Tom Schieffer on the Dodgers: “The complexity of the situation is daunting”

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Tom Schieffer, the Dodgers’ trustee, sat for an interview with the Associated Press yesterday, and he described a situation that makes it seem impossible that Major League Baseball will truly have any sort of resolution of its investigation of Dodgers finances before their payroll comes due at the end of the month.

Indeed, he has found that there are 26 separate legal entities that make up the Dodgers empire these days — you may recall this lovely flow-chart, courtesy of Dodger Divorce — and that he’s trying to hack through them like he’s going through the jungle with a machete:

“The complexity of the situation is daunting. The way things are structured, sometimes they’re for tax purposes and sometimes they’re for liability purposes, but it does require you to try to follow the dollar through the process, and that takes a little bit of time. And some of the entities are shells that were set up maybe to do something else and that don’t really bear a great deal on it. What you’re trying to do is figure out what is pertinent … and it just takes a little bit of time.”

Pointless hyper-complexity: always the hallmark of a well-run organization.  But what’s scary is that, according to Schieffer, this structure isn’t necessarily uncommon in Major League Baseball:

He points out that the Dodgers’ complex structure – he says going through the documents “is drinking out of a fire hose” – is not dissimilar to how other clubs are set up. What is unique is the McCourts’ legal tangle: Jaime successfully persuaded a court to invalidate a postnuptial agreement giving Frank McCourt sole ownership of the franchise.

I don’t claim to be an expert on business, but this seems insane to me.  While they’re high profile operations, baseball teams aren’t necessarily complex businesses by their very nature. They put on performances, travel, have a payroll that, while big in dollars, isn’t gigantic in terms of head count, and have to answer back to a regulatory authority.  There are tons of businesses that fit that general profile that don’t require 26 levels of shell corporations and subsidiaries to make things work.

There is just an astounding lack of transparency in the way baseball teams are run. Given how much public interest — and in most cases, public subsidies — are involved in their operation, this shouldn’t be the case.

Report: Major League Baseball bans transactions with Mexican League teams

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Jeff Passan of Yahoo Sports reports that Major League Baseball has banned all transactions with Liga Mexicana de Beisbol (LMB), popularly known as the Mexican League. As of now, all 30 teams are prohibited from signing players under contract with LMB teams. The ban was issued due to Major League Baseball’s contention that “corruption” and “fraud” run rampant in the player acquisition process.

Passan describes the issues in detail, and they sound pretty compelling. The upshot: LMB clubs — which have full control over their players — are taking advantage of them, taking most if not all of the signing bonuses MLB teams give them after negotiating for their rights. Mexican teams often sign players when they’re 15 years-old so that, once they are old enough for American teams to approach them, they’re in the position to take a usurious cut.

Passan says Major League Baseball is demanding greater transparency from LMB before it’s willing to lift the ban. He also says that the MLBPA is in “lockstep” with Major League Baseball on the matter, which makes sense given that, if MLB’s claims are accurate, players are being exploited here. He also says that if LMB does not change its ways, there is a “Plan B,” though it’s not clear what that is.

There aren’t a ton of Mexican players signed by MLB teams each year, but there are enough to make this a significant issue that is worth watching.