The Dodgers: Los Angeles' Answer to General Motors
Major League Baseball's decision to take over the team echoes the government's moves to stabilize the auto and banking industries
Major League Baseball seized control of the Los Angeles Dodgers on Wednesday, a move that is the sports-world equivalent of the government taking over General Motors. Nothing the team does now—from raising concession prices to making a trade—happens without the league's approval. In a town used to seismic events, this one rates as massive, and its effects are deeply emotional. It's a transformative moment for the Dodgers' fans and players, who have suffered through the protracted divorce of the team's owners, Frank and Jamie McCourt, whose eventual settlement may be the most expensive divorce in California history.
No city figure claims to have anticipated this; nor did Steve Soboroff, the businessman and former mayoral candidate hired earlier this week by Frank McCourt to get the Dodgers' house in order. But like the financial meltdown that precipitated the Great Recession, this latest development was long in coming, its signs chartable, its villains exhibiting the same flaws found in the CEOs of our nation's largest banks—namely, greed, an obsession with PR over substance, a reliance on highly leveraged deals, and a belief that the good times would go on forever. These are the qualities of Jamie and Frank McCourt, who since their arrival in L.A. have displayed more drive in insinuating themselves into the city's high society and cultivating good press than pleasing the team's fans or exercising fiscal responsibility.
The Dodgers are at least $433 million in debt—which is about equivalent to the national debt of Djibouti. The McCourts bought the team from Fox in 2004 for $430 million (whether the team is owned by Frank McCourt or both Frank and Jamie is the central component of their divorce trial; Frank asserts he is sole owner, while Jamie claims a 50-50 split). Fox loaned the couple $145 million to facilitate the deal. But it wasn't the only time Frank McCourt would turn to Fox for money to buttress its former asset. In February, the team attempted to borrow $200 million from Fox, but the league office intervened, forbidding the loan. McCourt then bypassed the league by personally borrowing $30 million from Fox—and that was just to meet April's payroll.
The owners' divorce proceedings have revealed a litany of offenses that have contributed to a growing populist backlash against the McCourts. Rather than paying down debt, they treated the team like a personal bank, taking $108 million from its coffers, much of it to fund the many houses they've purchased around Los Angeles (including two adjacent mansions in Holmby Hills). They put their sons on the payroll, despite their doing no work for the team, and charged the team millions in rent on stadium property, which the McCourts also own. For several years, they managed to pay no taxes.
All of this is on top of steep rises in ticket prices and parking fees, as well as the team's decision to leave its historic spring training site, Dodgertown, in Vero Beach, Florida, for a shared facility with the White Sox in Arizona. And then there's the bizarre, frighteningly real story of Vladimir Shpunt, a septuagenarian Russian healer who the McCourts paid six-figure fees to send positive "V energy" to the team.
On Opening Day this year, a Giants fan was beaten nearly to death in the stadium parking lot. McCourt's response was characteristic: After first saying that stadium security was fine, he then made a PR-friendly hire, bringing in former police chief William Bratton to devise a security plan. The team hadn't had a dedicated security chief since late 2010.
The consequences of this behavior have been severe. Attendance is down this year, while season ticket sales have fallen by about 10,000 over the last four years, according to the Los Angeles Times. Players have admitted that the owners' soap opera is a distraction; manager Joe Torre fled for a job with the commissioner's office. Fans nicknamed McCourt "McBankrupt" for his highly leveraged deals, while the acerbic Los Angeles Times columnist T.J. Simers has long called Frank McCourt "the Boston Parking Lot Attendant" and his wife "the Screaming Meanie." (McCourt's purchase of the Dodgers relied on his putting up as collateral Boston property that, despite its waterfront location, served as parking lots.)
The New York Times contrasted Commissioner Bud Selig's treatment of the Dodgers with that of the Mets, whose principal owners, the Wilpon family, face a $1 billion lawsuit for their involvement with another emblem of the Great Recession, Bernie Madoff. The Times attributed Selig's greater tolerance of the Wilpons' troubles to Fred Wilpon's willingness to sell a $200-million minority stake in the team and his longtime relationship with Selig. If the relationship among MLB owners and the league office is just as clubby as that of America's investment banks and its regulators, then the Mets are something like Goldman Sachs and the Dodgers are Bear Sterns. One is favored by the powers above and offered time and money to get its house in order; the other will receive no leniency. As always, it is fans, the proverbial shareholders of the team and its dear history, who will suffer.
Any resolution will be painful and prolonged. The commissioner's office could be controlling the team for months, as it conducts an extended investigation into the Dodgers' books. (The IRS is reportedly investigating the McCourts' own finances.) Having the league office— and by extension, the other 29 team owners—run and finance one of the sport's marquee franchises could get ugly. The league's previous stewardship of the Montreal Expos was a disaster, though Selig had a more recent success in guiding the sale of the Texas Rangers after the team's owner defaulted on loans. A similar fate may await Frank McCourt, who, despite his precarious financial state, was spending $1,000 a day to stay in a new Beverly Hills hotel after he and his wife separated.
Despite not winning a World Series since 1988, the Dodgers remained immensely popular, revered as one of the city's pillars. But as we've seen over the last few years, no American institution is immune to the effects of greed and wild risk-taking. Frank McCourt is digging in, reportedly preparing to sue the league. He released a three-sentence statement late on Wednesday that ended with the naive protestation, "It is hard to understand the Commissioner's action today." For longtime Dodgers fans, that is the least difficult part.