Wednesday, March 31, 2010

A quick thought about those magic words...

Several times--dozens of times--over the last few months, we've read something like this quote from Marc Seltzer, one of Frank's attorneys:
"It's a distraction to management. The team on the field is not affected in any way, shape or form."
Setting aside the lunacy of the notion that a distraction to management cannot trickle down to the independent contractors on the field, we see the same 'is not affected' language that has been omnipresent this winter. Frank and his attorneys have taken a lot of heat for that statement throughout the course of this drama. If the divorce isn't affecting the team, critics say, how can Frank explain the underwhelming personnel moves this offseason? 

Let me tell you something: I might just believe Frank. The divorce may not be not affecting the team.

From the outside, it sure looks like this budget crunch was sort of inevitable, regardless of the divorce. If you're to believe Frank's own lawyers, the couple's spending was "out-of-control [and] unsustainable." According to Jamie's filings, the couple has taken about $108 million out of the club since they took control. That's more than the club will spend on players this season. The McCourts have been living on borrowed money and borrowed time for years. Which is why the quotes drawing the most scorn all offseason--that the divorce isn't affecting the team--might just be true. Maybe this was coming all along. There's just a little more collateral damage than might have been expected.

Tuesday, March 30, 2010

August 30.

That's our post-nup trial date, according to the Times' Bill Shaikin. Expect "magic number" jokes.

I'll be on ESPN Radio 710 at 6:00 local to discuss the divorce, and I'll post here as news and events warrant.

Yesterday's interview.

Back with more as things develop today. And what a flattering screencap!

Monday, March 29, 2010

And we're entering the absurd.

Sorrell Trope, Frank's lead counsel, has stayed mostly quiet, letting his foils Dennis Wasser and Bert Fields grab most of the lawyerly spotlight. That might have been for the best. Today:

"If we look at this case, realistically, you can't order Mr. McCourt to borrow money to pay support," Trope told Superior Court Commissioner Scott Gordon.


"These people have lived their lives with borrowed money," Trope said. "They have to stop spending. This isn't the federal government."


"Where are we?" Trope asked. "This is like Alice in Wonderland, but you can't keep Alice in Wonderland going by borrowing on every single asset you have."

Oh my. So, if you're following along, Frank's side admits that the couple spent wildly. In fact, in his filings, Frank called their lifestyle "out of control [and] unsustainable." To make things clear, let's remember that "these people"--who lived their lives on borrowed money and have to stop spending--are the owners of the Los Angeles Dodgers.

I've been slow to jump to conclusions, but it's hard to ignore what's staring us right in the face. The owners of the Los Angeles Dodgers lived on money they borrowed from the team, and, according to one of them, did so at an "out-of-control, unsustainable" rate. In the corporate world, this would be outrageous. This would be Enron, or something like it. The owners of the Los Angeles Dodgers, according to one of them, blatantly abused their power and jeopardized the team's well-being to support their own "out-of-control, unsustainable" lifestyle.

And that's not even the strangest part of all this. Frank's argument here is that the lifestyle he and Jamie led...well, this seems to be the right time to rein things in a little bit. Now is the right time to begin living a life of restraint and responsibility. Having realized the foolishness of his ways, it's imperative that Frank and Jamie begin to act like proper stewards of a treasured civic asset. Now that Frank's being asked to pick up Jamie's tab.

Is Frank wrong about having to rein in spending? I don't think anyone who's followed this saga would say so. I don't think anyone has a problem with the owners of the Los Angeles Dodgers living a glamorous, enviable lifestyle. Most of us are completely comfortable with the reality that some people have it better than others, and the owners of a professional baseball team are some people.

But such a lifestyle cannot be funded by the club in such a way as to damage the health of the organization. It's bad enough that major league payroll is obscenely low for a team playing in such a huge market. And it's bad enough that this frugality at the major league level isn't balanced by spending on amateur free agents or premium draft picks. And it's bad enough that plans are in place to double ticket prices without increasing player spending.

No, where it really starts to sting is here:

From 2004 through 2009, the McCourts received in excess of $108,000,000 in what was characterized as "ownership distributions" from the McCourt Enterprise. . . . Further, those funds were not reduced by any income tax liabilties because the parties have not paid any federal or California income taxes since they moved to California in 2004.
On a recurring and systematic basis, large loans have been obtained, several of which were secured and/or paid by such future income streams. Substantial portions of the proceeds of those "monetizations" and other capital events then were used in whatever manner directed by the McCourts. When needed by the parties, millions of dollars of those funds were distributed to them.
All for what Frank's attorney now characterizes as an "out-of-control, unsustainable" lifestyle fueled by money borrowed on every asset the McCourts had.

They have to stop spending. This isn't the federal government.

And this is where they're at. Jamie's job is to flaunt the extravagance of their marital lifestyle--she believes, and perhaps rightly so--that Frank's dramatically overstating the direness of the situation. And it's Frank's job to say the couple so grossly mismanaged the Dodgers that, starting right this second, he can no longer afford to support one life in the fast lane, let alone two.

What a mess.

I'll be on The Filter with Fred Roggin tonight at 7:40ish Pacific to discuss the divorce. If you have something called KNBC Digital Channel 4.2, you can find it there. Otherwise, it should be available online here.

The McCourts are pretty far apart.

Per the AP and via Sports Illustrated, Frank's offer to Jamie is $150,000 per month. She's seeking roughly 600% of that figure. This is like a sneak preview of Manny's coming offseason.

Details on this morning in court.

The Times' Victoria Kim and Carla Hall provide the first account:
[Jamie's attorney Dennis] Wasser didn't skimp on details of their extravagant lifestyle.

"They lived in seven lavish homes ... they flew in private jets ... they had hair stylists come to their house every day. Every need, every want these people had was met," he told Los Angeles County Superior Court Commissioner Scott Gordon on Monday morning.

Wasser suggested not judging them for simply having an outsized lifestyle: "It's not our province to say, 'That's too much, that's too little, who lives like that?"

Instead, he offered that this case was no different than any other divorce case, despite all the zeros, and he invoked the coming sundown start of the Passover holiday. Appropriating from the Passover Seder question "Why is this night different from all other nights?" he said, "I said to myself, why is this case different from all other cases?"

While noting that the magnitude of the money and the number of attorneys involved in the case did make it different, he added that it was like any other divorce case.

"The same rules apply," he said.

He's right on this. The point isn't that, in the abstract, the court should make a value judgment as to the couple's lifestyle. The problem here is the context of the dispute. Say Frank and Jamie were happily married, but became embroiled in litigation that would cost $20 million to resolve as a duo. Is it reasonable to suggest they'd at least look at cutting personal expenses for the duration of the ordeal? 

Yes, in an ideal world Jamie should be paid enough to maintain the lifestyle to which she's become accustomed. But is she entitled to enjoy the same luxuries while Frank is also forced to pay $9 million toward her professional fees? Wasser's approach is correct; the same rules apply. But I'm sure Frank's side would argue that the marital lifestyle they could afford while locked in contentious litigation is not the same they could enjoy in happier days.

I'm not sure how much weight that line of argument will end up carrying. I do know that the hearing, expected to last through the end of the day, probably won't leave us too much closer to a resolution of the bigger issues in play than we were this morning.

Some mid-morning odds and ends.


  • TMZ is reporting that Jamie tried to access her old office at Dodger Stadium Saturday but was turned away by Dodgers security. Ah, it's like October all over again.
  • I just taped an interview with Linda Nunez of KNX 1070. It runs at shortly after 9:20 or 10:20 Pacific time, according to the show's producer.
  • Later this evening (7:45 Pacific, to be exact), I'll be a guest on Fred Roggin's The Filter digital show. I gather it's available online here or on digital channel KNBC 4.2 in Los Angeles. And no, I have absolutely no idea what the second part of that sentence means. 
Back later today as things develop.

Sunday, March 28, 2010

We're back in court; what's at stake?

The McCourts are back in...well, court today to determine two key issues rolled into one question: How much money does Frank need to pay Jamie to tide her over during the extended litigation over the post-nup? In deciding this question, a court will have to decide how much Frank must pay toward Jamie's professional fees as well as whether to force Jamie to take actions in compliance with the post-nup.

Frank's take.

Jamie has all the assets she needs in the form of the residential real estate and other property allocated to her by the terms of the post-nup. Whether it's renting, selling, or borrowing on the real estate, she is perfectly capable of generating cash. What's more, her spending on professional fees--lawyers, accountants, PR, etc.--has risen to unreasonable levels. And not only is it inappropriate for Frank to be on the hook for Jamie's several-millions-of-dollars in fees, it's impossible. Because of the way Frank's creditors have arranged their lending facilities, Frank's income is capped at a level which makes paying for Jamie's bills and lifestyle a significant hardship.

Jamie's take.

Frank's representations as to his own present liquidity are misleading and inaccurate. He has access to all the cash required to properly support Jamie throughout this process. Because of the enormous disparity in current earning power, it's only equitable that Frank bear the majority of costs associated with litigation. And under California law, Jamie is entitled to payments enabling her to life the lifestyle achieved over the course of the couple's nearly-30-year marriage. As for monetizing the residential real estate assets, Jamie is not legally entitled to do so; the post-nup's validity in question, disposing of the residences or encumbering them with further debt is not something Jamie is allowed to do on her own.

So what happens?

I don't have the greatest feel for this issue. I have a difficult time seeing either side getting exactly what it wants, though I think Jamie might be more likely to score a thorough victory. From what I've seen, her argument with respect to Frank's income streams is quite persuasive, and I would understand the court's reluctance to force Jamie to comply with the terms of the post-nup, that neat little document causing all this hubbub in the first place.

Still, I can see Frank scoring points on the soaring costs of this dispute; it projects to cost nearly $20 million in professional fees alone. The court is not obligated to rule on the matter right away, but I don't see a reason a decision couldn't be made fairly quickly. The key points of battle--Frank's present liquidity and the extent to which he must fund Jamie's representation--shouldn't require much more analysis than they've already been given.

What are the big-picture implications for tomorrow?

As Bill Shaikin and a few experts discuss here, days like tomorrow mostly serve to weaken the public's trust in McCourt leadership. Frank is arguing that he's cash-poor, and Jamie is arguing that Frank's cooked Dodger books. None of this is good, obviously. And the pessimistic view of tomorrow is that it is little more than litigation about litigation. With respect to the divorce, very little is actually getting done.

While we might have fun talking about these ancillary issues, the big target is still that post-nup, and it's anyone's guess as to when that issue will be resolved with finality. The potential for a major blow on that front coming out of tomorrow's action is small, but real. If the court cuts off Jamie completely, she might need to dispose of some of the residences, which she doesn't want to do. Moreover, if her cash reserves dip too low, she might need to look harder at settling, which she really doesn't want to do.

That's why I'm inclined to like her side a little better tomorrow; a negative outcome is expensive for Frank, but could be devastating to Jamie's ability to argue her side of the divorce. Courts are generally unfavorable to outcomes resulting in an enormous disparity in net worth for divorcing spouses. Because her case could be so damaged by inadequate representation, and because her potential negative outcome is the worst in this case, I think she'll be given every protection possible on the post-nup issue.

Make a prediction!

This is an easy spot to get into some trouble; it's a soft, gray issue. I'd be surprised if either side gets its way, though I do think the court might be more sympathetic to Jamie. I offer the caveat that nothing would shock me, and if I have this one pegged wrongly, I'll certainly be eager to jump into the why and how. I see Jamie getting a significant cash award, though some guidance about reasonable spending during the pendency of the divorce might come with it.

Tuesday, March 23, 2010

A busy day in divorce land.

On a day I'd be just as happy talking about the team's 2010 hopes, two high-profile writers add to the McCourt divorce saga. First billing goes to the Times' Bill Shaikin, who brings us yet another installment of he-said, she-said:
In making her case for temporary spousal support, Jamie McCourt fired back at her estranged husband in court papers filed Monday, making a reference to Frank McCourt's "extramarital activities."
"Frank [and his lawyers] make some hurtful and unnecessary personal comments about me," she wrote. "I would prefer not to address such accusations or to discuss my belief as to Frank's extramarital activities."
You'll recall that the letter sent to Jamie's attorneys alleging that Frank, too, had an intra-office affair was from an anonymous source. Indeed, it looks like Jamie and her lawyers don't feel comfortable asserting the alleged affair as fact; Jamie's "belief as to Frank's extramarital affairs" is all we've got. Further in Shaikin's piece:
In Monday's filing, Jamie McCourt's lawyers took exception to Frank McCourt's claim that his annual income is limited by bank restrictions to $5 million, arguing that he could access at least $18.4 million this year.
Her lawyers further argue that, by asking the court to deny any temporary support, Frank McCourt hopes to pin her in a financial position so precarious that she would "cave into his demands and relinquish any claim to the overwhelming bulk of the marital estate, including the Dodgers."
I don't know about you guys, but I think this kind of stuff is much more interesting than the alleged affairs or emotional breakdowns. The gist of Jamie's argument here is that Frank's stated liquidity is ridiculously deflated. While he claims that, under certain loan agreements, his payments are capped, she describes such an argument as hollow and misleading. Not only was the cap on his distributions temporary, she says, it also affected only certain income streams. 

And her lawyers are exactly right about what Frank's side is trying to do. That's how this works. I'd suggest he's also trying to force her into disposing of some of the residential real estate; what Frank would call "Jamie's" assets. This would at least create the impression that the post-nup has teeth. 

And, of course, the logical solution here (pay less for lawyers, accountants, experts, etc.) isn't going to happen. As we've discussed, there's just too much at stake to skimp on such things at this juncture. What's $10 million now when the prize is half (or all) of the Los Angeles Dodgers and associated enterprises? If Jamie really finds herself up against the wall, maybe we'll find out how much backing she'd actually have in an attempt to buy Frank out. Surely, one of the potential partners would cosign on her legal bills. Right?

Shaikin's article also notes that things look to have fallen apart for good in April 2009, when Frank confronted Jamie over her relationship with Jeff Fuller. We know that she'd been looking to formally boot the post-nup many months before.

The USA Today's Bob Nightengale has also dived into the divorce. Hi, Bob! For his well-researched, informative piece (which might be second to only the Annual as a starting point), Nightengale sat down with Frank McCourt himself.
The last six months have left him weary, emotionally exhausted and embarrassed, with his personal life and details of his crumbling marriage chronicled everywhere from TMZ to the Los Angeles Times to a burgeoning website:
Yet here at Camelback Ranch, as he watches his club in action during a Cactus League game, he shows no sign of stress.
McCourt's voice never wavers in his first in-depth interview this spring, showing a resolve that he will not only endure but also prevail through the most turbulent time of his personal life.
"It's tough. I'm not going to lie to you," he says. "It's a very, very sad thing. Nobody wants to go through this privately, never mind publicly.
"But in L.A., so much of it is about drama. L.A. is so much about personalities. It's just how the city functions. This is a juicy story for people until it's not juicy anymore. Then, they move on to somebody else's story.
"Tiger Woods was fantastic for me."
No doubt. Maybe my memory fails me, but, thinking back, I'm not sure Frank has done a whole lot wrong when it comes to addressing the divorce itself. He's been aloof at times, and he'll certainly offer a clunker of a quote on occasion. But who wouldn't? His lawyers have been much tighter with information, inclined generally to let this play out in court. Which is exactly what you do when, as I believe is the case, the law is on your side.

The damage Frank's suffered due to the divorce is the unfortunate (for him) airing of the club's financial laundry. This isn't a good time to be perceived as playing games with money, even if that's how the world really works and there's nothing untoward going on. And in the "the facts speak for themselves" category, there is that pesky payroll issue. 

You don't get to be the marquee team in Los Angeles and spend about the same as the Minnesota Twins. And even more damning is that the Twins aren't just doing it with payroll; any one of Wilson Ramos, Max Kepler-Rozycki, and Miguel Angel Sano (all recent Twins signees) would probably be the best amateur free agent in the Dodgers' system. No, spending is not a baseball panacea. But it's probably the closest thing we've got.

In Nightengale's piece, Frank also offers his take on the effect of the post-nup. I think he's right on when he stresses that this situation is much different from that of the San Diego Padres, due to the presence of the post-nup. Jamie's lawyer disagrees.
"Mr. McCourt is ducking the issue," Fields says. "He thinks he's going to get ownership of the Dodgers and 95% of the assets.
"They agreed to be 50-50 (owners). And she doesn't want to sell. She loves baseball. She has the ability to buy out Frank if he wants. If he doesn't want to sell, they'll have to figure out a way to run the team together."
I've seen much of Frank's filings; to say he's ducking the post-nup issue is ludicrous. As for however advantageous a position Frank might be in (I'm not sure 95-5 is accurate), it must be remembered that Frank also took a much greater risk than Jamie when agreeing to the terms of the post-nup. That has to be factored into any analysis of the fairness of the agreement. Moving on, I don't foresee any scenario in which the two could possibly run the team together. The only way it could ever work is for both to cede control to a management team, profiting but powerless.

Lastly, Jamie's repeated assertion (through her lawyers) that she is ready, willing, and able to buy the team is well...neat, I guess. Even assuming there is a universe in which Frank would voluntarily allow her to take over, any change in ownership would have to be put through the same approval process Frank endured several years ago. After the events of this winter, can you imagine baseball's owners signing off on an ownership group led (or at least fronted) by Jamie McCourt? I sure can't.

Monday, March 22, 2010

Should the Dodgers have traded for an ace?

In a piece that made the rounds Friday (and, graciously, mentioned this little corner of the internet), Fox Sports' Ken Robo Rosenthal suggests that the Dodgers should be using their economic might to stifle the rest of the division. In the coulda-shoulda-woulda department, Rosenthal writes:

The Dodgers should have capitalized upon their revenues, traded for an ace at one of the last two non-waiver deadlines and reached the World Series by now. 
They should be dominating the NL West, a division in which no other team approaches their financial might. Instead, they're fretting over their starting rotation, which lacks an ace at the top and depth at the bottom.
Addressing the second point first: I'm not sure lack of an ace or having enough depth at the bottom is the Dodgers' problem. If having an ace is important in the first place--which is debatable--then Clayton Kershaw is that guy. Or, at least, if he's not, then there aren't more than a dozen "aces" in baseball. And Chad Billingsley is not very far removed from being included in this sort of conversation. Dodger Divorce believes in Chad.

As for lack of depth at the bottom...I'm not seeing that as an issue. A winning team can give 30 starts to some combination of Eric Stults, James McDonald, Scott Elbert, Carlos Monasterios, Charlie Haeger, and the long-lost-Brothers Ortiz. Indeed, depth seems to be a strength.

To me, it's spots three and four that provide cause for concern. If Billingsley or (especially) Kershaw goes down, we're mostly screwed anyway. And there's plenty of arms for that fifth spot, should it be the revolving door we expect. Hiroki Kuroda and Vicente Padilla, slated for the third and fourth slots, are absolutely crucial to the team's success this year. Whether it's injuries (Kuroda) or inconsistency (Padilla), each gives us significant cause for concern.

If one or both of those two fails to give the Dodgers 175+ decent innings (a possibility, if not a likelihood), than that menagerie of mediocrity currently battling for the fifth spot extends its reach into the middle of the rotation. This is where things could get dicey for the Dodgers.

Having spent my March supply of alliteration, I'll move to the suggestion that the Dodgers definitely should have traded for one of the aces on the move. This group, off the top of my head, includes CC Sabathia, Cliff Lee, Roy Halladay, Jake Peavy, and maybe Johan Santana, depending on how far back you want to go. Would the Dodgers have been better off with at least one of those five on the roster?

Absolutely. But at what cost? I think it's entirely safe to assume that trading for one of them would have cost the club at least one of the two core stars, Kershaw and Kemp. It probably would have included at least one of the secondary impact players, a group which includes Billingsley, Andre Ethier, and Jonathan Broxton. Even if money wasn't an issue, would a year or two of one of the pitchers above been worth it?

Maybe. But it's this gray area which makes it a little harsh to say the Dodgers should have traded for a pitcher meeting the accepted, traditional definition of "ace." I'm the first one to acknowledge that the Dodgers should be terrorizing the NL West on an annual basis. Rosenthal's right; no other team in the division should have more financial clout. But let's not jump to the conclusion that there's no reasonable argument for holding onto premium young talent.

Tomorrow morning, my Five Questions: Los Angeles Dodgers season preview will run at The Hardball Times. Expect guarded optimism about...well, about everything. And, finally, rest in peace, my dear Kansas Jayhawks. Joe Posnanski wrote a typically-sublime post-mortem.

Tuesday, March 16, 2010

Jamie McCourt's unwanted celebrity.

As you might have seen, it has come to light that Jamie McCourt once directed former Dodgers' PR guru Charles Steinberg to prepare a plan of action which would result in her winning the Presidency of the United States. The Face of the Free World, if you will. Shaikin:
In a December 2008 e-mail, Dodgers executive Charles Steinberg presented her with "Project Jamie," a seven-page action plan that included this line: "Goal: Be Elected President of the United States."
In a March 2009 e-mail suggesting that she first run for mayor of Los Angeles and then governor of California, consultant Michael Wissot wrote: "Since I've never known you to joke with me about your professional objectives, I presume that this POTUS (President of the United States) goal is serious."


Steinberg's blueprint envisioned a "Jamie Coalition" of women, minorities, youth, Hollywood types and "sports-loving males" and the development of a "Dodgers University" that would include after-school programs for children, adult literacy classes and sports business seminars.

According to the plan, McCourt could then run for office on twin platforms of family improvement and education, using the Dodgers University to garner endorsements from the likes of Michelle Obama, Caroline Kennedy, Maria Shriver, Antonio Villaraigosa, Fernando Valenzuela and basketball's Bill Russell.
My first instinct on this is that it's being blown out of proportion. This is probably just the daydream of a very wealthy woman. We all get carried away. It's just that most of us don't have the power to make people indulge us and create action plans for carrying out our whims. And, it's quite safe to say, our delusions of grandeur rarely reach as far as attaining the highest office in the world.

What bothers me more about the current situation is Jamie's attempt to spin all the negative publicity into a the-world-is-against-me stance. She's repeatedly talked about how she doesn't want the litigation playing out in the public arena. Per Shaikin's piece:
She also said she hopes to parlay the "unwanted celebrity" conferred upon her by the divorce case to transform her work and life "into something fantastic."

"I love change, which is a lucky thing," she said. "There's no telling what's going to come next."
So, if you're following along at home: Jamie actively and intentionally put herself in the public eye as an owner of the Dodgers. You'll remember that among the perks she's seeking compensation for are professional makeup and table sponsorship funds for her many community and charity appearances. When the attention was positive and served her own ends--altruistic or otherwise--she sought the public eye.

Now that the attention is not so kind, she portrays her plight as the unfortunate acquisition of "unwanted celebrity." This is either naive or outright manipulative. Jamie has a habit of wanting things both ways; she wanted to be protected from creditors' claims in case the businesses failed, but now seeks half the businesses' worth. She desired attention--was paid to draw attention--when coverage was positive, but claims to be the victim of "unwanted celebrity" now that coverage isn't so rosy.

Unfortunately for Jamie, that's just not a decision for her to make. By affirmatively inserting herself into Los Angeles public business, politics, and society, Jamie surrendered any real chance at anonymity. If things went badly, as they did, this was bound to happen.

*Note: An earlier version of this post referenced Charles Steiner as the former Dodgers' PR whiz. I was referring to Charles Steinberg. Charley Steiner is, of course, a Dodgers radio play-by-play man. A hasty mistake--sorry folks.

Monday, March 15, 2010

Rites of Spring

After many frigid months as a recluse, the sun reemerged from behind the dark, gray skies, and it is Spring again in Minnesota. Down in Arizona, another March tradition--minor roster moves--remains in full swing. Eric Gagne, as you might have seen, has been reassigned to minor league camp, which shouldn't come as a surprise. He joins Kenley Jansen, who was among a group of four reassignees who learned of their new, shared fate yesterday. I'd strongly bet on seeing Jansen back with the big club sooner than Gagne.

There are roster moves in divorce-land, too, and this one might not be so minor. David Boies, who you may remember from such litigation as United States v. Microsoft, Bush v. Gore, and Perry v. Schwarzenegger, has joined Jamie McCourt's legal team. Boies has a reputation as one of the country's most proficient trial lawyers, developed by his work in a diverse and challenging assortment of legal fields.

It is often said that if the law is not on your side, argue the facts. This is what I'd expect Jamie's flotilla of litigators to do. Led by Bert Fields and David Boies, Frank will be portrayed as calculating and ruthless, a stone-hearted businessman who jumped at the chance to cut Jamie out of the family fortune. Frank's side's response will be a nuanced, technically-sound elaboration on "so what?"

Bringing on Boies suggests that Jamie's side knows its best chance to win half of the Dodgers comes by convincing the court Jamie was hoodwinked into signing this nefarious post-nup. I do think the law is on Frank's side, but, as I've cautioned, California courts do goofy things on occasion. Adding a lawyer of Boies' caliber and skill certainly makes sense for Jamie McCourt, the underdog.

Later this afternoon, a text ad will show up on the left side of the page. It is for, a team-specific site created by Barry's Tickets. If you use the promotional code 'divorce010' at checkout, you will receive 10% off your order. If you're looking to spend an afternoon at the Ravine, I hope you'll give a look.

Wednesday, March 10, 2010

Grab your salt shakers...

...I advise a few grains for this one. The Wrap has published an anonymous letter suggesting Frank had an intra-Dodgers fling, just like Jamie.

This doesn't have much bearing on the litigation, and I wonder why Jamie's legal team didn't hold on to this and use it as a bargaining chip in negotiations. Or maybe they did, and Frank's side wouldn't play ball.

It's like he read my mind.

On Monday, I halfheartedly speculated on whether Frank would fight Jamie's request for money to cover her professional fees. Via Shaikin, that's exactly what happened Tuesday:

Jamie McCourt has asked the court to order Frank to pay almost $1 million per month in temporary support and $9 million in fees for attorneys and accountants. In today's filing, Frank McCourt calls those fee amounts unreasonably high.
Frank claims that Jamie has about $11 million in liquid assets in addition to six residential properties she could rent or sell, as they are rarely occupied.

Man, that's cold. And a little brilliant. Frank's putting Jamie between a rock and a hard place; If Jamie disposes of any of the residential real estate, she's implicitly acknowledging the validity of the post-nup. If she doesn't, and the court orders her to pay her own costs, her war chest starts to grow a little thin.

Logically, it doesn't make sense for the court to side entirely with Frank on this one. Jamie's authority to sell the residential real estate depends on the validity of the post-nup, which is very much in question. I just don't see the court tipping its hand on that issue at this point. 

Now, if Jamie really does have a handful of cash (or other liquid assets), the court might reduce the amount Frank has to chip in for her lawyers and accountants. Heck, maybe the court will cut Jamie off entirely. But the most interesting thing to come out of this most recent spat is Frank's attempt to make Jamie follow the post-nup and sell off some of the homes. I doubt it gains much traction, but it's clever nonetheless.

Monday, March 8, 2010

On $19 million in professional fees.

Late last week, Bill Shaikin of the Times ran a pretty neat piece which speculated that the professional fees in the McCourt divorce--lawyers, accountants, and the rest--might end up totaling $19 million. As Shaikin cleverly notes, that's more than the Dodgers will spend on their starting infield going into the 2010 season. Further on in the article:

Divorce lawyers generally charge from $250 to $750 per hour in the Southland, according to Sharon Hulse, executive director of the Levitt and Quinn Family Law Center in Los Angeles. She said a "simple" divorce could cost $10,000.
The Britney Spears-Kevin Federline divorce cost $835,000, The Times reported last year. Former NFL quarterback Bernie Kosar told the Miami Herald last year he spent more than $4 million on attorney fees — at $600 an hour — on his divorce.
Charlotte Goldberg, who teaches family law and marital property law at Loyola Law School, said costs in the McCourt case appear to be extraordinarily high.
"Millions of dollars in a family law case — even in a high-profile one — is unusual," she said. "It's hard to imagine what issues are so complex as to entail such high attorneys' fees."

Jamie's lawyers justify their pay by referring to the complexity of unraveling the McCourt Enterprise's financial structure and dealings. And there's surely some truth to that; you can see the ultra-simplified organizational chart here. All of it exists, essentially, to launder money. I don't mean that pejoratively; there is nothing suggesting the McCourt Enterprise was operating outside the law. But our country's perverse tax structure begets complex mechanisms to avoid it. It's smart business.

There's likely something else behind the astronomical sums being expended in the discovery phase of this litigation: Jamie probably doesn't have to pay for it. Not really, anyway. Given that her motive here is to drag things out as long as possible, it makes sense for her to throw request after request at Frank's legal team, which must respond in kind. Because Jamie ends up billing Frank for the costs of her representation, she feels free to run up the bills with relative impunity.

What's going on is that neither Jamie nor her lawyers have incentives to cut costs. The court will likely grant Jamie's request that Frank pay her legal bills; he's unquestionably in a much better financial position than she is at the moment. And even if the court sticks her with the bills, the firms involved shouldn't be too worried about getting paid; Jamie's going to be a very wealthy woman coming out of this. It's just a matter of degrees.

As Shaikin's article notes, settling at least part of the litigation would save a goodly sum. However, both McCourts are taking the long view on this. For Jamie, what good is settling spousal support now to save $5 million in professional fees if she's leaving much more than that on the table by settling? Remember, she's asking for about $1 million per month. She'll spend whatever it takes.

The post-nup issue is even less likely to be settled any time soon. The outcome is so binary--the team's either Frank's or it's both of theirs--that it's hard to find common ground. I suppose Frank could pay Jamie a certain amount of money to drop her claim to the team, but there's no indication the two could ever agree on a number. 

So, yeah: $19 million is a lot of money, even an unprecedented amount. But this is an unprecedentedly expensive divorce.

Thursday, March 4, 2010

Where did Russell Martin's power go?

Maybe it was just misplaced. This is Russell's Dodger Stadium performance superimposed on Fenway Park. The blue dots are his doubles and the orange ones are his fly outs. The obvious caveat here is that many (if not most) of the hits to left field would have caromed off the Green Monster in Fenway. But still, this is a pretty fun tool to play around with.

Here's the link.

Wednesday, March 3, 2010

Some post-nup tips.

The Diamond Law Firm ("serving family law clients throughout the Los Angeles area") put out a Press Release today titled "Responsible Drafting of Marital Property Agreements in California." While I'm not entirely sure why it's a Press Release and not just, you know, an article, it is what it is. By way of preamble, it begins:
The high-profile separations and/or divorces of the rich and famous sometimes offer lessons of what not to do when it comes to marriage. The split after 30 years of marriage between Los Angeles Dodgers owner Frank McCourt and his now estranged wife Jamie serves as an example of the importance of properly drafting and maintaining marital property agreements to protect personal property in the event of a divorce.
The friendly folks at Diamond Law Firm offer some basic information about this difficult issue. I'll present it in the context of what went wrong with the McCourts.

Draft early and review often.

Drafting early wasn't an issue for the McCourts. Their post-nup was created prior to their move to Los Angeles. And they did an acceptable job reviewing it, as well. They reaffirmed it through subsequent property transfers. Of course, there came a time when Jamie wanted it to go away, and the couple even had the legal framework drawn up. If that doesn't constitute review, I don't know what does. 

Diamond does bring up one way that the McCourt post-nup is lacking: the parties weren't represented by independent counsel. They contracted out of this potential land mine in the agreement, but you can bet it will be one of Jamie's principal arguments in her attempt to invalidate the post-nup. Personally, I don't like it, seeing as how she's a lawyer. But California courts have done stranger things.

On community property.

Diamond notes that courts will treat marriages differently based on the length of the union and time elapsed since the pre- or post-nup. If, for instance, a pre-nup was signed 30 years ago, prior to the McCourt marriage, and it didn't contemplate anything close to the wealth attained by the couple, it might not be enforced. I don't see the length of the marriage being an issue here.

The McCourt post-nup was created and signed well-after the couple was on its way to remarkable wealth. What's more, the post-nup was made with these specific assets in mind. The intention of the party was to separate the business entities from the real estate. Jamie claims this was done not in contemplation of divorce, but to shield the homes from the businesses' creditors. Frank's response is, and should be, a resounding "so what?"

California courts are more concerned about fairness than the letter of the law.

Diamond suggests that, while the post-nup pretty neatly severs the Dodgers from the real estate, courts may look at commingling of assets as evidence that the assets were not effectively separated. Jamie will argue that the post-nup didn't really do anything. Frank will counter that, on more than one occasion, he surrendered his interest in the residential real estate pursuant to the post-nup. He'll also point to the MLB documents listing Frank as the sole owner and "control person" of the team.

The "Press Release" also notes that a valid post-nup should leave each party with enough assets to support itself in the event of a divorce. Jamie's argument on this point will be that the post-nup, by its terms, leaves Jamie with much, much less than Frank. Two things work against her here. First, she's asking for nearly a million bucks each month in spousal support. That award would serve to bridge the gap between Frank's net worth and her own. Second, it's important to look beyond the dollar amounts. When the post-nup was signed, everyone knew the Dodgers assets were worth more money than the residential real estate. Once you factor in the perceived risks at the time of the post-nup, however, the values even out considerably. 

The post-nup litigation has been pushed back until God-knows-when, so it will be a while before these issues are even briefed extensively. In the mean time, we'll just have to settle for the fight over spousal support, scheduled to begin in court on May 24.

Tuesday, March 2, 2010

I suppose this was bound to happen.

Robert Cruickshank,* writing for something called the California Progress Report (featuring a 'Navigation' widget with one link: 'Donate'), has a problem with Frank and Jamie's tax dealings. In discussing how California might make up its dramatic budget shortfall, he writes:

*Not 'Crookshanks', but wouldn't that be delightful?
Maybe one place to start is by looking at how the rich evade their tax obligations. Last week the LA Times's Michael Hiltzik showed that Frank and Jamie McCourt paid no federal or state income tax between 2004 and 2009. 
Many wealthy Californians and large corporations have similarly evaded taxes.
There's a lot there for investigative journalists to pore over. For example, California Watch could examine how much money some of California's largest corporate landowners have cost the state by using shell companies to get around property tax reassessments at sale, unfairly extending Prop 13 protections. Or they could examine how many other California CEOs follow Meg Whitman's lead and use offshore tax shelters. There is much more money the state loses through these means than the paltry $486 million over 3 years cited in the California Watch article.
But instead they seem to be focusing on attacking public workers. It's a sad reflection of the fact that in today's California, workers are seen as an acceptable punching bag, but corporations and the wealthy aren't.
I'm happy to see that, but for an odd article here and there, people haven't been to quick to demonize the McCourts for the tax issue. Cruickshank, here, has a nasty habit of using the work "evade" and its variants, which I think is unfairly pejorative. In addition to being legal, using loss carryforwards is a common, accepted practice. Joe Kristan at Going Concern explains:
Imagine of a world without loss carryforwards (I think you can!). You start a business and you lose $2 million in Year 1. In Year 2 things turn around and you make back $1 million. Without loss carryforwards, as a 35%-rate taxpayer you would pay $350,000 in Year two, even though the business is still $1 million in the hole. That’s an effective rate of >infinity%.
Perhaps Mr. McCourt is prosperous in spite of his loss carryforwards. Maybe his real estate has held its value, unlike everybody else’s. Maybe he’s even running personal expenses through his business (though Leona Helmsley learned that the IRS looks for that). But even a Los Angeles real estate empire can suddenly come crashing down.
Remember that maybe, just maybe, Mr. McCourt’s soon-to-be-ex-wife has a vested interest in making him look prosperous, and in making losses look like a mark of wealth. She might like some of that.
The commonwealth of Massachusetts is already auditing McCourt tax returns from several years ago, and all this notoriety might indeed attract a California or federal audit. If it does, running personal expenses through the various business enterprises is likely to be a much, much bigger deal than using loss carryforwards to offset income. 
It's frustrating to come to grips with the fact that the McCourts have taken $108 million out of the Dodgers which hasn't been subject to taxes. And it's certainly true that if we were to take an "if we weren't already doing it this way, how would we do it?" approach, we'd likely decide to go with something completely different. But the law is the law, and what the McCourts were doing could have been completely kosher.