Low profile allows Lerner to play hardball

Originally Published: May 4, 2006
By John Helyar | ESPN.com

Stack up all the big-name bidders for the Washington Nationals and the pile would reach Washington Monument proportions. Sprinkled among eight competing ownership groups were political luminaries (former Secretary of State Colin Powell, former Illinois Sen. Peter Fitzgerald), Redskins legends (Calvin Hill, Charles Mann, Art Monk, Darrell Green), billionaires (George Soros, Ron Burkle) and other notable men about town (political and corporate lawyer Vernon Jordan, former Fannie Mae chief Franklin Raines).

So ... how did a low-profile Washington real estate developer named Ted Lerner emerge as the winner over all these swells?

It turns out that the peculiar politics of Major League Baseball are a lot different than the usual politics of Washington, D.C. The groups that pulled up lame didn't figure that out. Lerner steadfastly refused to do any spinning for the media or any cozying up to City Hall. The 80-year-old patriarch of a family-owned development concern instead quietly established his bona fides and built his credibility with MLB, as methodically as he's built huge shopping malls in suburban Virginia and Maryland.

On Wednesday, we found out just how much commissioner Bud Selig values "quiet." He wanted the Nationals' new owner to be more like some of baseball's old owners -- the kind still extant when Selig entered the business with the Milwaukee Brewers in the early 1970s.

Theodore N. Lernerr, right, and his son Mark.
AP Photo/Haraz N. Ghanbari) Ted Lerner, right, and his son Mark bring one big happy family to baseball ownership.
"I think Lerner reminds Bud of John Fetzer," one veteran baseball executive told ESPN.com several days before the decision, referring to that era's Detroit Tigers' owner, who had a self-effacing demeanor, who looked beyond his self-interest and whom Selig frequently calls his mentor. Indeed, in announcing the new owner on Wednesday, Selig invoked the name of Fetzer, as well as that of the O'Malleys and Galbreaths -- family owners of yesteryear.

"Family ownership ... has served baseball well in the past and will continue to serve the game in the future," he said.

But this isn't really about taking the era of throwback jerseys and throwback ballparks one step further -- to throwback owners. It's about protecting baseball's vital interests in Washington. A freewheeling, ego-tripping owner is an annoyance to the commissioner in any market, but it's something more than that in a town where baseball has so much at stake. It's utterly unthinkable. Some of the worst moments of Selig's czar-hood have occurred on Capitol Hill, where he's been grilled about baseball's antitrust exemption and steroids scandal.

"He knows where this club is situated, and he does not want a problem child," says one Washington hand who is familiar with Selig's thinking.

It's not that the other groups were really loose cannons, but they didn't seem to understand how their actions would play with MLB. Washington entrepreneur Jonathan Ledecky, for example, no doubt thought he'd scored a coup last year when he landed George Soros as an investor in his bidding group. Soros, a currency trader, has a net worth of $7.2 billion, according to Forbes, making him the 27th richest person in America. But he also has a couple of problems, at least for baseball. One is that other owners don't care for someone with pockets as deep as Soros.

"Baseball's ideal owner," one well-placed insider explained, "is someone who can pay top price for a club but has absolutely nothing left over to start spending wildly on players."

The other problem is that Soros is a generous contributor to Democrats, and that doesn't play well in a Republican-controlled Congress. Rep. Tom Davis (R-Va.), who chaired the steroids hearings in March 2005, offered this ominous comment to Roll Call about the prospect of Soros as owner: "I think Major League Baseball understands the stakes. ... I don't think they want to get involved in a political fight."

At that point, you might say the Ledecky group was given its unconditional release from ownership contention.

Former U.S. President Richard M. Nixon
AP PhotoThe seeds of Wednesday's decision might have been sewn during the Nixon Presidency.
A group led by local financier Fred Malek at first seemed to have the inside track. That consortium worked closely with the city to attract baseball back to Washington, after a 33-year absence, when the Montreal Expos needed a new home. It had oodles of prestige, boasting the likes of Colin Powell, corporate-political power broker Vernon Jordan, former Fannie Mae CEO Franklin Raines and AOL founder James Kimsey. Malek was a political heavy himself, in addition to heading his Washington-based Thayer Capital firm. He was a campaign manager for the first President Bush, and he had a piece of the Texas Rangers during George W. Bush's ownership days.

But an unsavory part of Malek's political history put the first ding in his Nationals campaign. In the early 1970s, President Nixon was unhappy with the economic data coming out of the Bureau of Labor Statistics, and he clamored to know if its administrators had an agenda. He ordered a young aide, Fred Malek, to determine the number of high-ranking Jews there. Malek came back with a count (13), and he came to regret it when the episode eventually was revealed.

In subsequent years, local Jewish leaders have come to Malek's defense, saying he is no anti-Semite. But the story kept resurfacing over the past year, and it was connected with a widely held belief that Malek's group had planted press potshots painting Indianapolis-based bidder Jeff Smulyan as a "carpetbagger."

The Washington Post's Mike Wise addressed the issue in a November interview with Smulyan. Wise's story said, "Asked if he believed the Malek group was behind the out-of-town characterization and whether Smulyan's Jewish faith had anything to do with it, Smulyan said: 'You hear things, but I can't believe that. I don't think there's any anti-Semitism involved. If I could have been part of a group of Episcopal bishops from out of town, the same thing would have happened.'"

Baseball's ideal owner is someone who can pay top price for a club but has absolutely nothing left over to start spending wildly on players.
A well-placed baseball insider
That's a high-road response. But according to people familiar with the bidding process, Selig and MLB's lead owner on the Nationals matter, Jerry Reinsdorf of the Chicago White Sox, were both displeased with Malek. They believed he had been behind the negative campaigning, and they are friendly with Smulyan, who used to own the Seattle Mariners. Selig and Reinsdorf are also both Jewish. A spokesman for Malek's group declined to comment.

Further, D.C. city government's endorsement of the Malek group didn't count for much with MLB. If anything, it was a negative, since the district kept reopening the stadium-lease deal and delaying its finalization. Mayor Anthony Williams was openly contemptuous of the Lerners in a recent luncheon address, saying he'd never met them and would love to hear from them.

"Operators are standing by," he joked.

Most likely, that only firmed and hastened baseball's choice of Lerner. The Lords of Baseball have made clear from the start that if they were to favor Washington with a team, it would be on the Lords' terms. When D.C. representatives first met with Reinsdorf and laid out their stadium plans and requirements, they suggested the District would be up for paying two-thirds of the cost if the owners covered the other third.

"We were thinking of a different split," Reinsdorf replied, according to one meeting participant. "We were thinking three-thirds and no-thirds."

The district government, desperate for a team, agreed to foot the whole $611 million bill for the stadium.

Ted Lerner, meanwhile, was merely doing what Bud Selig had asked -- and what, in any event, comes naturally to him: He was keeping quiet. Smulyan tried to counter the carpetbagger theme by recruiting local African-American investors to buy a 25 percent stake in his group and trumpeting it through a PR firm. Malek bathed in the praise of the D.C. city councilors, who heaped scorn on the suburban developer Lerner.

Bud Selig
AP Photo/Caleb JonesThe last thing Bud Selig wanted was troubling ownership in the nation's capital.
Lerner kept his eye on the one constituency that mattered: the Lords of Baseball. He did bring some black investors into his group in the late going. But the key late addition was Stan Kasten, former president of the Atlanta Braves, who folded his own bidding group into Lerner's and will operate the Nationals. Kasten is a Selig guy all the way -- slogging into the trenches to represent the owners during hostile negotiations with the players' union during the 1994 strike.

Kasten, whose credentials for the job include building a ballpark and being a fiscally responsible winner in Atlanta, was the final piece of assurance Selig needed that the franchise will be in good and controllable hands.

"Now," a baseball insider said the other day, "Bud knows Lerner will not do crazy things."

If he plays his cards right, Lerner stands to make a second fortune on baseball. The Nationals are projected to become one of MLB's top-grossing teams upon the stadium's 2008 completion, according to a city hall-commissioned report.

Lerner made his first fortune by developing the first major suburban shopping malls in metro D.C. The most impressive is Tysons Corner, a country crossroads in Fairfax County, Va., where Lerner broke ground in 1968. It is now one of the biggest retail-office complexes in the country. Lerner has developed a reputation for being visionary, gutsy and tough as nails.

"They are tenacious," says one real estate executive who's done business with the Lerners. "If you're their partner, you love it. If you're on the other side of the table, it is a very grueling negotiation."

Ted Lerner has long been interested in sports ownership, making past unsuccessful runs at the Baltimore Orioles and Washington Redskins. Unlike most aspiring owners, however, he shuns the spotlight and keeps a low profile in the Washington area, despite his firm's ownership of more than 20 million square feet of real estate.

Ted Lerner has now ceded day-to-day responsibility for his regional real estate empire, but he's still an active consultant for it, and his firm remains "a tight-knit family operation," according to the real estate executive. The firm's key executives are Lerner's son, Mark, and two sons-in-law. Mark Lerner, currently a minority owner of the Washington Wizards and Washington Capitals, is expected to take the most active hand in the running of the Nationals.

John Helyar is a senior writer for espn.com and ESPN the magazine. He previously covered the business of sports for The Wall Street Journal and Fortune magazine, and is the author of "Lords of the Realm: The Real History of Baseball."

John Helyar

Sports Business
John Helyar is a senior writer for ESPN.com and ESPN The Magazine. He previously covered the business of sports for The Wall Street Journal and Fortune magazine and is the author of "Lords of the Realm: The Real History of Baseball."

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