This story is a month old but in light of the current News Corp. kerfuffle, and the compelling nature of the story itself, it makes for an interesting read...
Frank McCourt Must Go (UPDATED)
June 21, 2011 by Larry@IIATMS
Here’s the situation in a nutshell: the Dodgers have a tentative agreement in place with Fox, where Fox would pay something like $3 billion in exchange for the TV rights to Dodgers games for the next 17 years (though there’s some dispute that the deal is this rich). The Fox deal includes a $385 million “loan” to the Dodgers, with a bit more than $200 million of this loan going to the Dodgers, $80 million going to pay down unspecified indebtedness, and the remaining $93.5 million going to the McCourts individually or to the cost of a proposed settlement of Frank McCourt’s divorce case with his ex-wife Jamie...
If you don’t closely follow events west of the Rockies (or west of the Hudson), here are the basic facts about McCourt’s ownership of the Dodgers. McCourt bought the Dodgers from News Corp (Fox Sports) with $150 million he borrowed from Bank of America, $75 million he borrowed from Major League Baseball (MLB) and a $196 million debt package from Fox. That’s $421 million of debt.
After the purchase, McCourt rearranged this debt to his liking. McCourt traded his Boston parking lots to Fox in exchange for forgiveness of some of the Fox debt. Then he caused a Dodger affiliate, Dodger Tickets, LLC, to borrow $250 million to refinance most of the remaining acquisition debt. Plus McCourt cashed in on $50 million of “rebates” from Fox. With this rearrangement, McCourt effectively purchased the Dodgers – for a final purchase price of between $355 million and $371 million – in exchange for parking lots and $300 million (more or less) of debt. By all reports, McCourt put not one dime of his own into this purchase. Moreover, McCourt did not himself have to borrow the money used for the purchase – he got the Dodgers to do it for him.
It’s been frequently reported that McCourt “bought the Dodgers on a credit card”. That’s only half the story. The other half of the story, the more important half, is that McCourt bought the Dodgers on the Dodgers’ credit card.
Once McCourt had control of the Dodgers’ credit card, he continued to use it, this time to finance his family’s cost of living. Then Dodgers’ Executive Vice President Jeff Ingram (now team Vice Chairman) testified that the Dodgers built their team budgets around the personal cash demands made by the McCourts – from a financial standpoint, the team’s top priority was to raise the funds required by the McCourt family. Ingram described it like this: the “family and business checkbooks were largely one and the same.” Ingram actually testified that the family used the team like a “credit card”.
In an email disclosed in Jamie McCourt’s divorce filings, Ingram describes Jamie McCourt’s attitude towards the Dodgers as follows: “why have a family business but to support the family lifestyle.” Remember, Jamie McCourt was the team’s CEO. Jamie McCourt had the power to reach for the Dodgers’ checkbook and sign the checks herself.
How did the Dodgers manage to fund the McCourt lifestyle? Let’s start with salaries: Jamie McCourt received up to $2 million annually for her services as Dodgers’ CEO. Frank McCourt received up to $5 million annually from one or more businesses affiliated with the Dodgers. The Dodgers also paid up to $600,000 in annual salary to two of the McCourt children, one of whom was attending Stanford University and the other of whom had a full-time job at Goldman Sachs.
But $7.6 million a year was not nearly enough money to meet the needs (estimated at over $2 million a month) of the McCourt family. The McCourts spent money at a rate that turned heads, even in Los Angeles. Best known is the McCourt appetite for real estate. After buying the team, the McCourts proceeded to buy four homes in Los Angeles – two in Malibu, two near the Playboy Mansion – at a combined cost of around $89 million. This figure includes the estimated cost of McCourt “improvements” to these homes, including a roughly $14 million bill for tearing out tennis courts at one property and replacing them with a swimming pool. Then there were the other expenses: the vacation properties, the private jet, the private drivers, the hairdresser who worked exclusively for the McCourts five days a week … the list goes on and on. Here’s an expense that’s one of my personal favorites: over one 18-month period, Jamie McCourt paid over $100,000 to various florists, and charged the Dodgers for the expense.
The McCourt lifestyle unraveled when Frank McCourt fired his wife as Dodgers’ CEO, claiming that Jamie McCourt was having an affair with her driver. (Naturally, the driver’s salary was being paid by the Dodgers; Frank McCourt has alleged that his ex-wife and her driver spent 2½ weeks together on vacation in France, with the Dodgers once again paying the tab.) ...
UPDATE: Major League Baseball has announced that it has rejected the proposed TV deal between the Dodgers and Fox. The reasons given by MLB include many of those stated below: the deal is not in the best interests of baseball, it diverts too much money away from the Dodgers and to the McCourts and their proposed divorce settlement, it mortgages the future of the franchise, and so forth.
Tiger, Jamie McCourt, Joe Torre, Frank McCourt
http://itsaboutthemoney.net/archives/20 ... -petition/