There was bad news for the Los Angeles Dodgers and their owner Frank McCourt on June 20th when Major League Baseball Commissioner Bud Selig shot down a media rights agreement the club had worked out with Fox Television. McCourt is now on rocky ground since his cash flow is quickly drying up.
McCourt made a deal with Fox that would have seen the Dodgers receive close to $3 billion over the life of the contract and said without that money the club will be in financial trouble. He has been trying to get Selig to okay the deal for several months and his lawyers now say there could be a lawsuit to get it approved.
Selig released a statement which said he gave the contract with Fox a lot of thought, but he doesn’t think it’s in the best interests of the Dodgers and their fans. The agreement would have seen the franchise receive $385 million upfront from Fox with $173.5 million of it going to McCourt and his wife and their lawyers.
Selig has the right to squash the deal due to MLB’s debt-service rule. This states that ball clubs can’t borrow money on future assets to pay off current debts. The rule says if franchise owners want to raise money they must do so by selling equity in their clubs and/or cut down on spending. Selig said the deal was structured in a way which would see McCourt use some of the money for his personal needs and a diversion of the Dodgers’ assets could put the club’s future at risk.
The commissioner gave Tom Schieffer, the former president of the Texas Rangers, the job of monitoring the Dodgers’ business affairs back in April because he was concerned about the state the team was in. McCourt’s ex-wife is also involved as the couple agreed out of court that Frank McCourt would control the club if Selig approved the deal with Fox. However, that agreement is now off the table.
McCourt said he needs the upfront money from Fox to pay off his commitments, including the team’s $30 million payroll which is due at month’s end. He said that out of the $385 million upfront money, a total of $80 million was to be used to pay off debts and $23.5 million of it would have been used to pay back Fox after they gave him a loan to meet the team’s May payroll.
A further $10 million was to be used for legal fees and another $10 million was supposed to go to the McCourts. In addition, Jamie McCourt was to receive $50 million as partial payment of $100 million which McCourt agreed to pay her in their divorce, giving him complete ownership of the franchise. Documents from the McCourt’s divorce revealed that the couple used over $100 million of the club’s money for their personal use.
Selig told the press that he sent a letter to McCourt on June 20th which outlined the reasons why he vetoed the media deal with Fox. In reply, McCourt’s lawyers issued a statement that said he was disappointed in Selig’s announcement as the Fox deal would keep the Dodgers afloat for years to come. It added that the decision is potentially destructive for the Dodgers as well as Major League Baseball.
If McCourt doesn’t meet the club’s payroll by the end of June, MLB has the power to seize the franchise and take over operations. It can also put the club up for sale. However, McCourt said on June 17th that he won’t have a problem making the payroll deadline. If MLB did seize the club, McCourt could take the league to court to get control of the team back and to have the Fox contract approved.
