It’s around this time, when the Dodgers’ ownership is a matter to be decided by divorce court, that a noted investigative journalism brand publicizes rumours that Frank and Jamie have been siphoning money from the Dodgers. Now desperate for money, Frank McCourt takes the legal firm that drew up the aforementioned marriage property agreement to court, and then uses the theoretical capital that will produce as collateral in securing an emergency loan from a hedge fund. He also enters into a loan agreement with Fox which involves his personal finances, and signs a television rights extension with the same company which includes 385 million in upfront cash. This and the loans (we imagine Mr. McCourt telling himself) will be enough to get the Dodgers by until Rafael Furcal miraculously heals and leads them to the World Series, and accompanying riches.
It is at this point that Bud Selig felt compelled to move in, claiming in essence that someone who might not own something (pending legal decision) cannot make major decisions about its future, and also that financing, even in an emergency, must be done and not done in certain ways. Frank McCourt had reached a divorce settlement with a portion of the 385 million going to Jamie McCourt, and allowing Selig the easy claim that “Critically, the transaction is structured to facilitate the further diversion of Dodgers assets for the personal needs of Mr. McCourt.” This decision effectively foreclosed the possibility of the Dodgers making their June payroll, so Frank put the team into chapter 11 bankruptcy as of June 27. At the same time, they told the overseer appointed by MLB that he was not needed, or indeed welcome, at Dodger stadium, and the next day MLB was in the bankruptcy court with McCourt, where it was determined that the hedge fund loan could be used temporarily, at least until a July 20 hearing at which the league would attempt to take over financing the team.
At that hearing, it was ruled that the hedge fund money could no longer be used, but that McCourt must finance the team through MLB. This hearing also leaked out the nugget that Frank may have issues with the IRS, who will have to get in line with Fox, who intends to sue everyone in town if the rights deal they negotiated with McCourt earlier doesn’t go through. The court will attempt to decide the TV rights issue in August, which in turn will determine whether McCourt has the cash to pay back his loan, settle with his ex, and start regaining control of the Dodgers. Even if he does manage to do these things, Frank McCourt still has to defeat Jamie in court for full ownership to avoid selling, which is what MLB wants to happen at this point anyway.
So the reason that this storied franchise has gone bankrupt is because their owner didn’t have adequate reserves to operate in the event of a cash flow crunch, even before what has become a protracted and messy divorce. The cash flow crunch itself seems to be caused by a reduction in income from gate, combined with a staggering accumulation of payments to players who no longer contribute to the team. In other words, those really paying attention saw the writing on the wall around the time Andruw Jones’ and Manny Ramirez’ contracts turned sour.
Use the handy scorecard below to follow along with the case as it winds its way through the (Mc)court system:
PARTY CONTRIBUTION LIKELY REWARD
Frank McCourt Parking lot Bud Selig
Jamie McCourt Divorce papers Manny Ramirez money
Andruw Jones Stinking 11.1 million
Manny Ramirez Cheating, stinking 20.9 million
Bud Selig Overseer, unwanted loan Frank McCourt
Fox Broadcasting, original seller Parking lot.
Probably everything else.
Matt Kemp .312, 24HR, 75RBI Rihanna