Authors: Molly Knight
Their marriage fell apart at the worst possible time for the franchise. After Jamie filed for divorce on the night before the Dodgers took on the Phillies in Game 1 of the 2009 NLCS, she alleged what many critics had suspected: that her husband had mismanaged the Dodgers’ funds to within an inch of the club’s life. Just before their divorce trial began, Jamie recalled a traumatic incident back when the family lived in Massachusetts: she had answered a knock on the door to find a sheriff sent to collect their mortgage payment. After describing that ordeal, she was asked when her financial anxiety had eased.
“I never stopped worrying,” she said. Jamie revealed that in spite of their family flaunting its lavish lifestyle, she lived in constant fear that one day the government would seize all their possessions. McCourt denied her allegations and countered with a press release firing Jamie as the Dodgers CEO and accusing her of destroying their marriage by having an affair with her driver, a man he had hired to squire her around town because her poor eyesight made it difficult for her to drive at night.
Since they had been married for decades, Jamie felt she was entitled to half the value of the Dodgers. Frank disagreed. Their divorce trial raged on. Because McCourt didn’t have the cash to buy Jamie out, he released a statement saying the Dodgers were his and his alone, and that he had a signed document from Jamie to prove it. The certificate in question was prepared when the couple moved to Los Angeles to buy the Dodgers after their estate attorney informed them that California was a community property state. McCourt insisted that it gave him
sole ownership of the Dodgers, and his wife exclusive custody of the couple’s homes. In fact, he said, the division of assets was executed at Jamie’s insistence since she was worried her husband’s creditors would come after the family homes if his business deals soured, leaving her and their children with no place to live. Jamie, a former family law attorney, conceded she had signed the document, but said she hadn’t read it and had no idea what it meant. For reasons still unknown, Frank and Jamie each signed ten copies of the agreement. But when the lawyers unearthed all the duplicates from a safe they noticed something strange: five of the copies included the Dodgers on Frank McCourt’s list of separate properties, and five excluded the team. Jamie’s lawyers cried foul. Her case hinged on the enforceability of a contract that had different signed versions. In the end, the estranged couple spent more than $20 million in legal fees fighting over a document that cost less than $10,000 to prepare.
“Frank and I practically raised each other and put everything we had into the Dodgers,” Jamie said. “The notion that I’d give that up is preposterous.”
In perhaps the most pivotal moment in Dodger history since Walter O’Malley moved the team to Los Angeles, the judge ruled that the contract was unenforceable, which entitled Jamie to half of whatever the team was worth.
Since the two could no longer stand each other, running the Dodgers together was not an option. The only way McCourt could split the franchise in half was to sell it. But even though he was broke, and their salacious divorce trial had dragged the Dodgers through a prolonged national embarrassment, McCourt made it clear that he had no intention of parting with the team. According to court filings, the Dodgers owed $573 million to creditors in January 2012. In 2009, the Miami Dolphins had sold for $1.1 billion—a record for an American sports franchise.
Forbes
valued the Dodgers at $900 million. If the team sold for near that price, most of that money would be wiped out by debts and taxes, leaving the couple with nothing. But McCourt had an ace
up his sleeve. The Dodgers’ television deal with Fox was set to expire at the end of the 2013 season, and it was thought to be worth billions. If he could just hang on to the team for two more years, all of his financial problems would be solved, and then some.
Major League Baseball officials were not about to let that happen. Team finances are state secrets, but, much to the ire of MLB executives, the McCourt divorce trial had forced open the Dodgers’ books for public consumption, and tawdry tales of the McCourt family’s extravagant lifestyle had horrified the sport’s commissioner, Bud Selig. The Dodgers were one of the cornerstones on which his league was built, and McCourt’s driving the team into the ground threatened the livelihood of the game. Thousands of Dodger fans pledged to boycott as long as McCourt owned the team. From 2009 to 2011, attendance plummeted by 22 percent. The morale of club employees was in the gutter, too.
“Every day going to that stadium was like showing up to a funeral and watching the congregation get smaller and smaller,” said one Dodger executive. McCourt didn’t care. Selig wanted him gone, but ousting him would be tricky. The league viewed owners like country club members who could be evicted if they offended the populace. McCourt saw the Dodgers as his private property that no one could legally repossess. Both sides dug in for a protracted fight.
Then, tragedy struck.
• • •
On opening day in 2011, a San Francisco Giants fan named Bryan Stow was leaving Dodger Stadium when he was assaulted by two men wearing Dodger gear. He was taken to a hospital with massive brain injuries and remained in a coma for months. Writers and columnists were quick to suggest that despite escalating acts of violence between the rival fan bases over the years,
McCourt had been too cheap to pay for an increased security presence around the ballpark. The incident took place after dark and Dodger Stadium’s massive parking lot lacked sufficient lighting. Off-duty police officers in uniform cost fifty dollars an
hour, while undercover cops in polo shirts ran about half that. In 2009, the Dodgers started relying on the less expensive option. Their head of security resigned in protest.
As Stow clung to life and the hunt for his assailants intensified, the drumbeat for McCourt’s ouster grew louder. Major League Baseball seized the opportunity to pounce. While Selig didn’t exercise his power to toss McCourt out right then, by the end of the month he appointed an outside monitor to oversee all of the Dodgers’ monetary expenditures. It proved to be a fatal blow to his ownership. McCourt protested, even going so far as to call the commissioner un-American. It also became evident how leveraged the team was—McCourt had been forced to take out a multimillion-dollar loan against future season ticket sales and charge the Dodgers $14 million a year to rent their own stadium. McCourt also raised eyebrows when it was revealed that the Dodgers Dream Foundation, a charity established to build ball fields for children in underserved areas of Los Angeles, had paid its top executive and main McCourt henchman, Howard Sunkin, more than $400,000 of its $1.6 million budget one year.
With the team’s cash reserves dwindling, McCourt turned to Fox to try to extend the club’s television deal in return for cash up front to float him. The Dodgers were earning about $40 million a year for their TV rights when Selig sent in the monitor. But when it expired in two years, McCourt was free to entertain offers from multiple networks and select the highest bidder. The Dodgers’ next TV contract figured to bring in more than five times what the current deal was worth—maybe more. McCourt’s desperation to hold on to the club was understandable: a mountain of cash lay just around the bend.
So McCourt had an idea. Why not borrow money from Fox against that future TV deal? Fox was more than willing to take the rights to broadcast Dodger games off the market to avoid a bidding war later, and the two sides agreed in principle to a twenty-year television deal worth $3 billion that would begin in 2014. Under the terms of the agreement, McCourt would receive $385 million up front. Of that money,
$200 million would go into the team, while the rest would go to the McCourts and their divorce attorneys. Major League Baseball balked. With its monitor in place overseeing all financial transactions, there was no way it was going to let Fox toss McCourt a lifeline. Later that year, the league would allege in court filings that McCourt took $189.16 million out of the team for his own personal use, an activity Selig described as “looting.” Without that loan from Fox, rumors swirled that McCourt would not have enough cash to pay his players when checks were to be handed out that Friday. MLB didn’t care.
It rejected Fox’s loan to smoke him out. McCourt had one card left to play, and he didn’t hesitate. On the morning of Monday, June 27, 2011, he plunged the Los Angeles Dodgers into bankruptcy.
That afternoon, televisions in the Dodgers’ clubhouse played the grim news on a loop.
Players called their agents to make sure their checks wouldn’t bounce.
Though it ensured the end of his run as owner, filing for bankruptcy protection wound up being a brilliant move for McCourt. When an MLB team is sold, the commissioner’s office is involved in vetting and choosing the new owner. Because the league operates somewhat like an old boys’ fraternity,
the winning bid isn’t always the highest one. The league covets candidates it believes will toe the line, a sentiment that intensified after McCourt thumbed his nose at Selig at every turn. But since McCourt owed hundreds of millions of dollars to creditors—and the Internal Revenue Service wanted its cut—the authority of the bankruptcy court trumped MLB’s typical selection process by ruling that McCourt was entitled to collect the most money possible in order to pay off his debts. The judge emphasized that creditors took precedence over the league’s preferences for a new owner. And in a testament to how badly Major League Baseball wanted McCourt gone, it didn’t fight his unusual, unilateral power to choose his successor. The league’s acquiescence on this point was significant because it offered a way in for colorful outsiders like Mark Cuban, the outspoken tech billionaire owner of the NBA’s Dallas Mavericks. (Cuban had tried to buy
the Cubs a few years earlier but felt he had been blackballed because Selig didn’t want him to own a team.) The Dodgers’ sale offered an unprecedented opportunity for a Gatsbyesque character without connections to the commissioner’s office to buy his way in.
Bids for the Dodgers poured in from across the globe. One investor who announced his interest in buying the team was Laker icon Magic Johnson, the man who, following in the footsteps of Dodger great Sandy Koufax, had made the number 32 synonymous with sporting glory in Los Angeles. After his playing days ended prematurely when he announced he had contracted the HIV virus, Johnson had proven himself to be somewhat of a business savant, coming to own stakes in, among other things, movie theaters, Starbucks coffee shops, and his beloved Lakers.
Johnson was rich by the average American’s standards, but he had nowhere near the cash needed to buy the Dodgers. What people didn’t yet know, however, was that Johnson had formed an alliance with Stan Kasten, the man who had served as president of Ted Turner’s Atlanta Braves during their nineties dynasty. Kasten and Johnson had become acquainted when Kasten ran the city’s NBA franchise, the Hawks, for Turner during that same time period. With fifteen-man rosters and a limited minor league, the NBA, Kasten explains, is a small world where everyone knows everyone else. Kasten and Johnson had almost joined forces back in the mid-nineties when the former flew to Los Angeles to try to convince the latter to coach the Atlanta Hawks.
“But he turned me down, that son of a bitch,” Kasten said with a laugh. “The truth is he didn’t want to coach.” Though the two remained friends, they could not have imagined the impact their relationship would have in shattering the economics of sports franchises some twenty years later.
• • •
Magic Johnson’s smile had mesmerized Los Angeles from the moment the Lakers drafted him out of Michigan State in 1979. Thirty-two years later, that smile started a war. Despite the fact that he knew very little about baseball, six different prospective ownership groups courted
Johnson, each desperate to add his credibility with Los Angeles sports fans to its roster of moneymen.
“It was like Earvin was going through the college recruitment process all over again,” said his former agent and closest confidant, Lon Rosen, who would later become the Dodgers’ chief marketing officer. “Groups were coming to him and making presentations.” After his tenure in Atlanta ended, Kasten had moved to Washington, D.C., to take a job as the president of the Nationals the year after they relocated from Montreal. He stayed in that position for four years, and in 2010 he stepped down and planned to open his own consulting practice. Then Guggenheim contacted him. Would he be interested in joining their group to buy the Houston Astros? they asked. Kasten had heard the name Guggenheim before, but he had no idea who this group out of Chicago was. And when he went to search for information about the company’s president, Mark Walter, on the Internet, he couldn’t find anything. Walter seemed to be a ghost. Kasten was dubious. Sports franchise sales attracted so many hucksters and grifters pretending to be rich that the mystery surrounding Walter and Guggenheim did not help their cause. “There’s a lot of bullshit in putting deals together for hundreds of millions of dollars, let alone billions,” said Kasten. “There’s a lot of groups that claim to have money and just don’t.”
But after a series of conversations, Kasten decided the group’s money was real. And he became sold on Walter after Walter blew him off. A lifelong Cubs fan, Walter had kept his season tickets even though Chicago had been playing abysmal ball for years. On the day the first-ever phone call between Kasten and Walter was scheduled, Walter went to watch the Cubs play. “He sent me an email that said, ‘Hey guys, I have to put the call off for a little while because we’re in extra innings here at Wrigley,’ ” said Kasten. Walter stayed to the end and kept Kasten waiting for half an hour. “So that was great. I was like, ‘I’m gonna do something with Guggenheim.’ ”
In the end, Walter decided not to bid on the Astros. But while the Houston sale was being processed, Kasten mentioned to Walter that
because of the messy McCourt divorce, the Dodgers might be on the market soon. Walter had wanted to buy the Astros, but he was even more interested in the Dodgers. After McCourt filed for bankruptcy and it became clear Major League Baseball was going to force him to sell the team, Kasten called Rosen. He had someone he wanted Magic Johnson to meet, but the famously secretive Kasten wouldn’t tell him who. Rosen and Johnson agreed to the meeting because they trusted Kasten. “We thought if Stan’s bringing someone he must be legit,” said Rosen. And so in November 2011, Mark Walter and Guggenheim president Todd Boehly flew to Los Angeles to meet with Johnson. When Kasten, Walter, and Boehly set off in a car from Guggenheim’s Santa Monica office to Johnson’s Beverly Hills office, Kasten realized he still hadn’t told Johnson whom he was meeting with. “So I called [Rosen] and said, ‘We’re coming in a second, and here’s who they are,’ ” said Kasten.