In a legal battle with Jeffrey Loria, the Marlins’ financial secrets are a top prize

The finances of the Miami Marlins have always been one of the most sought-after secrets in local sports. Now a judge might start exposing them.

A lawsuit by Miami-Dade against the Marlins asks for a trove of financial information from Jeffrey Loria’s $1.2 billion sale of the team last October, as well as disclosures of some of the team’s long-term finances under Loria’s tenure. Loria has already resisted turning over anything but a bare-bones summary of the details of the October sale to Derek Jeter and partners.

The financial details behind that sale are the target of the lawsuit by Miami and Miami-Dade County over a nearly 10-year-old provision that traded more than $400 million in public money to build Marlins Park for a 5 percent share of certain proceeds if Loria sold the team by the spring of 2018.

Loria’s lawyers provided a five-page financial summary trying to justify the New York art dealer’s claim of a $140 million paper loss under the terms of the 2009 stadium agreement. On Thursday, Circuit Court Judge Beatrice Butchko ruled against Loria, saying he needed to provide more details to justify his claim of owing the taxpayers nothing on the sale of a team he bought for $158 million in 2002.

County lawyers hope the ruling will open a broad window into the team’s finances under Loria. The 2009 agreement calls for an independent accounting firm to look at the confidential financial documents and make an unbiased recommendation on profit-sharing. But a Miami-Dade attorney at the hearing argued Loria’s actions have thrust the question into what could be a drawn-out, detailed trial to explore how much Loria actually made selling to Jeter and partners.

“Our position is now that portion of the agreement is inoperable,” said Jorge Martinez-Esteve, an assistant county attorney in Miami-Dade. “Our argument is it’s for your honor and a panel of jurors to determine what the 5 percent equity payment is.”

Butchko declined to rule on whether she would let the dispute go before a jury — raising the prospects of county lawyers bringing Loria or even Jeter to the stand — or simply order both sides to undergo the arbitration process laid out in the 2009 agreement. Butchko could also oversee the appointment of an accounting firm to audit Loria’s numbers in private, likely shielding many of the underlying records from public view.

Marlins lawyers argued the county and city can learn more details if they want to protest Loria’s calculations before a neutral arbitrator.

“We are open to curing any request for information,” said Loria lawyer Peter Duffy Doyle, from Proskauer Rose in New York. “We are not telling them to sit on their hands. We want to have an open discussion.”

While the dispute involves only the calculated profit for the 2017 sale, the legal arguments could use evidence going back to the start of Loria’s ownership. One disputed deduction centers on a $30 million transaction fee paid to a financial firm owned by a Loria deputy, ex-Marlins vice chairman Joel Mael. The five-page summary of the 2017 sale prepared for Loria by the Grant Thornton accounting firm said the fee stems from a 2000 contract between a Loria entity and Mael’s firm, Tallwood Associates.

Loria also deducted $279 million in debt during his tenure as owner — money that the county claims in its suit was at least in part loaned from one Loria entity to another. The agreement also has a $35 million deduction for contributions owners made to the team over the years — cash that may have been needed to cover losses.

The Marlins’ financial health has been a matter of dispute since Miami and Miami-Dade leaders pushed through a series of unpopular funding packages in 2008 and 2009 that had the two governments agree to pay nearly $500 million in tax dollars for construction of the 37,000-seat Marlins Park in Little Havana and the garages that surround it. The Marlins contributed $155 million.

At the time, Loria argued his baseball team’s home in a football stadium owned by the Miami Dolphins had left the Major League Baseball franchise on a doomed track and he needed to turn around a money-losing operation by moving into a true baseball park. The county did not insist on seeing the Marlins’ book before signing the deal. Leaked financial reports published by Deadspin showed the franchise turned a $29 million profit in 2009, the same year Miami and Miami-Dade granted final approval for the stadium construction.

Marlins executives noted that even the Deadspin documents showed the 2009 profit stemming from a $48 million revenue-sharing payment from Major League Baseball — cash from large-market teams that helps subsidize smaller-market teams. As a new owner, Derek Jeter in November described the Marlins as a franchise “that’s been losing money for quite some time.”

Miami-Dade lawyers cited the financial statements in the Deadspin report in the Feb. 16 suit filed against both a Loria entity and the team that is now owned by Jeter, majority partner Bruce Sherman and others. “Prior to 2009, the Loria Marlins publicly threatened that, if they did not receive public funding for the construction of a new stadium, they would relocate the team outside of the County,” read the suit. They “were in fact one of the most profitable teams in Major League Baseball in 2008.”

A week before filing the suit, lawyers and administrators from the city and county met with Loria lawyers and accountants to discuss the five-page report declaring a $140 million loss on the sale. The government lawyers pressed the team to provide back-up material for the calculations, but Loria’s representatives declined. Henry Hunnefeld, an assistant city attorney for Miami, told Butchko during the hearing that the team had nothing to share.

“I asked for the work papers,” Hunnefeld said. “They didn’t just not bring some of their papers. They brought none of their papers.”

Those sought-after papers could spark the next big fight in Miami-Dade vs. Miami Marlins. Butchko told the two governments to file document requests with the county, which Loria or the current Marlins management could object to with motions to the judge. Butchko said it didn’t seem reasonable to ask Miami or Miami-Dade to protest Loria’s calculations without some underlying documents tied to the numbers.

“It would be a matter of showing up blind,” she said.

This story was originally published February 24, 2018 at 6:41 AM with the headline "In a legal battle with Jeffrey Loria, the Marlins’ financial secrets are a top prize."