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

May 13, 2011, 9:12 AM EDT

Schieffer

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.

  1. Joe - May 13, 2011 at 9:18 AM

    All those shell companies are required to prove to the players and fellow owners that there really isn’t that much revenue, and so that’s why they can’t pay higher salaries/pay more in revenue sharing. Oh, and also to prove to municipalities that there isn’t that much revenue, so can you build us a new ballpark, please?

    • bigxrob - May 13, 2011 at 9:32 AM

      Don’t forget entities that are there to take advantage of tax loop holes.

  2. yankeesfanlen - May 13, 2011 at 9:33 AM

    Aww, c’mon Craig, don’t be so naive. Any corporate entity of any size and longevitiy has a laundry list of subsidiaries, buy-throughs, sell-throughs, auxiliary suppliers, loosely-affiliated partners, tightly controlled personnel and security operations, the list goes on forever.
    The ultimate example is of how our Federal Government, which is a master of such things named aboved, could not figure out how General Motors was run (or not).
    A certain baseball team that we know and love, has this down pat, but fortunately has stable ownership. Follow the money on that $11 beer and you’ll see.

  3. craigbhill - May 13, 2011 at 10:26 AM

    It’s all about (a), hiding assets, for tax purposes, for which McCourt is fabulously successful, and in McCourt’s case (2) stealing assets, else he/Dodgers, as he has tied their joint income together, wouldn’t have to borrow to make payroll! Which ultimately is the big difference between his case and Wilpon’s, who did not steal from himself, he was stolen from, thru a bad and dumb investment. Which MLB has come to see is also a good description of their approval of McCourt as owner, a bad and dumb investment.

    The question, once the 5,000 rolls of kite string have been untangled, is where did the money go?! You have to really blow it, or hide it elsewhere for some, to me, unfathomable reason that stops McCourt from using it to avoid losing the team. He’s got to have blown it. THINK about how much. It is not merely $100 million. That’s what he let us know about, in the divorce papers, not his recent garbage can of new lies. It’s all the revenues that turn a paper multi-millionaire into a billionaire. Not only all the in-stadium revenues, from the advertising which is everywhere in Dodger Stadium, the tickets, the beer, the doodads, the parking, endless revenues from each and every three and a half million fans per year, for seven + years now. That in itself is astronomic. Add to it the streams of cash from local Fox cable, local commercial tv broadcasts, the Dodgers’ share from Big Fox, ESPN, TBS. It is hard to imagine how this insane man blew all that, to the point the money that’s coming IN seems to have already been vaccuumed up.

    That’s what Schieffer and MLB need to untangle and discover especially once they formally seize the team after they have to make payroll again for McPauper soon. The details should be mindbogglingly breathtaking. And then even the hardcore support who think “It’s his team, he can do with it as he wants” will melt into nothingness. Like the Twin Towers, where matter turned to dust. All such details await widespread public exposure.

  4. dogsweat1 - May 13, 2011 at 11:52 AM

    It’s time for Brooklyn Dodger baseball!

    • craigbhill - May 13, 2011 at 3:56 PM

      No longer!

      Run that by the NY Mess. The Dodgers surrendered all claim to the NY NL territory when they left, never to look in the rear-view mirror.

      As soon as McCourt goes, LA will flock to the games again. As soon as Ned Colletti goes, they’ll be back in the usual numbers, knowing that better players are on the way.

      Brooklyn’s Dead. Not in the league any more. At least not in the majors. The Cyclones are in what league, again? The Pony?

  5. teke184 - May 13, 2011 at 1:25 PM

    @craigbhill,

    When everything’s said and done, I’m certain that the MLB and IRS will determine that McCourt and his family looted the franchise during his ownership.

    The IRS is already investigating McCourt, his wife, and his kids for large salaries they drew from working for the Dodgers or affiliated organizations. The web of organizations will probably prove to have been a way for them to disguise how they’ve been taking large amounts of money out of the organization without it becoming public knowledge.

    • craigbhill - May 13, 2011 at 3:51 PM

      My guess!

  6. simplicitymadecomplex - May 13, 2011 at 2:38 PM

    Craig stated “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.”

    Meanwhile there are more businesses, including every level of government [read federal, state, provincial, regional, city, municipal, townships, yada, yada, yada] that bury their misdeeds and uselessness in exactly this [... levels of shell corporations and subsidiaries...] type of legalized corruption.

    Smoke and mirrors defines our new hegemony, time to buy rose-coloured glasses before they are priced out-of-reach [thru 363 levels of management/owners/subsidiaries and, of course, lawyers {out least 5 levels].

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