Getty Images

Top 25 Baseball Stories of the Decade — No. 18: Frank and Jamie McCourt bankrupt the Dodgers

5 Comments

We’re a few short days away from the dawn of the 2020s. So, instead of counting down the Top 25 stories of the year, we’re taking a look at the top 25 baseball stories of the past decade.

Some of them took place on the field, some of them off the field and some of them were more akin to tabloid drama. No matter where the story broke, however, these were the stories baseball fans were talking about most over the past ten years.

Next up: number 18 — Frank and Jamie McCourt Bankrupt the Dodgers  

 

The Los Angeles Dodgers have won seven straight NL West titles and two of the last three National League pennants. But in addition to being a year-in-year-out contender, they’re known for making and spending big money, sporting one of the biggest payrolls in the game, all while drawing nearly four million fans a year, easily leading the majors. While they’ve fallen short of a World Series title, the Dodgers are considered one of the strongest, most stable organizations in all of baseball.

That wasn’t the case in 2011. In April of that year the Dodgers had to seek a loan simply to make payroll, causing Major League Baseball to appoint an overseer of the team’s day-to-day operations. That June they were forced to declare bankruptcy at which point Major League Baseball moved to force a sale of the team. All of this in the wake of the sordid and scandalous divorce of the team’s owner, Frank McCourt, and his wife Jamie. A divorce which revealed rampant mismanagement of the team and which, in the end, changed the course of the franchise.

McCourt was born into a Boston family which made its bones in commercial real estate and development and Frank himself got into that business in the late 70s. One of his big acquisitions was some old railroad land — about 24 acres worth — in South Boston that McCourt turned into parking lots. It turned out to be a savvy investment which skyrocketed in value over the next few years, giving McCourt some considerable financial clout.

Frank wanted to use that clout to get into the baseball business and tried his damndest to buy the local Red Sox. It was a natural move for him as he was a big baseball fan whose grandfather once owned a piece of the Boston Braves. His plans for the Red Sox seemed pretty unnatural though: he was going to take them out of Fenway Park and put them in a new stadium on the land that held his parking lots. The Sox’ owners and Major League Baseball passed on McCourt’s debt-heavy offer and sold the team to John Henry instead. That worked out pretty well for the Sox.

Undaunted, McCourt went after the Dodgers when their owner, NewsCorp, put them up for sale two years later. McCourt’s bid — again, heavily laden with debt and collateralized by that Boston parking lot — won. He paid $340 million for the team and took ownership in 2004. He named Jamie the team’s CEO. While Frank was the control person per MLB’s rules, they presented themselves publicly as co-owners.

Frank’s first day as owner would arguably be the high point of his ownership, because he’d spend the next seven years running the team into the ground. Except no one really knew he was running his team into the ground, at least not at first.

No one knew, for example, that he and Jamie were using the team as a personal piggy bank, funding a lavish lifestyle — they owned multiple extraordinarily expensive homes, including two next door to one another — and giving their children what appeared to be do-nothing jobs, all paid for with Dodgers revenues. More seriously, they were accused of using the Dodgers’ team charities as a means of enriching themselves and their friends, with very little apparent evidence that they were, in fact, engaging in substantive philanthropy. That led to a grand jury investigation by the State of California which resulted in the McCourts being required to give back substantial sums.

A lot of people familiar with the business baseball have heard stories of team owners behaving in this way, but since most baseball teams are closely-held businesses, structurally no different than a corner store or a used car dealership, the information rarely comes to light. It did in the case of the McCourts and the Dodgers, however, because of highly-publicized and profoundly nasty divorce that spilled everything out into the open.

In October of 2009 — one day before the 95-win Dodgers were to begin the NLCS against the Philadelphia Phillies — the McCourts separated. One day after the Dodgers were eliminated in Game 5, Frank fired Jamie, who to that point was still the team’s CEO. Soon after, the most expensive divorce in California history began with Frank accusing Jamie of having an affair with her personal driver — a Dodgers employee — and Jamie countering by seeking to set aside a post-nuptial agreement that named Frank the team’s sole owner. She claimed that she was a full co-owner of the team with Frank and claimed she was going to buy him out. His lawyers, basically, said “bring it on,” and as the case dragged on, each side litigated it in the media as well as in court, with accusations of infidelity, extravagant spending and irresponsible management decisions hurled back and forth.

Meanwhile, the Dodgers were on shaky financial footing. The debt service on the loans McCourt used to buy the team was high, as was team payroll. Attendance, while strong compared to the rest of the league, was low by Dodgers standards. And, as noted, a vast amount of money was being siphoned off from the team to fund the McCourts’ lifestyle and, increasingly, legal fees. As a result, the team could not meet payroll. In April of 2011 McCourt had to get a personal loan from the team’s broadcaster, Fox, to cover the payroll. In response, MLB Commissioner Bud Selig — none too happy with one of the league’s marquee franchises looking like a pauper — appointed a league representative to oversee the day-to-day operations of the team.

McCourt tried to get out from under his financial duress by entering into an agreement with Fox to extend the current TV deal. It was a bad deal for the Dodgers and a bargain for Fox because, obviously, it was a deal entered into under duress given that McCourt owned Fox money and was desperate. Selig rejected the deal and, with no options left, McCourt put the Dodgers into bankruptcy. Over the next several months McCourt and Major League Baseball would fight, with the former trying to get his TV deal approved and the latter trying to force McCourt to sell the team.

In the meantime, Frank and Jamie fought over ownership of the Dodgers. At first Jamie — holder of an MBA and a JD, a former securities lawyer, the former CEO of the club and a veteran of numerous business and charitable endeavors of her own — claimed to have been a co-owner with Frank, equally entitled and qualified to run the team. As the months wore on, however, and the Dodgers’ situation appeared more and more dire, she became less interested in going down with the ship and became amenable to settlement, taking $131 million from Frank to end the matter entirely. At the time the deal was struck it didn’t seem like a terrible one for her. Major League Baseball had the upper hand on a forced sale and the Dodgers’ debt was enormous. Most observes wondered if Frank would take a bath on the sale and have to declare personal bankruptcy. Jamie stepping away from it all with over a hundred million bucks and no obligations seemed like a golden parachute.

Then something fun happened: two weeks after Jamie settled, Frank sold the Dodgers for $2.15 billion to Mark Walter, the Guggenheim Group and an ownership team that included Lakers legend Magic Johnson. Frank was out from under his pile of debt and, somehow, had made more than a billion bucks in sheer profit despite the fact that he was, arguably, the most financially irresponsible owner in baseball history. Jamie, after years of claiming to be the real brains and authority behind the team and its rightful owner, turned on a dime and claimed that she had been financially unsophisticated, taken advantage of by her husband, and hopelessly misled about the state of the Dodgers and sought to recover what she thought was her rightful chunk of the $2.15 billion. She’d end up losing, forced to survive, somehow, on only a mere $131 million.

That big Dodgers sale had very little to do with Frank McCourt’s savvy and very much to do with a sea change in the economics of baseball. With the rise of streaming media and the advent of cord-cutting, the entire business model of cable television appeared to be imperiled. The bulwark against the trend was sports, which people still preferred to consume live, commercials at all. This made sports insanely valuable for cable companies and sent the fees for broadcast rights through the roof. The new Dodgers owners happily paid what many thought to be an insane price for the team because they, correctly, realized that the new TV deal the Dodgers could get would be even more insane. And it was: over $8 billion. They were poised to make out like bandits and, thus, so too was Frank McCourt, maybe the luckiest man on the face of the damn Earth.

A lot has changed in the years since the sale of the Dodgers, both for the team and for the McCourts.

Lucky Frank took his billion and change, got remarried, had some more kids, and began to invest in other sports ventures. He’s now a part owner of an international professional equestrian tour and a French soccer team. He somehow managed to hold on to a stake in the parking lots around Dodger Stadium as part of the sale of the team and, every now and again, you hear about possible development plans at Chavez Ravine. He’ll never own the Dodgers again, but he may be, at least tangentially, a part of their future. Until that time happens he pops up in the news from time to time talking about how he “created value” for the Dodgers, pretending that it was something he did, as opposed to mere happenstance into which he fell, that allowed him to sell the team for so much money. I’ve yet to find any interviews of him in which he admits that, had he made that deal with Fox he had wanted to, he would’ve hamstrung the Dodgers for decades, causing them to be a mid-market team, financially speaking. Not once have I heard him admit that Bud Selig saved him from himself. Oh well. Maybe next interview.

Jamie McCourt has managed to do OK on her $131 million. She bought a winery in Napa Valley. The former securities lawyer and MBA holder also hit the lecture circuit for a while, talking about how she was a babe in the financial woods, ignorant of finances, taken advantage of by her husband and claiming that all she wants to do is to help prevent that from happening to other women. I suppose the message is a good one even if the messenger is a horrible one. Either way, you gotta respect that hustle. Anyway, this champion of women’s empowerment went on to chair noted feminist Donald Trump’s 2016 campaign in California, where he got just over 31% of the state’s vote, which was the worst a major party candidate has done there since 1924. Jamie was rewarded for those efforts by being named Ambassador to Monaco, proving that Frank is not the only McCourt who was adept at failing upwards.

As for the Dodgers, well, now that they are flush with that monster TV deal, they no longer flirt with bankruptcy. Team resources and payroll has skyrocketed and, thanks to a parade of star players and a string of winning seasons, attendance and revenue is at an all-time high.

It’s not all perfect, however: the cable company which agreed to pay the Dodgers that $8 billion had to, in turn, charge big prices to other cable companies to carry the newly created Dodgers TV network. Many of them balked and thus for the past several years around half of the Los Angeles area has bene unable to see the team on television. The checks are still cashed by the Dodgers — and they remain big, big checks — but one wonders if, down the road, the lack of a consistent presence on TV will cause the fan base to erode.

Maybe that’ll be a story in our next Decade in Review series. Check back with us in December 2029 for an update.

PREVIOUS ENTRIES:

No. 19: Baseball Embraces Gambling
No. 20: The Hall of Fame Logjam
No. 21: The Bat-flippers Win the Battle Over the Unwritten Rules
No. 22: Astros switch leagues
No. 23: The Strasburg Shutdown
No. 24: Chicken and Beer
No. 25: All-Star Game no longer counts
Honorable mention: Astros Sign Stealing Scandal

Don’t let Rob Manfred pass the buck

Rob Manfred
Getty Images
2 Comments

Yesterday morning, in Ken Rosenthal’s article, Rob Manfred made it pretty clear what his aim is at the moment: throw blame on the union for the sign stealing scandal getting to the place it is. It was clear in both his words and Rosenthal’s words, actually:

In fairness, Manfred was not alone in failing to see the future clearly. As far back as 2015, the Major League Baseball Players Association (MLBPA) expressed concerns to MLB about the rise of technology in the sport. The union, however, did not directly focus on the threat to the game’s integrity.

Then, in his press conference yesterday, he went farther, saying that the union refused to allow a situation in which punishment might happen, going so far as to claim that the union refused to make Astros players available for interviews without blanket immunity.

The union, both in its official statement last night and in Tony Clark’s words to Yahoo’s Hannah Keyser earlier this afternoon, is basically saying Manfred is full of it:

“We were approached with respect to their intentions to not discipline players. Our legal role and responsibility is inherent in accepting that consideration, which is what we did.”

Which is to say, it was Rob Manfred, and not the union, which started from the presumption that there was immunity for Astros players. Manfred is the one who settled on that at the outset, and he’s now trying to make it look like the union was the side that insisted on it so that people who are mad will get mad at Tony Clark for defending the indefensible as opposed to getting mad at him for creating a situation in which there was no legal way to punish Astros players.

And, as we have noted many times already, he did create that situation.

It’s undisputed that Manfred never attempted to make rules or set forth discipline for players stealing signs. Indeed, he did the opposite of that, saying over two years ago that GMs and managers, not players, would be held responsible. If he wanted to discipline players now, he’d have a big problem because he specifically excluded them from discipline then. I’d argue it was a mistake for him to do that — he should’ve said, three years ago, that everyone’s butt would be on the line if the cheating continued — but he didn’t.

Some people I’ve spoken to are taking the position that the union is still to blame here. I’m sort of at a loss as to how that could be.

It is the union’s job to protect its members from arbitrary punishment by management. It is not the union’s job to say “hey, I know our workers were off the hook here based on the specific thing you said, but maybe we should give them some retroactive punishment anyway?” If someone in charge of a union proposed that, they’d be in dereliction of their duties and could be fired and/or sued. Probably should be, actually. A lot of people might be mad about that, and I know fully well that unions aren’t popular. But then again, neither are criminal defense attorneys, and they don’t go up to prosecutors and say “well, there isn’t a law against what my client did — in fact, the governor issued an order a couple of years ago saying that what he did wasn’t prohibited — but we’re all kind of mad about it, so why don’t we work together to find a way to put him in jail, eh?” It’d be insane.

That doesn’t make anyone feel better now. The players are certainly mad, with new ones every day finding a camera to yell at over all of this. I get it. What has happened is upsetting. It’s a situation in which some members of the union are at odds with other members. It’s not an easy situation to navigate.

They should take that anger, however, and channel it into telling their leader, Tony Clark, that they don’t want this to happen again. That, to the extent Rob Manfred now, belatedly, proposes new rules and new punishments for sign-stealing or other things, he should get on board with that. They should also — after the yelling dies down — maybe think a little bit about how, if the facts were slightly different here, they would never argue that Rob Manfred should have the power to impose retroactive or other non-previously-negotiated punishment on players.

Either way, neither they nor any of the rest of us should take Manfred’s bait and try to claim that what’s happening now is the union’s fault. If, for no other reason, than because he doesn’t have much credibility when it comes to this whole scandal. Remember, he’s the guy who issued a report saying that, except for Alex Cora, it was only players involved despite knowing at the time he said it that the front office had hatched the scheme in the first place. Which, by the way, similarly sought to make the players out to be the only ones to blame while protecting people on management’s side. He’s not someone who can be trusted in any of this, frankly.

At the end of the day, this was a scheme perpetrated by both front office and uniformed personnel of the Houston Astros. To the extent nothing more can be done about that than already has been done, blame it on Rob Manfred’s failure of leadership. Not on the MLB Players Association.