Claiming accounting that is both “fuzzy” and “self-serving,” Miami-Dade is suing Jeffrey Loria over his attempt to pay nothing from a 2009 agreement that entitles the county to a share of profits from last fall’s $1.2 billion sale of the Miami Marlins.
Loria claimed a $140 million paper loss on the October transaction, based on the calculations allowed under the original deal with Miami-Dade and Miami attached to public financing for construction of the $615 million Marlins Park complex.
“We will see Mr. Loria in court,” Mayor Carlos Gimenez said Friday night.
At issue is $50 million in sale proceeds that Loria agreed to reserve to cover any claims from Jeter and partners as the buyers. Miami-Dade wants a judge to bar either side in the deal from draining that fund until the county can decide on how much profit-sharing revenue it wants to pursue. County lawyers accused Loria’s team of puffing up the expenses claimed in the sale, resulting in no profits left to share with the public.
“The Loria Marlins clearly believe that their unsupported, self-serving, and fuzzy math is a sufficient basis to deceive the public,” read the suit, “but the Non-Relocation Agreement, the implied covenant of good faith and fair dealing, and simple common sense require much more.”
Emilio González, city manager for Miami, said the city plans to file its own suit against Loria as well.
The lawsuit released Friday, Miami-Dade County v. the Miami Marlins, names as defendants both the Loria entity that used to own the team and the new one formed by Derek Jeter and partners to buy the team. The litigation claims the Jeter entity is “contractually responsible” to cover disputes tied to Loria’s profit calculations.
On Friday night, the Marlins issued a statement labeling the dispute as one that’s exclusively between Loria and the local governments that negotiated the 2009 deal with him. The statement revealed that Jeter and partners negotiated a clause with Loria designed to free the incoming owners from exposure to any profit-sharing claims from the city and the county.
“This claim has absolutely nothing to do with the ownership group,” the statement read. “We expect the previous ownership and the County to resolve this dispute in an expeditious manner.”
David Samson, the team’s former president under Loria, declined to comment.
The lawsuit does not claim a dollar amount under the 2009 Non-Relocation Agreement the county and city negotiated with Loria in exchange for funding most of the construction costs for the county-owned stadium and the city-owned garages outside it. The Marlins contributed about $155 million, though $35 million comes through annual rent payments.
The profit-sharing element of the agreement requiring the Marlins to play in Miami was designed to discourage Loria from “flipping” the team on the heels of increased value from moving into the government-funded stadium. The agreement gave the governments a diminishing share of profits from any sale over the next decade. For the final year of the deal, 2018, Miami-Dade was entitled to about 4 percent of the profits and Miami less than 1 percent.
On Feb. 1, Loria’s lawyers and accountants delivered to the county a summary of their profit calculations, showing the $141 million paper loss on the sale. The largest deduction came from the underlying value of the team under the terms of the 2009 agreement. While Loria bought the Marlins for $159 million in 2002, the county agreement pegged the team’s value at $250 million in 2008 and allowed it to increase 8 percent each year.
The county claims the Marlins got the math wrong on that calculation, saying the team claimed $374 million in growth when it should really be $180 million. It also questioned how Loria could claim more than $300 million in debt and cash contributions to the franchise. County lawyers said they were entitled to proof of the significant payouts and loans claimed by Loria.
The lawsuit also cites leaked financial records from the Marlins published by Deadspin in 2010, revealing some of the team team’s confidential accounting from 2008 and 2009. It notes that “while the Loria Marlins claimed to the public they were not profitable, they were in fact one of the most profitable teams in Major League Baseball in 2008.”
Using the Deadspin reports, the county also suggests Loria’s deductions against profit from the 2017 sale came from loans to the team from a Loria entity. It noted the financial reports showed a Loria entity, Double Play, collected $3 million worth of interest from the team in 2008 and 2009. And the team owed Double Play another $14 million in interest payments at the time.
The lawsuit said the loans hint at the debt deducted from the profits may reflect money one Loria corporation owes another. Those documents “appeared to shed some light on how the unexplained $279 million in ‘incremental debt might have been accrued” and charged against future proceeds from the sale.
Much of the complaint centers on the county’s need for more details than the five-page financial report Loria’s team turned over two weeks ago.
The 2009 deal allowed Loria to deduct transaction costs from profit, and he used that provision to claim a $30 million expense paid to a financial firm out of New York, Tallwood Associates. That firm also had an agreement with Loria to collect 5 percent of the proceeds from any sale of the Marlins, but the terms were apparently much more favorable than Miami-Dade’s. To earn $30 million on a 5 percent commission, the profit calculation for Tallwood’s agreement would have been $600 million.
County lawyers said they refused to accept Loria’s accounting as presented.
After “seeing the value of the Team quintuple from $250 million in 2008 to a sale of price of $1.2 billion in October 2017, the Loria Marlins expect the County and the City to accept — on faith rather than on any detailed explanation or substantiation — that the Loria Marlins lost over $140 million on the sale,” the suit read.