The biggest battle in baseball these days isn’t being played out in the ball park but in the board room. Baseball Commissioner Bud Selig’s recent takeover of the financially strapped Los Angeles Dodgers is perceived as a heroic act that likely will save the fabled franchise from the acrimonious divorce of owners Frank and Jamie McCourt.
Selig told McCourt that he intends to appoint a MLB representative to oversee all aspects of the club’s business and day-to-day operations. McCourt appeared to signal his intent to challenge Selig’s decision. “Major League Baseball sets strict financial guidelines which all 30 teams must follow. The Dodgers are in compliance with these guidelines,” McCourt said. “On this basis, it is hard to understand the Commissioner’s action.” The Dodgers have been in trouble since Jamie McCourt filed for divorce after 30 years of marriage and a week after her husband fired her as the team’s chief executive. “I have taken this action because of my deep concerns regarding the finances and operations of the Dodgers and to protect the best interests of the club,” Selig said.
Late last year, Los Angeles Superior Court Judge Scott Gordon overturned a March 2004, postnuptial agreement that gave Frank McCourt sole ownership of the team, allowing Jamie to seek one half of the franchise. “As the 50 percent owner of the Los Angeles Dodgers, I welcome and support the commissioner’s actions to provide the necessary transparency, guidance and direction for the franchise and for Dodgers fans everywhere,” Jamie McCourt said.
Frank McCourt is expected to fight Selig’s decision. He said that it is “hard to understand the commissioner’s decision” based on the fact that the Dodgers were in compliance with baseball’s financial guidelines. Selig acted because McCourt, already embroiled in an acrimonious divorce case, took out a $30 million loan from Fox Broadcasting Company to meet payroll. The loan was secured with funds that McCourt does not have and might never have. The Los Angeles Times reported that the loan was given to McCourt personally rather than being backed through the team, so he didn’t have to get Selig’s approval.
Andrew Zimbalist, an economics professor at Smith College and author of In the Best Interests of Baseball? The Revolutionary Reign of Bud Selig, said “The courts have generally agreed that leagues have a special characteristic that separates them from other businesses in that they have to cooperate with each other. Because they are a unique business, they grant extraordinary powers to the commissioner to enforce certain governing rules. I’d argue that the Dodgers case is a fairly typical case. This is a marquee franchise that has been mismanaged by encumbering Dodgers assets one after the other.” “No accountant would even let you put that on your balance sheet,” said Raman Sain, principal at Holthouse, Van Carlin & Trigt, an accounting firm that reviewed the Dodgers’ financial records. According to Sain, the nature of the loan — as opposed to McCourt getting a traditional bank loan or line of credit – shows that the Dodgers’ financial situation was “pretty dire.”
Steve Soboroff, a former advisor to Los Angeles Mayor Richard Riordan and currently the Dodgers’ vice chairman, differs with Selig and says that “Frank McCourt is financially fine.” He described the Fox loan as “This is like having money in the bank and having somebody hold your ATM card. The money is in the bank. The Fox deal is done. These actions are not allowing him to access money. That’s a lot different than saying he’s got financial problems.”
According to reports Selig took issue with that statement, but Soboroff stood his ground. He cited the Fox deal, potential real estate development in the Dodger Stadium parking lot and unidentified “other potential new revenue sources” as potential sources of revenue. “That would put the Dodgers in as strong a financial position as almost any team in baseball,” Soboroff said.