Friday, May 27, 2011
Deadline looms for Dodgers
LOS ANGELES -- When Frank McCourt bought the Los Angeles Dodgers in 2004 with his then-wife Jamie at his side, he promised to restore a treasured franchise that hadn't made the playoffs in seven years and hemorrhaged tens of millions of dollars under its previous owner.
Indeed, the team has gone to the postseason four out of the past seven years. Yet the team's financial woes have worsened so badly that Major League Baseball has appointed a monitor to oversee the Dodgers, and Jamie McCourt has asked judge presiding over the couple's divorce trial to order the sale of the team. That doesn't even factor in a lawsuit filed by the family of a San Francisco Giants fan who was badly beaten on Opening Day in a Dodger Stadium parking lot.
Next Tuesday, Frank McCourt hits an important deadline -- making Dodger payroll. If McCourt can't come up with the money -- he needed a $30 million loan from current television partner Fox to cover his bills earlier this year -- MLB commissioner Bud Selig could take over the team and put it up for sale.
"This is by far the darkest chapter in Dodger history these last couple of years," said William McNeil, who wrote "The Dodgers Encyclopedia" and "Miracle in Chavez Ravine." "It's the only period where the fans don't have a good sense of optimism about the team."
That's partly because fans have just recently been getting a taste of the lavish spending the McCourts bestowed upon themselves, using the Dodgers -- as one family adviser infamously put it -- like their personal credit card.
McCourt, a sinewy and savvy real estate developer, bought the Dodgers for $430 million using a 24-acre waterfront property in Boston as collateral and obtaining short-term loans. He was described at his divorce trial as being asset-rich and cash-poor.
In order to fund their indulgent lifestyle, the McCourts opted to borrow against Dodger-related businesses to the tune of at least $108 million between 2004 and 2009, according to court documents.
Most notable was the string of real estate purchases they made upon their arrival to Southern California. They bought a pair of homes next to each other near the Playboy Mansion and another two in Malibu at a total cost of more than $70 million.
Burdened by the mortgages as well as improvements -- $14 million to rip out tennis courts for an indoor, Olympic-size swimming pool at one of the homes -- McCourt has said he took out $60 million (part of the $108 million) on the land around Dodger Stadium to pay down the mortgages.
That debt is apparently due sometime this year and may be one of the reasons why McCourt is pushing a 17-year television deal with Fox estimated to be worth more than $3 billion.
Among the other expenses listed in court documents the couple incurred: a $225,000 monthly lease of a private jet, $10,000 a month for Jamie McCourt's hair stylist and tens of thousands of dollars on designer clothing for both of the McCourts.
Although McCourt argued the economic downturn hurt his financial standing, his ex-wife's lawyers pointed out he attended the Super Bowl last year and had spent as much as $80,000 on a Caribbean vacation. Even now, he still resides at a posh suite in Beverly Hills that runs about $30,000 a month.
He also has trouble explaining why two of his four grown sons were on his payroll at a combined annual salary of $600,000 despite one working at Goldman Sachs and another attending graduate school at Stanford University.
By his own account, McCourt knew he and his family were living beyond their means.
"I think it was a very -- very comfortable, very nice and very family oriented and we had a lot of nice things," he said in court documents. "I think it became an out of -- out-of-control, unsustainable and very uncomfortable lifestyle."
A common family practice was trying to determine how much was needed annually for living expenses. In 2008, for instance, that estimate was $14 million, court documents show.
McCourt also said at his divorce trial his ex-wife wanted $250 million at one point for her own personal use.
"I told her no," he said. "It was ridiculous. I thought she was wildly overreaching."
To the McCourts' credit, the team's revenue nearly doubled under their management from $156 million in 2004 to $290 million in 2009, according to court documents, which also showed the Dodgers lost nearly $200 million between 2000 and 2003 under the previous Fox ownership. McCourt also said he's made $150 million in team improvements.
But other income has been hard to come by for McCourt. Early on, he abandoned selling stadium naming rights. He had grand plans for the land around Dodger Stadium, including an NFL stadium project called "Gorilla" and a large-scale real estate development, according to court documents.
McCourt also sought to create a global sports entity that would include the acquisition of soccer teams in both China and England as well as retaining the Dodgers. McCourt said the project "died" because a Chinese investor no longer showed any interest.
He wanted to raise $125 million over the next several years, according to Jeff Ingram who headed one of McCourt's businesses before launching his own regional sports network, which was valued at more than $1.5 billion after the current deal with Fox would expire in 2013.
The funding never materialized because McCourt's advisers knew of the marital problems and wanted to wait until things had cooled down, Jamie McCourt's attorneys contend.
Cash-strapped, McCourt has put plans on hold for a $500 million renovation plan for Dodger Stadium that would include parking garages, a new plaza in center field and an interactive museum honoring the team's history.
In recent weeks, McCourt has clamored for Selig to approve the Fox television deal. However, he wasn't focused on a renewal with Fox last year until it became apparent of the impending cash crunch he currently faces.
"My current understanding right now is that we are not expecting to renew the contract with Fox," Dodgers chief financial officer Peter Wilhelm said in a January 2010 deposition.
McCourt also must pay his former wife $225,000 a month in temporary spousal support and $412,159 a month for six homes and a condominium. One of his attorneys, Sorrell Trope, probably summed up the matter best when he noted at one court hearing that Jamie McCourt uses one of the houses exclusively for swimming while another is used to store furniture.
"These people have lived their lives with borrowed money," Trope said at a hearing in March 2010. "They have to stop spending. This isn't the federal government."