November 19, 2012

Bizball

Marlins Ownership and a History Lesson in Greed

by Maury Brown

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“The point is, ladies and gentleman, that greed, for lack of a better word, is good. Greed is right; greed works.” —Gordon Gekko, Wall Street

I don’t know if Miami Marlins owner Jeffrey Loria owns a copy of Oliver Stone’s Wall Street. The movie, which came out at the height of the 1980s’ “excess is best” period would seem to play well with him. That now infamous speech by Gekko summed up everything that was wrong with not only Wall Street but also where America was headed. Loria, it seems, is still living in the 80s.

I’m not saying Jeffrey Loria is Gordon Gekko. The biggest difference between the two is that while Gekko out-and-out broke rules, Loria has been able to skirt the edges of them, dodge bullets, and snub his nose in the process.

To understand Loria, the greed element, and what his most recent fire sale means requires understanding of his history within Major League Baseball.

Loria Gets the Expos
He first surfaced on MLB’s radar in 1994. After purchasing the minor league Oklahoma City 89ers in 1989, he sold them in 1993. In 1994, he set his sights on the Baltimore Orioles, who were being auctioned out of bankruptcy. He lost the auction to Peter Angelos but kept his desire to get into MLB. In 1999, he took $12 million and purchased a 24 percent minority stake in the Montreal Expos. As the club floundered in red ink, cash calls were made to the investors in the club. When the other investors failed to come through, Loria swooped in and eventually found himself the majority owner of the Expos at 94 percent.

It’s here where the “Loriaizing” of each club he’s owned began to take shape. He almost immediately said that Olympic Stadium was substandard and that a new ballpark was needed. When that didn’t seem to be taking hold, Loria and his stepson David Samson, who was made club Executive Vice President, began dismantling the fan base further by not coming to an agreement for English-speaking radio and television deals. The effect was simple: it made the case that Montreal was not a viable baseball market even if the actions of the ownership had played a key part in driving fans away.

Bud Selig really couldn’t do anything about Loria being in his midst when he began purchasing majority interest in the club, and besides, if he could get the Expos either a new stadium or shut down via contraction, so be it. The latter of those options didn’t come into full bloom until Loria left Montreal. The league pulled a nepotistic maneuver when the sale of the Boston Red Sox surfaced in 2002 and a group that was comprised of then-Marlins owner John Henry came on the scene. A love triangle of sorts was concocted. The league would purchase the Expos from Loria for $120 million. In turn, Loria would purchase the Marlins for $158.5 million, which would allow Henry to purchase the Red Sox. Loria didn’t have (or maybe didn’t want to dig up on his own) all the money needed, so the league gave him a $38.5 interest-free loan to bridge the gap. Loria and Co. were so cheap that when the sale was complete, they took all the office furniture and computers, leaving people like Omar Minaya, who was GM of the Expos, with a mess. The rest of the minority owners filed a Racketeer Influenced and Corrupt Organizations Act (RICO) lawsuit against not only Loria but Bud Selig and the league for conspiring to purposely derail the club in order to contract it (read the RICO complaint, plus see MLB’s response here). An arbitrator sided with Loria and the league, and eventually, the Expos wound up in DC as the Nationals.

Loria Lands Sweetheart Deal for Marlins
Loria was the luckiest guy on the planet shortly after this situation unfolded. Following the purchase, the Marlins won the 2003 World Series. Prior to Loria—and really before Henry, when Wayne Huizenga had owned the club—the cries for a new, baseball-only ballpark had been sought. Fresh off winning the World Series, Samson began what some called the “Great Relocation Tour,” going to places like San Antonio and Portland where there had been interest in relocating the Expos when they were up for relocation. I was part of Portland’s effort to land a team, and on a cold, rainy winter day, baseball boosters in the city and I hosted Samson.

Samson Disparages the Brewers and Touts “Building It Up and Tearing It Down”
The club had begun dismantling the team that had won the 2003 World Series—yet again—citing the need for a new ballpark to allow them to retain players. Unable to sign Ugueth Urbina and Iván Rodríguez, they left in free agency. They traded Derrek Lee to the Cubs for Hee-Seop Choi and pitcher Mike Nannini. They did sign Mike Lowell to a four-year deal, but it had a provision within it where Lowell could opt out of the final two years of the deal if no new ballpark was built for the Marlins. As I walked over to Samson, who was sporting his gaudy new World Series ring, I mentioned (naively, it seems in retrospect given recent moves by the club) how the retention of talent must be difficult without their own ballpark. It was also here that I realized just how scary the Marlins’ brain-trust really was (and still is). Samson broadsided me, not by speaking of the Marlins directly but by disparaging a fellow club.

“Can you believe those [effing] Brewers?” Samson said, not hiding his disgust. “They’re giving away tickets to the last game of the season because they finished over .500. How [effing] stupid is that? Giving away tickets for being ‘average.’ I tell you, we’ll build it up and tear it down year after year if that’s what it takes to win a World Series.”

I was stunned. First off, Brewers owner Mark Attanasio was doing something positive for the fans after not being above .500 for years under Selig’s tenure. It was a smart move that, as we’ve seen, has endeared him to the community, which in turn has allowed the Brewers to draw attendance totals over 3 million more than once now (2008: 3,068,458; 2009: 3,037,451; 2011: 3,071,373) and has helped them be competitive. In terms of the tearing down and building back up of the Marlins’ roster, it was then that I realized that only quick fixes would ever do for the organization. That the ballpark was not going to really be part of it. That what Wayne Huizengahad done with his fire sale after the 1997 World Series was not limited to just Wayne Huizenga. This was something that seemed to be embraced by Loria and Samson as well. But that was 2003. It was possible that if and when a new stadium did come about, things might change.

Marlins Bilk Public for Stadium, Get Hand-slapped by MLBPA, Funnel Money to Themselves
Of course, they didn’t. When Loria and Samson finally found local and regional politicians gullible enough to help build their stadium (or worse, as an SEC investigation into the funding of the ballpark is ongoing), they only had to pitch in $125 million of the $634 million price tag. To make matters worse, when it’s all said and done after interest, the ballpark will cost taxpayers $2.4 billion. And prior to that in 2010, the club got into hot water with the MLBPA for potentially breaking the Collective Bargaining Agreement. At the time, a joint statement by the union and the league was released that said, in part:

The Basic Agreement requires that each Club use its revenue sharing receipts in an effort to improve its performance on the field. This requirement is of obvious importance to all players, Clubs and fans of the game. In recent years, the Union has had concerns that certain Clubs have not lived up to this requirement, and has consulted regularly with the Commissioner’s Office about those concerns. The Florida Marlins are one of a number of Clubs that have been discussed.

Of course, the Marlins being the Marlins, hand caught in the cookie jar and at the point where the MLBPA was on the verge of filing a grievance against the league, denied wrongdoing:

The Marlins have consistently made every effort to put the best product on the field and our record supports the fact that we have been successful in that regard,” said Samson as part of the release from the league and union for the players. “Throughout the discussions, the Marlins maintained that there had been no violation of the Basic Agreement at any time. While we know that the Marlins will always comply with the Basic Agreement, we were happy to work cooperatively with the Union and the Commissioner’s Office on this matter.

At that stage, the Marlins had ranked no higher than 20th by end of year player payroll:

A few months after getting taken out behind the woodshed by MLB and the MLBPA for not using revenue-sharing funds properly, Deadspin and The Associated Press leaked financial documents from several clubs, including the Marlins (see here). The documents fueled the debate of whether the club had any interest beyond using revenue-sharing as a form of welfare, but it also showed that the club was cooking the books. On page 34 of the financial documents, under the section “Management,” it cites Double Play Company, which was getting paid in the high $2 millions annually and then saw their fee increase to $3.2 million. This was counted as an expense. Who are the listed owners of Double Play Company?  Jeffrey Loria and David Samson. In other words, millions of dollars each year funnel out of the Marlins coffers and line the pockets of Loria and Samson through the fees.

Marlins Go on Spending Spree
Less than a year ago at the Baseball Winter Meetings in Dallas, this behavior seemed like it might all end. The Marlins were there, flush with new money that was coming in prior to their first season in the new ballpark, and made it known they were going to spend. No, they wouldn’t grant no-trade clauses, but they would give long-term deals. They signed SS Jose Reyes to a six-year, $106 million deal; starter Mark Buehrle to a four-year, $58 million contract; and closer Heath Bell to a three-year, $27 million deal that has an option for 2015. All told, the Marlins splurged $191 million at the Winter Meetings, and it could have been more. It was reported that one of the reasons Albert Pujols declined interest in the Marlins was because of that no-trade clause policy. In hindsight, he was smarter than the others.

The Marlins Fire Sale to the Blue Jays
All of this brings us to just after 6 p.m. on November 13. That’s when the next chapter in this story of greed surfaced. Last Tuesday, the club moved Reyes (2013: $10M, 2014: $16M, 2015: $22M, 2016: $22M, 2017: $22M, 2018: $22M club option with $4M buyout), Josh Johnson (2013: $13.75M), Buehrle (2013: $11M, 2014: $18M, 2015: $19M plus a $4M deferred signing bonus), John Buck (2013: $6M), and Emilio Bonifacio (who is arbitration eligible this year), and $4 million (or potentially more) in cash to the Blue Jays for Yunel Escobar, Henderson Alvarez, Adeiny Hechavarria, Jeff Mathis, minor league pitchers Justin Nicolino and Anthony Desclafani, and minor league outfielder Jake Marisnick. All told, the Marlins could strip $163.75 million off the books, and that doesn’t include the option year or buyout for Reyes or what Bonifacio will get in salary arbitration this year. Bell had been traded earlier in the season to the Diamondbacks. Since the deals that the Marlins had done were all back-loaded, the sum total they shelled out for Reyes and Buehrle for 2012 totaled just $16 million. Based on Cot’s, the Marlins’ current player payroll obligation for 2013 is $36.475 million, $5.5 million for 2014, and nothing for 2015. That’s it. Nothing past 2014, and we can debate if you want to call $5.5 million “something” for 2014.

Why There’s Nothing That Can Be Done About It
As of this filing, Commissioner Selig has yet to approve the trade. Physicals have to be conducted, and Selig’s review is pending. The odds of him stopping the deal, however, are very low if you read into what he said coming out of the Owners Meetings this past week.

"I've talked to two baseball people—I have a lot of people that I check with and talk to—who have, actually, an interesting view on the trade," Selig said at an airport hotel just outside of Chicago after the meetings. "They think that (Miami), in terms of young players, did very well. These are two independent baseball people. These are not chefs in these kitchens here.”

"So I want to think about all of it and I want to review everything. I want to be my usual painstaking, cautious, slow, conservative self in analyzing it... There are a lot of variables here."

The clamor by those that cover baseball and by the players affected has been loud in disgust of the move.

"They talked about that, a winning philosophy, and how they were building a winner to play in the new ballpark," Giancarlo Stanton said to Peter Gammons after the deal. "They talked about me and Jose. They talked about how they'd have Jose and [Emilio Bonifacio] and Hanley [Ramirez] in front of me and how they would go get a bat to protect me.”

"Jose, Bonifacio, Hanley... all three are gone now. I had people warn me that something like this could happen, but it runs against the competitive nature every athlete has, that nature that everything is about winning. This kind of thing is what gets talked about all the time around this team. Former Marlins come back and they warn us. It gets talked about during the stretch, in the clubhouse, after games, on the road. Again, I do not like this at all."

It goes further. The Marlins were smart not to put no-trades into writing, but that doesn’t mean they didn’t lie through their teeth to get the deals with Reyes and Buehrle done by making promises they didn’t keep.

But here’s the deal: based on what’s recently transpired and the rules on transactions, there’s little that could reasonably stop the deal, even if Selig wanted to evoke the “best interests of the game” line.

• The Marlins Weren’t Exactly the Best Last Season. As David Samson noted in his defense, the Marlins weren’t exactly the best last season, losing 93 games. The future can’t be told, and it seems likely that the Marlins won’t be much better (if not worse), but that spending spree that at the last Winter Meetings didn’t exactly work out. This begs the question, when did the Marlins really lose their minds? Now, or last year when they went free agency dating?
• Don’t Bring Up Frank McCourt and Tom Hicks. While the two raised the ire of Selig, the difference was that both of them were attempting to use television revenues to pay off debt. If there’s one thing you don’t do in MLB, it’s mess with the future value of clubs by touching television revenues. The Marlins aren’t in that position, so they aren’t in the same conversation.
• You Can’t Say There Wasn’t a Bunch of Salary Moved Off the Books Recently. The Marlins receive some cover from the in-season deal between the Red Sox and the Dodgers in which a record amount of payroll moved off Boston’s books. That works for the Marlins even though the Red Sox have historically been one of baseball’s highest-payrolled clubs and (even with moving players off) will have over $100 million on the books before the Winter Meetings in December.
• Cutting Payroll Isn’t Just For the Marlins. Remember, the Astros have been slicing payroll for several seasons now. While they’re not in the newest ballpark, Minute Maid Park isn’t exactly “old.” The Marlins could use Houston for cover.
• Could It Really Hurt Attendance? Well, sure it will. But, here’s what’s sad: while the Marlins saw the largest increase in attendance of all MLB’s clubs last season, of the 14 ballpark openings that have opened since 2000, it was the lowest-attended. So attendance will drop, but with season tickets sold and suites leased, they’ll still have higher attendance than when they were in Sun Life Stadium with the Miami Dolphins.
• Selig Tied His Own Hands. The Rays Suffer. Who Will Really Want to Sign There? The biggest problem with club owners is that once you get a fox in the henhouse, it’s very, very difficult to get them out. As one high-ranking club executive said to me, “We don’t like [the Marlins] very much. But there’s little we can do.” Like Frank McCourt, the league should have never let him in the door. At the very least, they shouldn’t have given Loria that interest-free loan to purchase the Marlins in the first place. Unfortunately, this has implications beyond the here and now. The Rays, who are seeking a new ballpark and already have detractors, now have to answer to, “How can you ensure us you won’t be like the Marlins?” It also gets into whether free agents will really want to call Miami home. While Juan Pierre requested to go to the Marlins and the deal appears done, it’s Juan Pierre. If you’re Josh Hamilton or any other top-tier free agent, would you really want to go to a location where a slimy handshake and the aforementioned history would make you believe that Loria and Samson have any real interest in you as a player?

For the Marlins, it’s a matter of how can they weasel more money out of fans who continue to partake in what can only be described as battered spouse syndrome for baseball fans.  Jeffrey Loria has now reached the pinnacle in his ownership career. Congrats; you’re now considered one of the worst owners in sports... if you ever weren’t on that list.

Maury Brown is an author of Baseball Prospectus. 
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