Wednesday, November 25, 2009

Mr. and Mrs. McCourt

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A few weeks back, I speculated that the McCourts were worth significantly less than the $1.2 billion suggested by Jamie's filings. The Wall Street Journal's John R. Emshwiller concurs. Mr. Emshwiller notes: 
Mr. McCourt's filing paints the picture of a man who, relative to his lifestyle, is operating without much of a cash cushion. In the filing, Mr. McCourt said his liquid assets consisted of a bank account with less than $1.2 million. 
His filing said Mr. McCourt wouldn't see any significant income until next year -- possibly as late as March -- when he expected a quarterly payment of as much as $1.25 million from the partnership that owns the Dodgers. He said payments from the partnership were "my only source of personal cash flow" other than checking-account interest. Mr. McCourt said his liquid assets recently fell as low as $167,000, after paying about $700,000 in expenses for his wife, who filed for divorce last month. He said the Dodgers don't pay any of his personal expenses. 
By contrast, Ms. McCourt has more than $3.5 million in liquid assets and an additional $1.8 million coming from an investment account, according to Mr. McCourt's filing. Ms. McCourt "is in a much better current liquid financial position" than Mr. McCourt, the filing said. 
H/T to Dodger Thoughts.

First, a word of caution: just like Jamie's filings were unrealistically optimistic about the couple's financial position, Frank's assertions may well be overly pessimistic. That's the nature of this game. But would it really surprise anyone who has followed the McCourts that Frank may be dangerously low on cash? I get many wonderful reader e-mails, and Frank's liquidity (or lack thereof) might be the most popular topic.

Of course, the Dodgers, as an organization, don't depend on Frank's cash reserves. Payroll doesn't come out of his personal checking account, so I wouldn't worry about the Dodgers being on the hook for any overdraft fees any time soon. Still, though, it's sort of shocking to hear someone with a net worth in the hundreds of millions claim to have nearly run out of cash.*

*In the way that multi-millionaires nearly run out of cash, of course.

I have to admit that Frank's assertions are having their intended effect. I'm certainly thinking a little bit differently  about Jamie's request for nearly $500,000 each month. But, as Jamie's lawyer, Bert Fields, responded, "he is not the first husband to claim poverty when he is asked to support his wife." Fields went on to suggest that Frank should be "ashamed of himself" for painting such a bleak picture of his financial condition.

It's a game, folks. Frank needs to show as little liquidity as possible. Jamie needs to demonstrate that Frank has access to millions and millions of dollars beyond his personal checking account. Jamie's legal team has to toe a very narrow line right now. On one hand, they have to argue that Frank's extraordinary wealth makes Jamie's request for nearly $500,000 each month appropriate. On the other, she has to fight the post-nup battle, which--if she wins--will make her support demands fairly ridiculous. 

Before, I'd considered Frank's motion to separate the post-nup litigation from the divorce proceedings a no-brainer, a formality. That might not necessarily be true. The order in which these issues are settled has dramatic implications. The spousal support litigation, if treated first, would set some important precedent the court might follow in the fight over the post-nup. The grant of a figure on the high end of the spectrum could represent a de facto conclusion that the Dodgers are Frank's. Conversely, an award on the low side would suggest the court believes Jamie to be in a better financial situation than she claims.

I still believe the litigation over the post-nup should (and will) be heard first. The division of the assets--and resolution of each party's net worth--is too important to take a back seat to the support battle. After all, if Jamie wins on the post-nup and everything goes into community property, she and Frank will basically have equal net worths. In such a situation, support payments might still be appropriate, but not at the levels Jamie currently demands.

It will be interesting to follow the procedural gamesmanship the lawyers engage in over the next few weeks. It's legal Whac-a-Mole--although, judging by the tone of comments and e-mails, a Hydra analogy might be more appropriate. I'm looking forward to the December 15 proceedings, which will hopefully lend some clarity as to the shape of things to come.
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Barring major developments, this will be the last you'll hear from me for a couple days. I know Thanksgiving (and its 24-hour free pass on sentimentality) isn't until tomorrow, but I'd like to say thank you to the readers of this little corner of the internet, and to the proprietors of many other little corners who helped this one get off the ground. Have a safe, happy, and relaxing holiday.
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2 comments:

  1. Not only following the gamesmanship of the lawyers, but just the general money that the lawyers soak off of both of them too. This will be a costly little fight.

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  2. I think the biggest thorn to Frank McCourt's main point about the post nup is that he co-signed the loans/mortgages/credit line for Jamie's properties!!! As much as Jamie's point about the post nups are weak to frivolous, Why in the world would he (Frank) co signed the mortgages!!! if they want to keep liabilities to a minimum on both their personal asstes and the Dodger's operations?!?! If she couldn't pay, and he didn't have money, the banks can go after the Dodgers,(or more likely parts of the Dodgers) because Frank signed the loans..

    The whole Javanese Puppet theatre and Tai Chi moves with back and forth preliminary legal filings may help both sides with getting the best financial settlement, but it makes mockery of why in the world they are running the Dodgers What the filings have shown is that the McCourts are leverage way to the limit, with very little room for crisis and new contingencies, their only income is the Dodgers, (Which is sort of like politicians paying themselves a salary out of their campaign fund, which is legal) The Banks have agreements that he can only take $5 million salary. (Which also questions Jamie's $2 million salary)

    If I was one of the institutional investors in financing Frank and Jamie's debt. I would be curious how much they are writing off their lifestyle as a Dodger expense.

    I am also curious why did Jamie need to push for a new post nup, if Franks co signed the loans for the properties?!? I don't see her doing a palace coup for control of the Dodgers with a new post nup, because of California as a Community property state. My speculative guess, is that she wanted to hoc some of the Dodger properties for more loans, or play with them. She was an executive officer of the Dodgers, but she couldn't sign them over for collateral unless she had more authorization, like owner of the Dodgers.

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