Commentary

Jerry Reinsdorf: one sweet deal-maker

Legal looks at a bargain-basement price for the Coyotes, Barry Bonds' wait and more

Originally Published: May 6, 2010
By Lester Munson | ESPN.com

Bonding power. Bonds power. (Yep, Barry. That kind of power.) Prescription drug abuse. Where sports and the law lead, Courtside Seat will follow. Today, we start with &

Deal of the century

Who is the best deal-maker in sports?

Tough question, until now. But the answer might be a little more clear these days in light of Jerry Reinsdorf's deal to purchase the Phoenix Coyotes. He has put together an unprecedented transaction that will be the envy of franchise owners everywhere.

Almost any owner can grab a bit of taxpayer money to help build a stadium. It's become commonplace. But now, Reinsdorf, the owner of the White Sox and the Bulls in Chicago, has broken new ground in his purchase of the Coyotes. Somehow, he has persuaded the city of Glendale in Arizona to pony up a large portion of the price Reinsdorf will pay to purchase his newest team.

[+] EnlargeJerry Reinsdorf
Jonathan Daniel/Getty ImagesHis White Sox won the World Series in 2005. His Bulls have won six NBA titles. Can Jerry Reinsdorf get the Coyotes a Stanley Cup?

In a preliminary agreement known as a memorandum of understanding (MOU), the Glendale City Council has agreed to pay $65 million in public funds over three years to the NHL, the current owner of the Coyotes, as part of Reinsdorf's purchase. The NHL took over the team after Jerry Moyes, the previous owner, threw the franchise into bankruptcy court in a failed effort to sell the club and move it to Hamilton, Ontario.

The $65 million to be paid by Glendale is nearly 40 percent of the total Reinsdorf will have to pay to the NHL to acquire the Coyotes. But although Glendale is paying 40 percent, Reinsdorf and his group will own 100 percent of the team.

"This has never been done before," observes an admiring Marc Ganis, a Chicago-based sports industry consultant who has put together numerous deals, including the development and financing of the new Yankee Stadium. "No one can get more out of the public sector. [Reinsdorf] is the best of the best."

And that isn't all that Glendale is doing for Reinsdorf. The MOU includes six concessions from the city that some team owners wouldn't even dare to request:

• Total debt-free control of the Jobing.com Arena with a subsidy from Glendale;

• A city guarantee of up to $100 million in operating losses for a team that has lost $300 million since it moved to Arizona from Winnipeg in 1996;

• A promise from Glendale to use its bonding power to gather the funds for the purchase price and the operating-loss guarantee;

• A limit of five years on a promise to keep the team in Glendale;

• The right to sell the team in five years if it is not profitable;

• A guarantee that Reinsdorf will recapture his $103 million share of the purchase price in any sale.

Although the MOU and these terms are preliminary steps in the process of Reinsdorf's purchase of the Coyotes, Reinsdorf and Glendale have agreed that the MOU is "the basis for documenting a final agreement." The deadline for completion of the Reinsdorf purchase is June 30. It is the NHL's deadline. If there is no deal by June 30, the NHL may consider moving the team.

Jerry Reinsdorf
Jonathan Daniel/Getty ImagesReinsdorf takes in a game at 'The Cell,' the House That Jerry Built … with the help of public financing.

Moyes, the previous owner, did not respond to ESPN.com's requests for comment on the Reinsdorf-Glendale deal; but it's clear that if Glendale had offered the same subsidies and guarantees to Moyes, he may have been able to avoid his bankruptcy maneuver and his attacks on NHL commissioner Gary Bettman and other NHL owners.

How does Reinsdorf do it?

"Although he is not shy about making demands that others may not make, he is honorable in his negotiations," Ganis says. "If he tells you something, you can rely on it."

A group of 30-something Yale hockey players who have made small fortunes in finance attempted to bid against Reinsdorf for the Coyotes. They appeared before the city council to make their pitch and were rejected. They are in awe of what Reinsdorf accomplished in the MOU with Glendale, according to Daryl Jones, a member of the group and its spokesman.

"We presented a very fair offer, and they chose Mr. Reinsdorf," Jones says. "It seemed like the council members had a bias for him, and we wish him the best."

Jones and his group guaranteed Glendale that the team would remain in Glendale and proposed to finance their purchase with loans and parking fees, avoiding the Reinsdorf-backed revenue bonds that will tax real estate throughout the arena's neighborhood.

Although Reinsdorf appears to be on his way to joining Wayne Huizenga as the only three-team owner in sports history (Huizenga once owned three teams in the same market: the Miami Dolphins, the Florida Marlins and the Florida Panthers), there may be trouble on the horizon. Public-interest groups in Arizona, including the Goldwater Institute, are already looking hard at the deal. A recent decision by the Arizona Supreme Court questions the use of taxpayer money to support private businesses such as the Coyotes. A court challenge is likely.

But assuming the purchase is completed, Reinsdorf will have added another transaction to his impressive inventory of advantageous deals. He developed a new Comiskey Park in Chicago, now known as U.S. Cellular Field, with a threat to move the club to St. Petersburg and a deal that provided for public financing with, incredibly, an attendance subsidy. When the Sox attendance drops below prescribed levels, the Illinois Sports Facilities Authority is obligated to help the team with expenses. And, on behalf of Major League Baseball, he helped produced a stadium deal for the Washington Nationals that is a model for the use of leverage to obtain public financing for a private enterprise.

When professors at the nation's finest business schools are looking for examples of brilliant deal-making, they should be looking at Jerry Reinsdorf.

Judges tarry over Barry


The three judges who are deciding the fate of the Barry Bonds perjury prosecution have been sitting on their decision for nearly eight months now, a period of contemplation that is more than double the norm for criminal cases in the U.S. Court of Appeals for the 9th Circuit.

After filing the necessary briefs and paperwork last year in accordance with a rigid schedule, federal prosecutors and lawyers for Bonds presented their verbal arguments to the court on Sept. 17. The issues presented by the attorneys appear to be relatively simple -- they concern a series of rulings by U.S. District Court Judge Susan Illston in San Francisco that barred prosecutors from using positive drug tests, drug calendars, purchase records, and other evidence that supported the government's theory that Bonds used steroids and lied to a grand jury about it.

[+] EnlargeBarry Bonds
Kevork Djansezian/Getty ImagesHow is Barry Bonds biding his time? Taking in a Lakers playoff game last month, for one thing.

There was no trial. There was no lengthy record of witnesses and their testimony. There were only a few documents to consider. The briefs and the other papers are minimal, only a fraction of the typical appeal considered by the high court.

But there has been no decision.

In the last 10 criminal cases decided by the judges of the 9th Circuit, the average time between the lawyers' oral arguments and the judges' decision has been 116 days, according to an ESPN.com survey of those decisions. Some of those 10 cases involved voluminous records of trials on charges such as bank robbery, immigration fraud, wholesale sale of cocaine, and child pornography.

It's been 231 days (as of May 6) since the arguments in the Bonds case. That's a long time even for the 9th Circuit court, the slowest-moving court in the federal system.

Court officials and judges will not discuss the time spent on the court's decision. They will say only that decisions from the court are posted at 10 a.m. Pacific time each day.

What is taking so long? The three judges making the decision include the most notorious liberal on the nation's most liberal appeals court, another judge known to be left of center, and one Republican conservative.

It is difficult to be certain, but the delay might be the result of a split decision, with one of the judges writing a dissenting opinion. Judge Stephen Reinhardt, 78, who is known for lengthy and literary opinions, might be writing another of the opinions that has made him the prototype of the liberal, activist judge.

Judicial protocols and courtesies require the three judges to share their thoughts and their writing with one another before they publish their decision.

How long will the process go on? The decision is already overdue. It might be a good idea to check the court's website at 10:05 a.m. PT each day.

Tough pill to swallow


Saints coach Sean Payton's denial could not be more adamant.

"I have never abused or stolen Vicodin or any other medication," he proclaimed in a statement responding to serious allegations in a lawsuit filed by the New Orleans Saints' former director of security.

Will Payton's statement become one of those denials that live in infamy? Rafael Palmeiro shaking his left index finger at a congressional committee and denying the use of steroids. Bill Clinton, also shaking his left index finger, and declaring, "I did not have sex with that woman."

Or will Payton's denial become the first step in a successful attack on Geoffrey Santini, the former security director and a former FBI agent who says Payton and assistant head coach Joe Vitt were stealing team drugs for their own use? Santini has filed a lawsuit seeking money damages for "constructive discharge," a legal term that means the team's misconduct (an alleged attempted cover-up and failure to report controlled substances that were missing) forced him to resign. By their conduct, according to the lawsuit, Saints officials forced him out of his job.

[+] EnlargeSean Payton
Chris Graythen/Getty ImagesSean Payton denies the suggestion that he's abused prescription drugs, but the allegations in a lawsuit are serious.

A close look at Santini's 12-page lawsuit indicates that Payton and the Saints could be in for a rough time. As Santini investigated what everyone agrees was a series of thefts of Vicodin from the Saints' drug cabinet, he gathered videotapes, audiotapes and original drug-inventory records.

The videos allegedly show Vitt unlocking the medication cabinet and taking unauthorized quantities of Vicodin; and then, after team officials removed the drug from the cabinet, making an unsuccessful attempt to gather more of the drug.

The audiotapes allegedly include conversations involving Santini, team trainer Scottie Patton and assistant trainer Kevin Mangum discussing general manager Mickey Loomis' instructions to destroy video and to alter drug records in an apparent cover-up.

According to the lawsuit, Santini has copies of the original team drug records, which he alleges show that 130 Vicodin pills are not accounted for. Vicodin is a "Schedule C drug" and all pills must be accounted for with pill-by-pill precision. Missing pills must be reported to the DEA and, under NFL rules, to the league office. The missing pills make for a situation that will be difficult to explain.

The lawsuit's most damaging allegation against Payton -- he is described only as "Senior Staff Member A," but people familiar with the lawsuit say the coach is the unidentified person in the complaint -- is trainer Patton's statement that the amounts of missing drugs indicated a pattern of abuse.

Although the language and the syntax of the lawsuit indicate that it was written in a hurry, its series of specific events at specific times and places, most of them apparently recorded on video or audio, could be a problem for Payton and the Saints.

Chances are, it will take more than an adamant denial from Payton to bring this to an end.

Lester Munson, a Chicago lawyer and journalist who reports on investigative and legal issues in the sports industry, is a senior writer for ESPN.com.

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