Dem Bums (2 of 2)

July 31, 2011

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

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Dem Bums (1 of 2)

July 26, 2011

The Dodgers moved from Brooklyn to L.A. in 1954, and from there to the moon in 2010.  If you don’t believe me, read this, and then shake your head and have a little chuckle.  The team of Jackie Robinson, Sandy Koufax and Orel Hershiser has truly fallen on hard times.  As of right now the Dodgers are currently in chapter 11 bankruptcy, being protected from their creditors, like Andruw Jones, and who owns the team, whether they’re for sale, and who is allowed to loan them how much emergency capital is all in legal dispute.  How could this happen?

A history lesson:

Frank McCourt purchased the Dodgers in 2004 from Fox.  You might think he did so with the proceeds from Angela’s Ashes , but apparently he somehow managed to do it with a parking lot, which gives a nice tragic-comical air of inevitability to the whole thing.  From 2004 until now, the Dodgers have done some smart and/ or lucky things, like bring in Joe Torre, sign Hiroki Kuroda, and develop current major star and celebrity Matt Kemp.  They also did silly things, including inking deals promising too much for too long to players who would do too little.  They had better and worse years, but made the playoffs a couple of times, and they have never been a lost cause on the field.  So, again, how did it happen?

They say that attendance is down by 8,500 per game.  The first article linked to above claims this is because McCourt has been revealed as a charlatan, but if so the revelation comes not only from the team’s poor win-loss record, but also from the affairs of McCourt himself.  The real core of financial disarray is nothing to do with baseball, but rather the divorce of Frank McCourt from Jamie McCourt, and that is where the actual problem is demonstrated.  As of today, Frank McCourt owns the Dodgers as ‘debtor in possession,’ comically yet seriously referred to as ‘DIP.’  This status, however, is in dispute, because Jamie McCourt claims that the Dodgers are joint property from their marriage, and therefore half hers.  Frank McCourt was savvy enough to have a property agreement worked out with her, but not a legal one, in the opinion of the court.

To reiterate; Jamie McCourt says ‘I’m divorcing you and putting my half of the controlling interest in the team up for sale.’

Frankie says ‘Relax; you don’t have a half of the controlling interest, check out this document you signed!’

Jamie says ‘My copy doesn’t say that.’

Judge says ‘You have two substantially different copies of what you claim to be the same document.  Is this some kind of weird joke?’

*To be continued*