonilla Day.” Each year,…

Bobby Bonilla, the Mets, and Bernie Madoff - July 1, 2022 Among fans of professional baseball, July 1 is known as “Bobby Bonilla Day.” Each year,…

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Jim Stice

Provo, Utah, United States 47K followers 500+ connections

About

Courses by Jim

Finance and Accounting Tips

By: Jim Stice

Financial Modeling and Forecasting Financial Statements

By: Jim Stice

Activity

💡 Stukent has arrived on the scene for Accounting education. 💡 With cutting-edge simulations, we’re pushing the boundaries of experiential…

Liked by Jim Stice

My brother Kay just posted an item suggesting that Apple has NEGATIVE retained earnings. I have copied the post…

Posted by Jim Stice

My brother Kay and I are excited about our upcoming April 14 Webinar on the topic of "Flipping the Accounting Classroom." If you are interested, use…

Shared by Jim Stice

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Brigham Young University

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Education

University of Washington - Michael G. Foster School of Business

Recommendations received

Randy Zeroth, CAPM, MBA, BSBAAC, BSMK

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Bobby Bonilla, the Mets, and Bernie Madoff - July 1, 2022 Among fans of professional baseball, July 1 is known as “Bobby Bonilla Day.” Each year,…

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Provo, Utah, United States
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