CSS Button No Image Css3Menu.com

Baseball Prospectus home
Click here to log in Click here for forgotten password Click here to subscribe

<< Previous Article
Western Front: As a Ma... (05/01)
<< Previous Column
Premium Article Bizball: 12 Detailed L... (04/23)
Next Column >>
Premium Article Bizball: Who Will Be M... (05/07)
Next Article >>
Premium Article Prospects Will Break Y... (05/01)

May 1, 2012


The Frank McCourt Era Is Over

by Maury Brown

the archives are now free.

All Baseball Prospectus Premium and Fantasy articles more than a year old are now free as a thank you to the entire Internet for making our work possible.

Not a subscriber? Get exclusive content like this delivered hot to your inbox every weekday. Click here for more information on Baseball Prospectus subscriptions or use the buttons to the right to subscribe and get instant access to the best baseball content on the web.

Subscribe for $4.95 per month
Recurring subscription - cancel anytime.

a 33% savings over the monthly price!

Purchase a $39.95 gift subscription
a 33% savings over the monthly price!

Already a subscriber? Click here and use the blue login bar to log in.

It took a day longer than expected, but shortly after 10 AM PT on May 1, the sale of the Los Angeles Dodgers from Frank McCourt to Guggenheim Baseball Management LLC (“GBM”)  for $2 billion took place. The Dodgers’ new ownership includes Mark Walter as control person, Earvin “Magic” Johnson, and Stan Kasten as CEO of the organization.

The Los Angeles Dodgers stated, “The Dodgers emerge from the Chapter 11 reorganization process having achieved its objective of maximizing the value of the Dodgers through a successful Plan of Reorganization, under which all claims will be paid. The Dodgers move forward with confidence - in a strong financial position; as a premier Major League Baseball franchise; and as an integral part of and representative of the Los Angeles community.”

Three-thousand and fifteen days. Or, eight years, three months, and two days. That’s how long Frank McCourt owned the Los Angeles Dodgers. His tenure now over, $1.588 billion cash has been moved out of escrow from Guggenheim Baseball Management, making the sale final. As part of the sale, GBM will assume $412 million in debt that the Dodgers have incurred under McCourt’s watch, and with it, the new owners get the Dodgers, Dodger Stadium, and the land upon which Dodger Stadium is built. In a separate deal for $150 million, GMB will partner with McCourt to develop the land around Dodger Stadium. But while McCourt is a partner, he does not get the revenue from the parking lots; that will go to GMB.

The deal had been set to close on Monday because McCourt owes his former wife, Jamie, $131 million as part of his divorce settlement.  McCourt had wisely set up “bridge funding” for $140 million in case the deal did not occur on time. Due to the complexities of the deal—one that has been called the most complex sports franchise sale ever—an agreement was not reached until Tuesday. After settling with his former wife, Jamie, Frank McCourt will walk away with $1.457 billion outside of the $150 million land sale. They say you should never reward bad behavior, but apparently, McCourt didn’t get that memo.

Frank McCourt purchased the Dodgers in January of 2004 for $421 million. It took two separate transactions for the Bostonian to get the money together.  News Corp., who owned the Dodgers at the time, loaned McCourt $196 million. The remaining $225 million of the $421 million sale was done through Bank of America. The entire deal was leveraged from the get go, and it had the league nervous.

While MLB has been skewered for ever allowing McCourt to purchase the Dodgers in the first place, the deal was a forced marriage. News Corp. had reached an agreement in principle with Tampa Bay Buccaneers owner Malcolm Glazer in January of 2003, but when the sides tried to close the deal, it ran into complications with both the NFL and MLB’s ownership rules.

At the time, MLB had rules in place stating that 60 percent of any club sale had to be cash (the rest could be financed). To that end, Glazer couldn’t come up with the cash without leveraging the Buccaneers, which was against the NFL’s rules.

The NFL has rules stating that if you’re going to purchase a club in another league, you can’t use NFL assets as collateral to get loans to make the purchase. The NFL also requires that you have an independent management team in place for the new club. Glazer had been trying since April of 2002 to make both happen, but he couldn’t. One idea on the management side was to have his son Ed, who lived in Los Angeles, run the Dodgers. That didn’t fly well with MLB. As one executive put it at the time, they were concerned with Ed’s "management credentials."

As News Corp. got itchy and impatient, they began searching for a fallback. Wanting to get out from the Dodgers as fast as possible, they looked to Frank McCourt—who had missed out on the Red Sox and Angels—to complete a sale. The reasons that McCourt missed out on both of those sales had as much to do with how he had money wrapped up as they did with whether better bids would be available. He would have never been able to pull either of those sales off without other investors. The Dodgers purchase was about being in the right place at the right time for McCourt.

While billionaire philanthropist Eli Broad stepped in at the 11th hour at the behest of civic leaders in Los Angeles, News Corp. had had enough and settled on McCourt. The sale went through and, with it, problems began almost immediately.

President Bob Graziano and Executive Vice President of Business Kris Rone left over what was deemed philosophical differences with Frank and Jamie McCourt. Graziano had been with the Dodgers for 18 years, so the shift came as a bit of a shock. As noted in the LA Times on March 9, 2004, “sources familiar with the situation said that both questioned the viability of a business plan based on a best-case scenario. If that best case doesn't totally evolve—and seldom do all of the pieces fall in place in baseball —Graziano and Rone were concerned, the sources said, about McCourt's long-term operating potential given the level of the debt servicing in his highly leveraged purchase of the club.”

After that, McCourt was supposed to lure Mike Dee, the Red Sox’ Executive VP of Business Affairs, to the Dodgers to replace Gaziano. It never happened. Derrick Hall, Dodger Senior Vice President also fled. Along the way, there were firings, including GM Dan Evans, who was left hanging while whispers of Billy Beane and Paul DePodesta wafted about as replacements. When McCourt did bring in DePodesta, it lasted all of 20 months (from February 16, 2004 to October 29, 2005).

But it got worse. While the problems in the front office were mounting, the pilfering of funds from the Dodgers surfaced as part of the divorce from his wife, Jamie. As Jamie considered herself part owner of the Dodgers, she requested a lavish list of Dodger “benefits”  as part of her divorce filing. She was to continue receiving paid dinner and lunch five days a week, club-paid-for private and country club memberships, a 24-hour driver, fresh flowers daily, gifts sent from the ownership office, and hair and makeup for Dodger events.

On top of this, the Dodgers’ charitable Dream Foundation was investigated by California Attorney General Jerry Brown in 2010 over what was seen as funds coming out Dream Foundation to benefit Jamie McCourt. In a report by the LA Times, it was said that, “In a letter to the Dodgers Dream Foundation dated March 3, the attorney general's office said the foundation in 2008 had authorized a consulting contract worth $122,352 in violation of state requirements governing charity funds. The money was ordered repaid to the charity, and foundation attorney William Choi said Frank McCourt complied.” All told, the investigation into Dream Foundation for improper expenditures totaled $361,432 in 2007 and 2008. That also included a bonus payment of $239,080 to Dodgers executive Howard Sunkin. "Whatever was going on with the Dodgers Dream Foundation was directed by either Frank or Jamie McCourt," Rob Manfred, MLB's executive vice president said at the time.

McCourt threw the Dodgers —yes, the Los Angeles Dodgers, a cornerstone club that saw Jackie Robinson break the color barrier, was one of the first two teams to relocate to the west coast, and which operates in baseball’s second largest market—into bankruptcy. He tried to leverage the Dodgers’ current media rights deal with FOX ahead of it expiring. As Commissioner Selig said in his letter to McCourt rejecting the proposed plan to sell the media rights to pay off Dodger debt, “While other clubs have received signing bonuses and other up-front payments as part of media rights deals, the $385 million that would be accelerated as part of the Proposed Transaction far exceeds any up-front payment previously received by any other club. No other owner has sacrificed so much of his team’s future for immediate payoff.”

In the end, McCourt bent and settled, but the damage was significant. While the Dodgers are one of the key teams to watch early in the 2012 season—they hold the second-best record in MLB behind only the Rangers—they’re ranked sixth in average attendance at 38,759. Last season, they finished even worse: 11th, with an average attendance of 36,236 and a total attendance that was under three million for the first time since 2000.


Avg Attendance





























*Through 11 games of 2012 season

A Bright New Day?
For fans of the Dodgers, today is the first time they have an ownership that they can have faith in since the O’Malley family owned the team. Ever since News Corp. purchased the Dodgers in 1997 for $311 million, fans have never really had an ownership group to get excited about.

Many feel that the Dodgers may be active at the trade deadline (though they don’t have a deep well of prospects to deal from), but they are likely to be major players in the off-season. Along the way will be a new television deal that will likely see a floor of $4 billion but may get as high as $5 billion.

Don’t cry for Frank McCourt; he’s got all that money. Of course, owning an MLB club is also about the visibility of owning a sports franchise. Fans should be relieved to know that through his ownership of the Dodgers, Frank McCourt will never own any portion of a MLB club again. It’s also likely that through his poor running of the Dodgers, McCourt will never be allowed to own a major league sports property in any league. Farewell, Frank. Don’t let the door hit you on the way out.

Maury Brown is an author of Baseball Prospectus. 
Click here to see Maury's other articles. You can contact Maury by clicking here

6 comments have been left for this article. (Click to hide comments)

BP Comment Quick Links


And this couldn't have happened without "BudLight" and his business acumen.

May 01, 2012 11:41 AM
rating: 3

While there's certainly nothing to argue about here, I can't help but feel that McCourt is not being given his due. All the man did is finance his purchase of the Dodgers at a fire sale price by buying low using other people's money. Then he cleaned house gutting long serving management and installing in their stead his wife and sons in high paying jobs that required no work. Well, isn't that the point? Why be rich if not to do whatever you damn well please (with the Dodgers in this case) and to hell with everybody else. I find the outrage and umbrage over McCourt's tenure to be more than just a little over the top.
Frank McCourt is a success story. There's little difference between him and say, the likely Republican nominee for President who made his own considerable fortune finding distressed 'assets', gutting the labour force that built (but didn't own) them and reselling the newly 'viable' properties. If Andy Warhol was right, that any publicity is good publicity, the public spectacle of the McCourt's excesses just brought more attention to the real value of the Dodgers, in the end helping to boost the price into the stratosphere.
DodgerDan's comment about 'BudLight' is spot on as far as it goes but more needs to be said about the inherent hypocrasy of Selig's (and MLB's) stance opposite McCourt's attempts to leverage the Dodger's future media rights--the TV money--to save his ass. All MLB owners are salivating at the prospect of future revenue streams from sports networks bearing their team monikers. McCourt was just ahead of the curve on this. Doubtless, had he not been squeezed by his divorce on one side and by Selig on the other, he would have pulled off his own megadeal with Fox or someone else. As it is I hope the inevitable condo development at Chavez Ravine is named after McCourt. He's earned it and Bud Selig deserves it.

May 01, 2012 15:09 PM
rating: -1

... and to think, the team would still be his if his divorce lawyers didn't screw up simple paperwork.

May 01, 2012 16:24 PM
rating: 4
BP staff member Maury Brown
BP staff

So very true. So very scary.

May 01, 2012 17:05 PM

oh my--michaelmcduffe--I'm guessing you're English? if only you wrote this letter for the LA Times--well done. If you are from across the pond, can you offer any similar examples in European sports circles?

May 02, 2012 20:20 PM
rating: 0

No one ever mentions how Rupert Murdoch gave up over a billion dollars by selling his investment 8 years too soon. I guess he is incapable of running Newscorp.

May 03, 2012 04:31 AM
rating: 0
You must be a Premium subscriber to post a comment.
Not a subscriber? Sign up today!
<< Previous Article
Western Front: As a Ma... (05/01)
<< Previous Column
Premium Article Bizball: 12 Detailed L... (04/23)
Next Column >>
Premium Article Bizball: Who Will Be M... (05/07)
Next Article >>
Premium Article Prospects Will Break Y... (05/01)

Premium Article What You Need to Know: June 2, 2015
Premium Article The Call-Up: Manny Banuelos
Fantasy Rounders: Split the Bit
Premium Article Painting the Black: #HugWatch2015: The Hugge...
Premium Article Transaction Analysis: They're No Angels
Premium Article Rubbing Mud: The Cole Hamels Decision
Premium Article The Call-Up: Miguel Sano

Baseball Prospectus News: Introducing the Re...
Baseball ProGUESTus: Spitting Imaging
Fantasy Article Fantasy Beat: September Surges, April Strugg...
Fantasy Article Value Picks: First, Third, and DH for 5/1/12
Premium Article Collateral Damage Daily: Tuesday, May 1
Premium Article The Prospectus Hit List: Tuesday, May 1
What You Need to Know: Tuesday, May 1

2012-05-29 - Premium Article Bizball: Inside the 2012-16 CBA: The Luxury ...
2012-05-14 - Premium Article Bizball: New CBA, Fans Sue MLB, Jerry McMorr...
2012-05-07 - Premium Article Bizball: Who Will Be MLB’s First $300 Mill...
2012-05-01 - Premium Article Bizball: The Frank McCourt Era Is Over
2012-04-23 - Premium Article Bizball: 12 Detailed Looks At Early MLB Atte...
2012-04-16 - Bizball: Why the Seattle Mariners Could Be S...
2012-04-09 - Premium Article Bizball: Big Money and the Opening Day Payro...

2012-05-29 - Premium Article Bizball: Inside the 2012-16 CBA: The Luxury ...
2012-05-14 - Premium Article Bizball: New CBA, Fans Sue MLB, Jerry McMorr...
2012-05-07 - Premium Article Bizball: Who Will Be MLB’s First $300 Mill...
2012-05-01 - Premium Article Bizball: The Frank McCourt Era Is Over
2012-04-23 - Premium Article Bizball: 12 Detailed Looks At Early MLB Atte...
2012-04-16 - Bizball: Why the Seattle Mariners Could Be S...
2012-04-09 - Premium Article Bizball: Big Money and the Opening Day Payro...

2012-05-08 - Premium Article Western Front: Three Days, Three Dingers