[Continued from yesterday’s Part 3 and the preceding Part 2 and Part 1.]
As we’ve seen in the first three parts, when a charlatan gains control of a valuable, regulated asset, he can cause no end of trouble, in all the ways that Frank McCourt has already done, including put the entity into bankruptcy. By the way, under Article VIII of baseball’s constitution the bankruptcy filing would allow Major League Baseball to expel the Dodgers from the league:
Will no one rid me of this troublesome owner?
Sec. 4. Involuntary Termination. The rights, privileges and other property rights of a Major League Club hereunder and under any other Baseball-related agreement may be terminated (i) in the event of contraction, pursuant to Article V, Section 2 (b) (1), or (ii) involuntarily, with the approval of three-fourths of all Major League Clubs, if the Club in question shall do or suffer any of the following:
(l) Make an assignment for the benefit of its creditors or file a voluntary petition in bankruptcy, or if a receiver or trustee in bankruptcy is appointed for the properties and assets of the Club, or if reorganization proceedings in bankruptcy are instituted by or against the Club.
Such a move, however, would damage the Dodgers dramatically, and all the baseball teams peripherally, so Mr. McCourt’s bankruptcy move is the financial equivalent to strapping explosives to a baby and wheeling its pram into Dodger Stadium.
Nobody move or the kid gets it
In any case, as reported in ESPN.com’s July 22 summary (blue Calibri) and a disemboweling 11-page letter from Commissioner Bud Selig to Dodger owner Frank McCourt (red Georgia font), posted by the Los Angeles Times (link leads to gif’s of the pages), in seeking to hold on to his milk cow, Mr. McCourt had only one last tactic to try – pure unadulterated bad faith.
Once you go over to the dark side and leave ethics and truth behind, there is almost no end to the schemes you can invent.
Apply to your own situation
Bad Faith Act 1. Put out false statements to the press.
When you’re completely in the wrong on the facts, it’s natural enough to want to render the facts irrelevant by turning the story into he-said she-said.
You fools will believe anything I say, won’t you?
Since few people like a regulator – they always seem drab and careful – and many journalists like a story, it’s beyond simple for shysters to say absolutely false things in the press, hoping to win sympathy:
Over the last two months, you and your attorneys have repeatedly demanded that I “immediately approve the Fox transaction” (including with respect to multiple prior incarnations that you had represented to be “final”) and have asserted that my “continued delay” was barring both the Club and you personally.
As you know, over this period, for several reasons, there was no transaction before me for approval. (Pg. 2)
I’m tired of you lying about me in the media
Details, details; there was going to be a transaction, and you should have approved it before you saw it!
There he goes again
Bad Faith Act 2. Be gratuitously belligerent in hopes people will think you’ve been wronged.
Even as Mr. McCourt was playing the Innocent Victim Wronged to the press, his attack dogs attorneys were snarling in private:
After I received your letter of June 18, your counsel also sent a letter to ours – which is entirely at odds with the tone of your letter – threatening to sue me and to pursue “acrimonious” and “extensive” litigation designed to embarrass me and Major League Baseball and to cause harm to all constituents (including the Dodgers franchise).
The longer one is in business, the more one discounts threats of litigation, especially if they lard on scary adjectives (like acrimonious and extensive).
Ooo, hurt me again.
In the first instance, putting aside the obvious fact that such a lawsuit [By McCourt against MLB – Ed.] would violate both the Major League Constitution [Article VI, Sec. 2, “the Clubs agree to be finally and unappealably bound by actions of the Commissioner …” – Ed.] and the contractual commitments that both you and the Club (and all other Major League Clubs) have made, these threats clearly do not put things on a “constructive path”. Indeed, they are utterly contrary to the best interests of Baseball. (Pgs. 6 – 7)
Bad Faith Act 3. Fib about deal terms, then make them worse when nobody’s looking.
Like a frantic safe cracker, Mr. McCourt has been spinning the deal-term dials, hoping in the first instance to find a combination that would get past the commissioner, and failing that, to suggest to the press that he was being reasonable and inventive:
In addition to a new letter agreement, which contains terms of particular relevance to my previously-stated concerns, the June 7 documents change the nature of your personal guarantee from a guarantee of collection to a guarantee of payment –
Under a guarantee of collection, the creditor (in this case, Fox) would have to sue the Dodgers and fail to collect from them before proceeding personally against Mr. McCourt; under a guarantee of payment, they would go after him immediately. This could put him personally into bankruptcy, and hence would put the club at greater risk.
We owned the Dodgers once; we can own them again
– and waive any right of subrogation, reimbursement or other recourse or defense you may have against the Regional Sports Network, RSN, in the event that the Telecast Rights Agreement is terminated for any reason other than the RSN’s material breach. (Pg. 2)
Bad Faith Act 4. Cross your fingers behind your back when you promise anything.
The list just keeps growing, doesn’t it?
What lies?
Moreover, I have been asking you for some time to raise real equity from new investors – not the intercompany transfers that you characterize as equity – to address the Club’s financial problems. (Pg. 7)
All of his previous promises having proved to be falsehoods, Mr. McCourt is happy to offer another:
While you indicate that you are prepared to modify the use of the $80 million that is allocated in your Term Sheet to pay certain “indebtedness” or to “commit” to obtaining certain “third party equity,” you do so without any specifics –
Mr. McCourt also promised this seven years ago, and failed to follow through. Fool me twice …
Fool me twice, shame on – you shouldn’t fool me twice
– and with an immediate qualifier that intentionally side-steps and asks me to ignore the unique circumstances in which you have placed the Dodgers. (Pg. 7)
That is, Mr. McCourt’s nonstop absconding with club assets and his having driven the club into bankruptcy.
Bad Faith Act 5. Cry crocodile tears about how unfair and arbitrary everything is.
I should add that you and your counsel have been urging me for weeks to render a decision in this matter, even though it was clear that there was no final transaction for me to consider. In this context, now that the transaction is finally ripe for consideration, you request that I delay making a decision so that you can meet with me personally. (Pg. 7)
Bad Faith Act 6. Offer a solution that is no solution at all.
Given the history of your ownership and the Club’s current financial condition, I cannot approve a transaction that would allow you to extract millions upon millions more from this storied franchise. (Pg. 7)
World Series winners, 1955 – just before they moved to LA!
Aside from allowing him to bilk the club for another hundred million dollars or so, Mr. McCourt’s proposed financing would simply buy him a short interval of time before the Dodgers would once again be back in the soup:
You have agreed in the Term Sheet [With his wife, Jamie McCourt – Ed.] that should Ms. McCourt prevail at this trial, the Dodgers franchise and related assets would be sold under the Court’s supervision. Thus, there would appear to be a meaningful chance that the Dodgers would be sold in the next few months in your proposed scenario. (Pgs. 8 – 9)
If he hasn’t got the cash, I’ll take the ball club – it worked for Rosenbloom, didn’t it?
In fact, we have estimated that after revenue-sharing, taxes, transaction costs, payment of your debts and satisfaction of your $45 million obligation to Ms. McCourt, the Club would require additional liquidity as early as 2013; otherwise, it would again have difficulty in paying its players, satisfying its financial obligations to other Major League Clubs, operating a first-class baseball franchise and ensuring that Dodger Stadium provides a safe and enjoyable environment for Dodgers fans. (Pg. 8)
The resolution. After this beautiful destruction of Mr. McCourt’s miserable proposal, the Commissioner’s decision comes as no surprise:
I cannot approve the Proposed Transaction. (Pg. 11)
You’re trash, Frank, total trash, and I should never have endorsed your admission
And he finishes with a flourish, a legal nuclear threat:
Finally, I trust that it goes without saying, but I will remind you that any attempt or effort to proceed with the Proposed Transaction notwithstanding my determination will violate the rules of Baseball and constitute a failure or refusal to comply with a “requirement of the Commissioner” within the meaning of Article VIII, Section 4(f) of the Major League Constitution. (Pg. 11)
Mr. McCourt, you’re no Dodger fan
Baseball repeated these arguments in its court filing:
In pursuing his own financial interests at the expense of the Club, overleveraging it and draining millions of dollars it needed for capital investment and operations, Mr. McCourt has placed the Debtors in their current, incredible position of not being able to make payroll less than halfway through the regular season. In the process he has alienated fans, sponsors, and business partners, and eroded public confidence in the Club. In addition, Mr. McCourt improperly filed the Debtors [in bankruptcy – Ed.] without authority. Mr. McCourt simply disregarded this requirement [that he obtain baseball’s approval first].
The bankruptcy judge, realizing that this is only the first inning of a long mud-slinging game by Mr. McCourt, merely called his financing out:
While acknowledging an “underlying feud” between Selig and Dodgers owner Frank McCourt, Judge Gross said he was basing his decision on debtor-in-possession, or DIP, financing on the narrowest grounds possible and leaving arguments over the team’s management for later.
“The court finds that the Baseball loan is not a vehicle for Baseball to control debtors,” wrote Gross, who ordered the team to negotiate with MLB cooperatively and in good faith.
“Debtors and Baseball are entitled to the other’s full cooperation in finalizing and administering an unsecured loan facility,” he said.
Good luck getting either good faith or full cooperation from Mr. McCourt.
Frank McCourt deserves to be thrown out of baseball and banned from it for life.
You can’t throw out our owner!
Can’t I?
