Jeffrey Loria’s financial team breached a 2009 agreement between local governments and the Miami Marlins in turning over a sparse, five-page justification of the former team owner’s claim of zero profits from his $1.2 billion sale of the franchise to Derek Jeter and partners, a judge ruled Thursday.
“There is no detailed calculation,” Miami-Dade Circuit Judge Beatrice Butchko said in siding with Miami and Miami-Dade’s request for more time to demand a share of Loria’s profits under the agreement tied to the construction of Marlins Park. “That’s a problem.”
Butchko’s ruling doesn’t address whether Loria was justified in his claim of no profits under the calculations allowed in the agreement, which was part of the team’s deal with Miami and Miami-Dade to receive upwards of $500 million in public financing for a nearly $600 million stadium complex. The 2009 deal awards the city and county a 5 percent share of certain proceeds from a team sale if Loria sold before the spring of 2018.
The dispute could mean millions of dollars for the two governments. While Loria claimed no profits under the calculations allowed under the governments’ agreement, he paid nearly $30 million from the sale to a financial firm that also had negotiated a 5 percent share of the proceeds under different terms.
With Butchko’s injunction waiving next week’s deadline for Miami and Miami-Dade to assert their claims on profit-sharing, the real fight can begin. The judge authorized county and city lawyers to begin requesting financial documents from Loria through the court, allowing the former owner’s lawyers to object if they think the disclosures would go too far.
“If we have miscalculated, they have a claim,” said Peter Duffy Doyle, a Loria lawyer from Proskauer Rose in New York. “There is a process, and the county would like it not to be followed.”
Loria lawyers said they complied with the terms of the 2009 contract, and that the two governments should pursue their claims with the arbitration process laid out in the contract. Loria’s camp has pointed to the lack of profits from a 10-figure sale as more a reflection of the original government deal than the former owner actually losing money on selling a team he paid $158 million for in 2002.
The 2009 agreement allows Loria a string of deductions from sale profits, including taxes on the deal, transaction costs and the value of the franchise before the new county-owned ballpark and city-owned garages opened in 2012. One of those deductions was $29.9 million paid to Tallwood Associates, a financial advisory firm described as “an unaffiliated third party” in the Jan. 31 report claiming a $140 million loss under the terms of the 2009 profit-sharing deal.
The Miami Herald reported Thursday that Tallwood Associates was founded and run by Joel Mael, vice chairman of the Marlins under Loria and the former owner’s longtime investment banker. Jorge Martinez-Esteve, an assistant county attorney for Miami-Dade, called the disclosure evidence of “funny business” on the part of Loria, and declared the five-page report “not worth the paper it’s printed on.”
Loria’s lawyers did not address the connection between the team’s front office and Tallwood. Loria claimed $33 million in transaction fees tied to the sale, with most of that going to Tallwood. Butchko said of the transaction expenses: “That’s a lot of money.”
“So the vice chairman of the Miami Marlins, for financial advisory fees, gets $29 million while the city and the county, under their contract terms, would get zero?” Butchko asked. “All that may end up being a proper line item. But there needs to be the documentation to back up that payment.”
The county filed the suit Feb. 16, and Miami officially joined the complaint on Tuesday. The Miami Marlins, a company Loria formed when he owned the team, is a defendant, as is Marlins Teamco, a company Jeter and partners formed to buy the franchise last October. (Martinez-Esteve said he would make things easier by calling one the “Loria Marlins” and one the “Jeter Marlins.”)
Miami-Dade claims the Jeter group is ultimately responsible for paying the profit-sharing proceeds if Loria refused. Jeter’s camp has said the sales agreement makes the profit-sharing obligation a Loria responsibility, and Jeter himself told reporters the suit “has nothing to do with us.”
His top lawyer emphasized that stance before the hearing even began on the fourth floor of Miami-Dade’s civil courthouse. Ashwin Krishnan, general counsel for the Marlins under Jeter, declined to take a seat at the defense table. When Martinez-Esteve noted Krishnan was in the courtroom representing one of the defendants, the judge asked for an introduction.
“Mr. Krishnan, do you want to show me yourself?” the judge asked. “I’m right here,” Krishnan said, rising from his perch on a spectator bench two rows back.
Krishnan, who also worked as a team lawyer before the sale, declined the invitation to sit with the Loria lawyers. He said he wanted the former owner’s legal team to handle the proceedings on its own.