Tuesday, September 14, 2010
Living on Borrowed Money, or Where Was MLB?
By Ross Newhan
The divorce trial known as McCourt vs. McCourt resumes Monday with it's fascinating cast of lawyers and embarrassing catalogue of details--or how many houses do two people need (nine in this case) and how much money can you spend in one year on haircuts ($150,000 in the case of Frank and Jamie, which noting the above caricature is clearly $150,000 more than I need).
It would be arrogant of me to insist that much of the daily reports coming out of this entertaining insight into excess you have read before. However, if you followed my reporting as the national baseball columnist at the Los Angeles Times during the period when the McCourts were negotiating to buy the Dodgers from Rupert Murdoch's Fox Entertainment Group, ultimately gaining approval from Major League Baseball in 2004, that would be the truth.
I did not predict that Frank and Jamie would ultimately divorce or that they would single handidly keep the Southern California real estate market afloat or that Michael Kors would happily send a limo any time Jamie needed a new outfit, even if she was calling from one of her two Malibu homes at the time.
What I did repeatedly report, often in collaboration with Jason Reid, who was brilliantly covering the Dodgers at the time and now works for the Washington Post, is that the McCourts comparatively had little money of their own at stake and would be buying the Dodgers largely on credit, the $430 million primarily underwritten by the Murdoch company, so determined to sell the club after a tumultuous six year ownership period during which Fox achieved its primary objective, spreading regional networks across the country like a spider's web.
What Reid and I also repeatedly reported is that the McCourts would be filing a business plan with MLB that called for a yearly reduction in player payroll accompanied, as it played out, by a yearly increase in ticket and parking prices.
All of this has been documented by court filings and testimony in the divorce case. However, I do not bring it up to pat Reid and myself on the back but to ponder again how MLB allowed the McCourts to make a shoestring purchase of a flagship franchise and file a business plan that seemed certain to undercut the club's ability to provide three million-plus fans a year with the best players money can buy.
Some way, some how, the Dodgers reached the National League's Championship Series in each of the last two years, but 2010 has largely been a misery for General Manager Ned Colletti, overshadowed by the divorce and the disappearance of Manny Ramirez. The Dodger payroll of $95 million ranks 11th among the 30 teams, and Frank McCourt is $433 million in debt, according to a story in The Times, written in concert with an accounting firm. He has been turned down three times in the last year for additional funding to run the team, according to the story, and multiple sources have told this writer that he has been attempting to borrow money from whoever and wherever he can--relatives and non-relatives alike.. "Every dollar is going to pay off the debt," a source closely tied to the divorce proceedings said.
MLB has refused to comment on the case, or why McCourt received 2004 approval after his finances were thoroughly checked by the industry. According to sources, Commissioner Bud Selig is now said to be extremely concerned about the prospects of this trial and possible appeals playing out over several years and it's impact on the Dodgers, but it's questionable what he can do.
Under Selig, baseball revenue has soared to over $7 billion a year, but the Dodgers have become a financial mess--or at least the McCourts have--despite the club's court documented revenue of $286 million last year.
As noted, there was a long line of potential buyers before the McCourt were approved: David Checketts, former CEO of Madison Square Garden and the New York Knicks; Malcolm Glazer and sons, L.A. residents and owners of the Tampa Bay Buccaneers; L.A. real estate magnate Alan Casden; a group headed by former Commissioner Peter Ueberroth, and, at the 11th hour in what might have been strictly a grandstand maneuver, renowned L.A. philanthropist Eli Broad, who would have reinstated Peter O'Malley as club prsident.
O'Malley worked out of a Dodger Stadium office virtually every day of the year prior to selling the club in 1998 for two principal reasons:
--He wanted to build an NFL stadium on Dodger Stadium property but refused to battle the city, which wanted him to support the Coliseum as a potential NFL site;
--He felt it was time to get estate taxes in order for his sister and family, and soaring baseball salaries left him convinced that the sport had become too difficult for family ownership unless they also had revenue from NFL ownership.
Now the McCourts operate out of separate offices in Beverly Hills, there is no assurance that Manager Joe Torre will return for another season of financially limited roster additions like the current one, and there is no telling how Judge Scott Gordon will rule in regards to a series of conflicting postnuptual agreements which will determine whether Frank or Jamie owns the Dodgers separately or jointly--and whether he, she or they together will have to sell the team, which, of course, is the rooting interest among Dodger fans given the financial soap opera that has emerged from the trial.
Financial details that were reported in large measure by Jason Reid and me more than six years ago, and apparently no concern at the time to Selig and the approving owners.