Friday, July 01, 2011

Due Diligence

The question of how a relatively small time operator like Frank McCourt managed to buy one of the most storied franchises in all of professional sports is a fair one.  Certainly McCourt was a wealthy man having made most of his money in real estate development-parking lots mostly-in the Boston area.  But he wasn't Steinbrenner level rich. 

Indeed, McCourt tried to buy the Boston Red Sox and was turned down.  He also tried to buy the Los Angeles Angels back when they were happy to be from Anaheim and was likewise turned down.  The reason?  He didn't have enough money.  Or at least he wasn't considered sufficiently liquid to become a player in that world.

And yet, in 2004 McCourt managed to "buy" the Dodgers with only 9 million of his own money.  The rest of the financing for the 430 million dollar deal came from Bank of America, Fox and-get this-Major League Baseball.  That's right. MLB loaned McCourt 75 million to help him join the club.  As an aside this would make MLB a creditor as well as the trade association that is most likely going to try to seize ownership of the Dodgers from McCourt and his numerous corporate alter egos.  Some might find this to be a conflict of interest.  Some, myself included, might find this hilarious.  Talk amongst yourselves.

So how in the name of Calvin Griffith did this deal get done?  I have a couple of theories.

First of all, compared to the NBA and the NFL, the baseball owners are considered to be for the most part, well, idiots.  Twas ever thus. As the perpetually cranky Philadelphia Daily News columnist Bill Conlin once said, " If it were raining soup, baseball's owners would be standing outside with forks."

The rumor at the time the Dodgers were put on the market by Rupert Murdoch was that Mark Cuban was interested in getting into baseball.  Cuban, the owner of the recently crowned NBA World Champion Dallas Mavericks, was in those days frequently fined by NBA Commissioner David Stern for his sideline antics and post-game tirades about officiating.  The story is that the thought of Mark Cuban elbowing his way into "the club"sent MLB Commissioner Bud Selig and some of the other MLB owners straight for the Mylanta.  These guys thought McCourt would be a better fit than the brash young owner of the Mavericks. 

The second theory is that the whole economy at that time was running on the foolish assumption that real estate was forever going to appreciate.  My guess is that McCourt, like many other people during that halcyon time who put up real estate as collateral for loans that they couldn't afford -in his case parking lots in the Boston area-looked good on paper.  Well we know what happened don't we?  Real property values went through the floor taking the economy along with it.

Boston Globe sportswriter Bob Ryan said something on ESPN's Sports Reporters to the effect that the folks in Boston were on to McCourt all along and that Bud Selig is getting exactly what he deserves.  Some people in the Commissioner's office have said that maybe, just maybe, they should done a better job of due diligence when Frank McCourt first hiked his skirt at MLB.  Ya think?

I bet Mark Cuban, who has recently been quoted as saying that he wants nothing to do with the Dodgers mess, is looking pretty good in retrospect.  He may have a big mouth but he's got a ring.  And he can pay his bills. 

I bet he looks pretty good.  Especially on paper.

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