Morally Bankrupt Owner Now Has Financially Bankrupt Team

So here’s a thing that happened this morning: the Dodgers have filed for Chapter 11 bankruptcy protection. Craig Calcaterra, former lawyer and current baseball writer, is in the perfect position to explain what this means:

Obviously the situation is fluid, and more details will stream in as the morning and day progresses, but for the time being, this could buy McCourt some time. Why? because a bankruptcy filing puts a halt on all legal action with respect to the bankruptcy estate (i.e. the Dodgers).  McCourt will certainly argue that this will prevent a takeover from Major League Baseball, though the court may decide differently when it gets a chance to weigh in, likely in the next few days.

The problem for McCourt is that the kind of bankruptcy the Dodgers have certainly filed is designed to reorganize the financial house.  Frank McCourt, however, does not have a plan available to him to do such a thing or else he would have already done it.  The filing isn’t yet circulating, but my guess is that he’s going to ask the court to order that the Fox TV deal be executed — assuming Fox wants to still do it, which it has been reported it may not — thereby providing funding.

The problem with that, of course, is that the bankruptcy court won’t approve of anything that is not seen as in the best interests of the Dodgers, and it’s obvious that Major League Baseball and others would come in and make a strong case that the Fox deal is disastrous for the Dodgers or, at the very least, not the best deal they could make.

If McCourt can do no better, the court may very well order a sale of the team. Perhaps auctioning it off, Texas Rangers-style. Which, by the way, would also put Major League Baseball in the same position it was in with respect to the Rangers: less-able to control who owns the team than it would otherwise be.  Mark Cuban bid on the Rangers, after all. If his or some other non-chosen person’s money looked green to the bankruptcy court in such a scenario, Bud Selig would be hard-pressed to stop them from participating in a team auction.

But let us not get ahead of ourselves. For now, we simply have Frank McCourt where he was inevitably headed: bankruptcy court. And some time has been bought. A little anyway. The end game for McCourt, however, doesn’t look all that better than it did before.

We’ve also got McCourt’s usual ludicrous, out-of-touch statement on the matter (emphasis mine):

“The Dodgers have delivered time and again since I became owner, and that’s been good for baseball,” McCourt said.  “We turned the team around financially after years of annual losses before I purchased the team.  We invested $150 million in the stadium. We’ve had excellent on-field performance, including playoff appearances four times in seven years.  And we brought the Commissioner a media rights deal that would have solved the cash flow challenge I presented to him a year ago, when his leadership team called us a ‘model franchise.’  Yet he’s turned his back on the Dodgers, treated us differently, and forced us to the point we find ourselves in today.  I simply cannot allow the Commissioner to knowingly and intentionally be in a position to expose the Dodgers to financial risk any longer.  It is my hope that the Chapter 11 process will create a fair and constructive environment to get done what we couldn’t achieve with the Commissioner directly.”

I mean… good lord. I know this is all legal and public posturing, but it’s almost like he doesn’t realize that he’s the guy who took over $100m out of the team for his own personal use. Get a clue, Frankie.

You can read the entire bankruptcy filing here. I’m not a lawyer and don’t pretend to understand it all, but what really caught my eye is the list of creditors. It’s no surprise that they still owe Manny and friends for deferred payments, but I think there’s a few names that will jump out at you. The list goes down to 40, and even includes Vin Scully at one point, though I’m just going to show 12 for reasons you’ll soon see…

List of unsecured creditors and amount of claim

  1. Manny Ramirez, $20.992m
  2. Andruw Jones, $11.075m
  3. Hiroki Kuroda, $4.483m
  4. Rafael Furcal, $3.725m
  5. Chicago White Sox, $3.5m
  6. Ted Lilly, $3.423m
  7. Zach Lee, $3.4m
  8. Kaz Ishii, $3.3m
  9. Juan Uribe, $3.241m
  10. Matt Guerrier, $3.090m
  11. Juan Pierre, $3.050m
  12. Marquis Grissom, $2.719m

You see the same thing I do, right? Marquis Grissom hasn’t played for the Dodgers since 2002, Kaz Ishii since 2004… and yet they’re still owed about $6m between them. I can’t even put all of that on McCourt, because he didn’t own the Dodgers when Grissom played, so that’s just opening up an entirely new can of worms into the Dodger financial history. (Update: since a few people have asked me already, the White Sox and Pierre are listed separately because they owe Pierre deferred money from his years as a Dodger and also sent money to Chicago for the remaining years on his deal.)

There will be more throughout the day, no doubt, as people far more qualified to break down legal briefs than I weigh in. One thing hasn’t changed, however, and it’s what we’ve been saying for months: this is going to get a lot worse before it gets better.

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