Major League Baseball is performing an intervention on the Los Angeles Dodgers.
Commissioner Bud Selig will appoint a representative to oversee the club. Selig declined to identify the representative Wednesday, but he announced that the person would “oversee all aspects of the business and day-to-day operations of the Club.”
Dodgers owner Frank McCourt does not plan to go down without a fight.
He intends to take legal action against baseball for appointing a representative to oversee the Dodgers, major league sources say.
The Dodgers released a statement Wednesday night on behalf of McCourt:
"Major League Baseball sets strict financial guidelines which all 30 teams must follow. The Dodgers are in compliance with these guidelines. On this basis, it is hard to understand the Commissioner’s action today."
An owner is permitted to sue baseball, one source said, and those who know McCourt have said for weeks that he would mount a vigorous legal fight to maintain control of the team, if necessary.
Selig said in a statement that he took action because of “deep concerns regarding the finances and operations of the Dodgers and to protect the best interests of the club.”
Those concerns include security in the aftermath of an attack on San Francisco Giants fan Bryan Stow at Dodger Stadium, an attack that left Stow in a medically induced coma.
However, McCourt also is in the middle of a costly divorce from his wife, Jamie, and is running short on funds, sources say.
Jamie McCourt released a statement Wednesday afternoon responding to the earlier news that MLB is taking control of day-to-day operations of the Dodgers:
“As the 50% owner of the Los Angeles Dodgers, I welcome and support the Commissioner’s actions to provide the necessary transparency, guidance and direction for the franchise and for Dodgers fans everywhere.”
The Dodgers reportedly are under great financial strain; McCourt recently received a $30 million personal loan from FOX to help the Dodgers cover their expenses into next month, according to the Los Angeles Times.
And McCourt could be in more trouble. TMZ reported Wednesday that the Internal Revenue Service is investigating the finances surrounding the Dodgers as well as Frank and Jamie McCourt.
According to the site, the IRS is looking into:
Disclosures that the McCourts took $145 million from the team and paid no taxes.
McCourt children receiving a salary but performing no services
Team losses that were carried forward.
TMZ also says the California Franchise Tax Board is investigating.
Meanwhile, newly hired Dodgers vice chairman Steve Soboroff has called Selig’s action "irresponsible." Soboroff, who was hired this week to improve the fan experience at Dodger Stadium and help with ties to the community, made the comment Thursday during the Dodgers’ victory over the Braves.
Selig’s action Wednesday is thought to be unprecedented. Baseball purchased the Montreal Expos from Jeffrey Loria in early 2002 and oversaw the Rangers’ operations for a period last year while the team was in bankruptcy. But the Dodgers, a jewel franchise in a major market, are a different case.
The expectation within the industry is that the Dodgers would command a record price, exceeding the $690 million that a group led by John W. Henry paid for the Boston Red Sox in 1992.
Baseball may need to assume some or all of the Dodgers’ expenses and help the team meet payroll, sources say. But potential new owners almost certainly would be willing to commit to such a takeover short-term, knowing that they would get their money back immediately once the team was sold.
It is not clear whether baseball will cite the Dodgers for violating the debt-service rule, which ties the amount of debt that a team is allowed to carry to its cash flow.
In February, Selig rejected a proposal under which FOX would have loaned the Dodgers $200 million. Court documents revealed that the McCourts had used the team’s profits to maintain an extravagant lifestyle, rather than reinvest in the team.
Selig’s statement reads, in full:
"Pursuant to my authority as Commissioner, I informed Los Angeles Dodgers owner Frank McCourt today that I will appoint a representative to oversee all aspects of the business and the day-to-day operations of the Club.
"I have taken this action because of my deep concerns regarding the finances and operations of the Dodgers and to protect the best interests of the Club, its great fans and all of Major League Baseball. My office will continue its thorough investigation into the operations and finances of the Dodgers and related entities during the period of Mr. McCourt’s ownership. I will announce the name of my representative in the next several days.
"The Dodgers have been one of the most prestigious franchises in all of sports, and we owe it to their legion of loyal fans to ensure that this club is being operated properly now and will be guided appropriately in the future."
Although the situation with the Dodgers is unique, MLB has intervened in the past to rescue troubled clubs.
In 2002, the Expos were placed in a virtual receivership when Major League Baseball purchased the franchise from Loria for $120 million.
The sale was the result of a series of moves that included the purchase of the Red Sox by a group led by Henry, then owner of the Florida Marlins. Henry then sold the Marlins to Loria for $158.5 million, and Loria sold the Expos to MLB.
After the 2004 season, MLB moved the franchise to Washington, D.C., where it was renamed the Nationals. In July 2006, MLB sold the franchise for $450 million to a group headed by Ted Lerner.
The Expos were restricted financially by MLB. Even though the team was in the thick of the wild-card race at the end of August 2003, MLB refused to allow it to spend money on expanding the roster with September call-ups.