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Frank McCourt leaves his mark on baseball's labor deal

November 22, 2011 |  7:13 pm

The divorce proceedings between Frank and Jamie McCourt revealed a lavish lifestyle, with the couple enjoying side-by-side homes near the Playboy Mansion, side-by-side oceanfront estates in Malibu, house calls from hairdressers and makeup artists, and travel by private jet to some of the finest restaurants and hotels in the world.

Yet McCourt's fellow owners cared less about those titillating details than about this scheme: Why were the Dodgers paying themselves $14 million per year to rent property they owned, and how could Commissioner Bud Selig possibly have approved the plan?

That rent money was deducted from the Dodgers' revenue-sharing liability, essentially taking money out of the pockets of other owners. In June, when The Times reported the Dodgers were among nine teams that Major League Baseball said had violated baseball's debt-service rules, the Dodgers cited a waiver issued by Selig's office.

In 2005, Selig also had approved a refinancing plan that diverted much of the Dodgers' annual ticket revenue outside team operations, including debt repayment. You can take a look at the complex structure of the McCourt business entities here.

So, after the Dodgers' bankruptcy filing triggered a wave of charges and counter-charges, the MLB claims that McCourt diverted $189 million from the team were answered in part as follows: "Many of the distributions and transactions about which the Commissioner now complains were disclosed to and approved by the Commissioner years ago, while others do not involve the Dodgers and the baseball assets and thus were never subject to the Commissioner's review and approval."

MLB responded that McCourt misled the league about some of those deals and concealed others, but the collective bargaining negotiations provided Selig with a vehicle to tighten some of baseball's financial rules.

McCourt has agreed to sell the Dodgers, so the new rules won't apply to him. However, in an effort to ensure no team can be as leveraged as the Dodgers were, the new labor agreement lowers the general amount of debt a team can carry from 10 times its annual earnings to eight times its annual earnings.

And, to address the structure under which team revenue was funneled to other McCourt entities and not counted against the Dodgers' debt, MLB announced this change as part of the new labor agreement: "Debt of a club's owner or related party will be covered by the debt service rule if the debt is serviced, in whole or in part, using club funds or assets."

Too wordy? Call it the McCourt Rule.


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-- Bill Shaikin

Photo: Dodgers owner Frank McCourt. Credit: Kirby Lee / U.S. Presswire