May 13, 2011, 9:12 AM EDT
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.
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