Diane M. Grassi
SEC investigation casts cloud over sunny Miami Marlins
By Diane M. Grassi
When we think of Miami, Florida, it immediately brings to mind sunshine. Yet, even sun seekers might be surprised that it has taken federal Securities and Exchange Commission (SEC) subpoenas to shed any type of daylight upon Major League Baseball's (MLB) Miami Marlins and their financing deal for their soon to open brand new stadium, on April 4, 2012, and presently called Marlins Park.
It is perhaps the smoke-and-mirrors approach to keep ardent Miami Marlins fans as well as fans of MLB distracted from learning more of or even suspect such a federal investigation is taking place. For Jeffrey Loria — owner of the Florida Marlins since 2002 and his now renamed Miami Marlins — in time for the stadium's bow, went on a spending spree this past off-season; the likes of which had been exclusively reserved previously for the likes of the New York Yankees.
The question regarding the Marlins' finances arose in the mind of this reporter, as to where the millions upon millions of dollars surfaced. For the Marlins' $111.8 million payroll for the 2012 season and the $350 million in total new off-season contracts is staggering. The payroll alone for 2012 is double that of 2011's. Anyone with an iota of common sense should have their antenna raised.
And further, since Loria over the past 10 years has described the Marlins as cash-poor, how is it that the organization is plush with dollars for a new stadium complex?
At a cost of $634 million and with cost over-runs, estimated to rise as high as $645 million, the answer is somewhere in the details. But that will only be the case if the SEC does its due diligence and even acquires the supposed documents it has requested, in order to make a fair determination.
Unfortunately, this is no mere anomaly afflicting but one lowly MLB franchise. This is once again a perfect storm that involves government, high financiers and the entity of MLB, Inc., to name but a few players. And during this recession, that seemingly will not quit, it is not just the behaviors which resulted in this recession, but the unethical behavior at the very least, including possible criminality that continues to permeate.
An orchestration of monumental cover-ups, glad-handing and pay-for-play campaign finance schemes continue to inflict consumers, taxpayers and the public-at-large, by way of MLB in this case, with civil practices by government officials from the unethical to the criminal, in the case of the Marlins.
And the supposed suckers are the residents of the City of Miami, FL and of Dade County, FL.
The SEC investigation was triggered by the flotation of tax-free bonds totaling some $500 million for the stadium construction as well as additional loans, leaving the taxpayers and bondholders on the hook there, too.
In fact, it will take some 40 years for Dade County to recoup the outlay for the stadium and its four parking garages. When all is said and done, Miami and Dade County will have paid out approximately $2 billion, with accrued interest, for the stadium's full cost.
But let us go back all the way to 2002, when Jeffrey Loria, was the former majority owner of the Montreal Expos, which he sold to MLB, Inc. and its other 29 franchises. Loria bought the Marlins, shortly thereafter, for $158 million at that time from John W. Henry, the present owner of the Boston Red Sox. Forbes, latest valuation as of 2010, has the Marlins worth $360 million, prior to the new stadium being built.
MLB commissioner, Bud Selig, bent over backwards to allow the deal for both Loria and Henry to occur, as he could realize his plan to relocate the Expos to Washington, D.C. and to make them the Washington Nationals.
The Marlins won their first of two World Series Championships in 1997, only 6 years after the franchise was awarded by MLB to original Marlins owner, Wayne Huizenga.
Yet, management split up its roster and reloaded after its championship. The club went on to win its next World Championship in 2003, when Loria had established himself as the club's 3rd owner. But, Loria once again broke up the Marlins roster after the 2003 World Series.
Loria believed that the only way to earn a profit was by erecting a new stadium, with a retractable roof and in no way resembling the Sun Life Stadium used for football, in which the Marlins played all of their home games since the club's inception.
The new stadium would hold luxury suites, restaurants and eateries, concessions and could thrive by being not just a baseball field but an event to attend, in order to maximize his potential profits.
Loria followed that up by making deals with politicians, labor unions, construction contractors, all the while lining his own pockets from MLB's revenue sharing system, where healthy revenue generating clubs and especially those who paid luxury taxes such as the New York Yankees and Boston Red Sox at the time, provided a windfall for him.
From what we now know, Loria benefited from millions of dollars in profits for his club and his own personal war chest, rather than reinvesting in his payroll, as he was required to do so by MLB.
Meanwhile, the county of Dade's commissioners approved the new stadium without a public referendum, and gave Loria a sweetheart deal whereby the taxpayers and bondholders would be responsible for no less than 80% of the financing. Loria would chip in $120 million in total costs.
How Miami and Dade County elected officials allowed for approval of a potential $645 million public project without public input, during the height of the Great Recession, where real estate and unemployment rates surged in Florida, remains stunning.
To make matters even worse, county commissioners approved the whole project without seeing any financial records from the Marlins or Jeffrey Loria. They claim that he would not turn them over.
There are, however, two stories in one in this caper by Loria and the politicians who played dumb. To appreciate the dynamics of the SEC probe which began with letters from the SEC dated 12/01/11 to both the City of Miami and the County of Dade, it is important to touch upon the back-story concerning MLB and its lack of checks and balances.
And that story would have remained unknown had it not been for a Wikileaks dump of documents in August 2011, which provocative sports website, Deadspin.com, picked up, to their credit. Such contained financial data which showed millions of dollars in profits from the previously noted revenue sharing system streams, received by the Marlins, among other clubs, who had previously claimed they could not afford to invest in a reasonable payroll.
But neither, MLB, Jeffrey Loria, or Marlin's president, David Samson, expected to have their dirty laundry publicly displayed for all of the world to see. In fact, Bud Selig's outrage seemed more reserved for the information becoming public rather than any scorn for Jeffrey Loria.
So, Jeffrey Loria and David Samson were hardly suffering from a case of poverty, but rather the opposite.
According to a Forbes magazine report in 2008, the Marlins made a pure profit of $35.6 million. But David Samson's response to the reports was that, "It's a shame their readership is forced to read numbers that aren't true." And in 2008 and 2009, according to the leaked financials, the Marlins enjoyed $49 million in sole profit.
It has also been estimated that since 2002, upon the Loria's purchase of the Marlins, that the Marlins have reaped some $300 million in revenue sharing benefits of which $154 million was pure profit.
And regardless of how the figures have leaked, it is safe to conclude that Loria and Samson, at the very least, owe MLB, its other franchises, its fans and the taxpayers of Miami-Dade.
But the silence is deafening.
A lawsuit was filed by Norman Braman, former owner of the Philadelphia Eagles, and now Miami resident, in order to force Loria's hand in his non-disclosure of finances to the county.
After all, it was but a reasonable request if Miami and Dade County residents were going to foot 80% of the bill, with no remuneration from stadium profits. Unfortunately, and probably predictably, the presiding judge through out Braman's case.
Loria owes a tip of the hat at least to Selig as he used the like-excuse that MLB does that its franchises are private entities, and therefore not legally required to turn over their finances or books to anyone. And technically, they are not legally beholden to do so, unless of course they have violated the law in some capacity.
The officials of Miami and Dade County let down the people of their city and county and morally speaking, Loria, Samson and yes, MLB, did the same. Not even Bob Dupuy, former CEO of MLB at the time, who was a hard-nosed advocate on behalf of MLB to get the Marlins' stadium built, apparently never questioned any of the Marlins' revenue sharing profits, either.
It truly seems that few in positions of power, whether in the government, the finance industry or in $7 billion businesses such as MLB, have learned little in this Great Recession.
In so far as the SEC is concerned, it is very specific in what it wants to know at present, and MLB is not subject to their probe.
Rather, the SEC is primarily trying to get information on whether there was a pay-to-play scheme set up between city and county officials in order to expedite the building of the stadium and whether malfeasances were committed on the bondholders, as a result. Whether payoffs were made to politicians and officials is the crux of the investigation.
Therefore, the structuring of such a lopsided deal to the detriment of the people of Miami and Dade County is not the issue; the possible tax violations by the Marlins as well as for Loria in setting up a dummy corporation called Double Play Co. that he used to squirrel away revenue sharing profits, is not the issue. But they should be.
And there could be viable complaints by other MLB franchises; by the fans of other MLB clubs who indirectly subsidized the Marlins; by bondholders from other jurisdictions who purchased the tax-free bonds.
While this story is one of multi-facets, it is made even more complicated due to many gaps in information, or of facts deliberately made unavailable. And there is plenty of room for explanations including by MLB, in order to help to restore a sense of some trust and goodwill.
The 2010 bankruptcy of the Texas Rangers, the current bankruptcy of the Los Angeles Dodgers, the current deal which the owners of the New York Mets just made with the court in order to avoid a trial regarding their alleged willful intent to help defraud other clients of Bernie Madoff's, for a mere settlement of $162 million, are but a few examples of mismanagement and scandals within MLB by its owners, with Bud Selig at the helm. Is it not about time for MLB to get its house in fiscal order?
And sadly, it is no longer unreasonable to conclude that the requisite art of deception and trickery has become a fixture in the world of high finance, government, industry, and not the least of which, professional sports leagues, including the world Major League Baseball.
© Diane M. Grassi
March 23, 2012
When we think of Miami, Florida, it immediately brings to mind sunshine. Yet, even sun seekers might be surprised that it has taken federal Securities and Exchange Commission (SEC) subpoenas to shed any type of daylight upon Major League Baseball's (MLB) Miami Marlins and their financing deal for their soon to open brand new stadium, on April 4, 2012, and presently called Marlins Park.
It is perhaps the smoke-and-mirrors approach to keep ardent Miami Marlins fans as well as fans of MLB distracted from learning more of or even suspect such a federal investigation is taking place. For Jeffrey Loria — owner of the Florida Marlins since 2002 and his now renamed Miami Marlins — in time for the stadium's bow, went on a spending spree this past off-season; the likes of which had been exclusively reserved previously for the likes of the New York Yankees.
The question regarding the Marlins' finances arose in the mind of this reporter, as to where the millions upon millions of dollars surfaced. For the Marlins' $111.8 million payroll for the 2012 season and the $350 million in total new off-season contracts is staggering. The payroll alone for 2012 is double that of 2011's. Anyone with an iota of common sense should have their antenna raised.
And further, since Loria over the past 10 years has described the Marlins as cash-poor, how is it that the organization is plush with dollars for a new stadium complex?
At a cost of $634 million and with cost over-runs, estimated to rise as high as $645 million, the answer is somewhere in the details. But that will only be the case if the SEC does its due diligence and even acquires the supposed documents it has requested, in order to make a fair determination.
Unfortunately, this is no mere anomaly afflicting but one lowly MLB franchise. This is once again a perfect storm that involves government, high financiers and the entity of MLB, Inc., to name but a few players. And during this recession, that seemingly will not quit, it is not just the behaviors which resulted in this recession, but the unethical behavior at the very least, including possible criminality that continues to permeate.
An orchestration of monumental cover-ups, glad-handing and pay-for-play campaign finance schemes continue to inflict consumers, taxpayers and the public-at-large, by way of MLB in this case, with civil practices by government officials from the unethical to the criminal, in the case of the Marlins.
And the supposed suckers are the residents of the City of Miami, FL and of Dade County, FL.
The SEC investigation was triggered by the flotation of tax-free bonds totaling some $500 million for the stadium construction as well as additional loans, leaving the taxpayers and bondholders on the hook there, too.
In fact, it will take some 40 years for Dade County to recoup the outlay for the stadium and its four parking garages. When all is said and done, Miami and Dade County will have paid out approximately $2 billion, with accrued interest, for the stadium's full cost.
But let us go back all the way to 2002, when Jeffrey Loria, was the former majority owner of the Montreal Expos, which he sold to MLB, Inc. and its other 29 franchises. Loria bought the Marlins, shortly thereafter, for $158 million at that time from John W. Henry, the present owner of the Boston Red Sox. Forbes, latest valuation as of 2010, has the Marlins worth $360 million, prior to the new stadium being built.
MLB commissioner, Bud Selig, bent over backwards to allow the deal for both Loria and Henry to occur, as he could realize his plan to relocate the Expos to Washington, D.C. and to make them the Washington Nationals.
The Marlins won their first of two World Series Championships in 1997, only 6 years after the franchise was awarded by MLB to original Marlins owner, Wayne Huizenga.
Yet, management split up its roster and reloaded after its championship. The club went on to win its next World Championship in 2003, when Loria had established himself as the club's 3rd owner. But, Loria once again broke up the Marlins roster after the 2003 World Series.
Loria believed that the only way to earn a profit was by erecting a new stadium, with a retractable roof and in no way resembling the Sun Life Stadium used for football, in which the Marlins played all of their home games since the club's inception.
The new stadium would hold luxury suites, restaurants and eateries, concessions and could thrive by being not just a baseball field but an event to attend, in order to maximize his potential profits.
Loria followed that up by making deals with politicians, labor unions, construction contractors, all the while lining his own pockets from MLB's revenue sharing system, where healthy revenue generating clubs and especially those who paid luxury taxes such as the New York Yankees and Boston Red Sox at the time, provided a windfall for him.
From what we now know, Loria benefited from millions of dollars in profits for his club and his own personal war chest, rather than reinvesting in his payroll, as he was required to do so by MLB.
Meanwhile, the county of Dade's commissioners approved the new stadium without a public referendum, and gave Loria a sweetheart deal whereby the taxpayers and bondholders would be responsible for no less than 80% of the financing. Loria would chip in $120 million in total costs.
How Miami and Dade County elected officials allowed for approval of a potential $645 million public project without public input, during the height of the Great Recession, where real estate and unemployment rates surged in Florida, remains stunning.
To make matters even worse, county commissioners approved the whole project without seeing any financial records from the Marlins or Jeffrey Loria. They claim that he would not turn them over.
There are, however, two stories in one in this caper by Loria and the politicians who played dumb. To appreciate the dynamics of the SEC probe which began with letters from the SEC dated 12/01/11 to both the City of Miami and the County of Dade, it is important to touch upon the back-story concerning MLB and its lack of checks and balances.
And that story would have remained unknown had it not been for a Wikileaks dump of documents in August 2011, which provocative sports website, Deadspin.com, picked up, to their credit. Such contained financial data which showed millions of dollars in profits from the previously noted revenue sharing system streams, received by the Marlins, among other clubs, who had previously claimed they could not afford to invest in a reasonable payroll.
But neither, MLB, Jeffrey Loria, or Marlin's president, David Samson, expected to have their dirty laundry publicly displayed for all of the world to see. In fact, Bud Selig's outrage seemed more reserved for the information becoming public rather than any scorn for Jeffrey Loria.
So, Jeffrey Loria and David Samson were hardly suffering from a case of poverty, but rather the opposite.
According to a Forbes magazine report in 2008, the Marlins made a pure profit of $35.6 million. But David Samson's response to the reports was that, "It's a shame their readership is forced to read numbers that aren't true." And in 2008 and 2009, according to the leaked financials, the Marlins enjoyed $49 million in sole profit.
It has also been estimated that since 2002, upon the Loria's purchase of the Marlins, that the Marlins have reaped some $300 million in revenue sharing benefits of which $154 million was pure profit.
And regardless of how the figures have leaked, it is safe to conclude that Loria and Samson, at the very least, owe MLB, its other franchises, its fans and the taxpayers of Miami-Dade.
But the silence is deafening.
A lawsuit was filed by Norman Braman, former owner of the Philadelphia Eagles, and now Miami resident, in order to force Loria's hand in his non-disclosure of finances to the county.
After all, it was but a reasonable request if Miami and Dade County residents were going to foot 80% of the bill, with no remuneration from stadium profits. Unfortunately, and probably predictably, the presiding judge through out Braman's case.
Loria owes a tip of the hat at least to Selig as he used the like-excuse that MLB does that its franchises are private entities, and therefore not legally required to turn over their finances or books to anyone. And technically, they are not legally beholden to do so, unless of course they have violated the law in some capacity.
The officials of Miami and Dade County let down the people of their city and county and morally speaking, Loria, Samson and yes, MLB, did the same. Not even Bob Dupuy, former CEO of MLB at the time, who was a hard-nosed advocate on behalf of MLB to get the Marlins' stadium built, apparently never questioned any of the Marlins' revenue sharing profits, either.
It truly seems that few in positions of power, whether in the government, the finance industry or in $7 billion businesses such as MLB, have learned little in this Great Recession.
In so far as the SEC is concerned, it is very specific in what it wants to know at present, and MLB is not subject to their probe.
Rather, the SEC is primarily trying to get information on whether there was a pay-to-play scheme set up between city and county officials in order to expedite the building of the stadium and whether malfeasances were committed on the bondholders, as a result. Whether payoffs were made to politicians and officials is the crux of the investigation.
Therefore, the structuring of such a lopsided deal to the detriment of the people of Miami and Dade County is not the issue; the possible tax violations by the Marlins as well as for Loria in setting up a dummy corporation called Double Play Co. that he used to squirrel away revenue sharing profits, is not the issue. But they should be.
And there could be viable complaints by other MLB franchises; by the fans of other MLB clubs who indirectly subsidized the Marlins; by bondholders from other jurisdictions who purchased the tax-free bonds.
While this story is one of multi-facets, it is made even more complicated due to many gaps in information, or of facts deliberately made unavailable. And there is plenty of room for explanations including by MLB, in order to help to restore a sense of some trust and goodwill.
The 2010 bankruptcy of the Texas Rangers, the current bankruptcy of the Los Angeles Dodgers, the current deal which the owners of the New York Mets just made with the court in order to avoid a trial regarding their alleged willful intent to help defraud other clients of Bernie Madoff's, for a mere settlement of $162 million, are but a few examples of mismanagement and scandals within MLB by its owners, with Bud Selig at the helm. Is it not about time for MLB to get its house in fiscal order?
And sadly, it is no longer unreasonable to conclude that the requisite art of deception and trickery has become a fixture in the world of high finance, government, industry, and not the least of which, professional sports leagues, including the world Major League Baseball.
© Diane M. Grassi
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