Tuesday, April 10, 2012

Welcome to Maloofery: A Sacramento Kings fan personal hell

A lot of people who do not follow the Kings or understand the Sacramento dynamic do not understand how destructive the Maloofs have been in the Sacramento market and in particular to the Kings brand from a franchise standpoint. But the few members of the Sacramento sports media (the one's that are not kissing their ass like their redhead bitch boy Grant Napear--the Kings TV Play by Play announcer--who just so happens to host the ONLY prime time drive home radio show in Sacramento) have literally completely turned on the Maloof family following their recent string of nonsense floated in the LA Times in late March. This doesn't even mention national media members who have Sacramento ties (most notably Sam Amick and Aaron Bruski) in this matter who have either reported important details and/or been critical (in Bruski's case) on the topic throughout what is now a several year ordeal.

I wrote a timeline about this when I first started writing here at the TPBT, and it may help some of the references I'll make later on.This is the most important part of the piece that applies today:

I know one thing. There is one clear winner in all of this, especially if the arena is constructed, and that is Kevin Johnson. He will forever be remembered as a guy who not only managed to get an arena built using only monetized asset's, but getting a significant contribution from Kings ownership and the arena operator along the way. Additionally, there will be minor pieces that add up to probably about 5 million dollars in the final tally. More importantly, the most important piece was the actual commitment the Maloofs made directly to Sacramento to Kevin Johnson. That means a lot even if in real terms it means actually little in the final analysis. Recently, the Maloofs hadn't been too committed despite public comments and statements made to the contrary. One way their ownership would be tolerated if they consistently and constantly immerse themselves in the Sacramento community. Within the last year, Joe and Gavin Maloof--to Joe & Gavin's credit--have done just that.

I'll admit linking to my own words here is godawful. Now, that exact opposite, of the Maloofs agreeing to terms with the City of Sacramento, has happened just a short 6 weeks later. A polar opposite if you happen to be into that terminology.

Let's start at the beginning. Here is the LA Times article that started this recent brouhaha:
Maloof spokesman Eric Rose said: "If an arena project cannot be completed by the timeline set by the city, then the Kings would be forced to explore all of their options."

As I've said elsewhere, I'm not a lawyer, accountant or even an elected official. My experience with this is limited. But, it seems to me that you can't determine ahead of time that an arena project can't be completed on time if it's your timeline that the city of Sacramento is trying to meet. (Try to stay with me; it's not real logic but it is the Maloofs I am writing about. I'm sorry that it makes no sense.)

This is the most important part of the piece from the Maloof vantage point:

Public scrutiny of city spending has also spawned a civic group to fight plans for the arena investment. Sacramento Taxpayers Opposed to Pork filed an initiative with the Sacramento City Clerk's Office to stop public arena funding.

Amid uncertainty about who will pay for a slew of pre-development and construction costs, the Maloofs pressed for specifics from the city March 20. "The leadership in Sacramento is aware of the many challenges in completing the project in the time frame they set," Rose said in a prepared statement.
Then David Stern said this:

"The parties have been attempting to reach agreement on funding the pre-development expenses that must be incurred in order for the project to move forward in a timely fashion," Stern said. "Those discussions have stalled, but I have advised Mayor Johnson that the NBA will advance pre-development expenses on behalf of the Kings pending our report to the NBA Board of Governors at its meeting on April 12-13."

Translation: Go Fuck yourselves and sell already. The key takeaway is about pre-development costs that the Maloofs say they never agreed to. It doesn't matter that the NBA and the city already agreed to those terms BEFORE Orlando, and that the Maloofs are trying to snake the NBA AND THE CITY OF SACRAMENTO at the same time. This family is bold, gamblers even, but they aren't very savvy about the process from my vantage.

Yesterday, Ryan Lillis of the Sacramento Bee wrote Kevin Johnson's response from yesterday in a blog post:

Mayor Kevin Johnson voiced his own anger earlier today, when he lashed out at the Maloof family during a press conference, calling their statements that the family never agreed to pay for pre-development costs of a new arena "disingenuous." The mayor also accused the Maloofs of "tactics and antics that are not becoming of a true partnership."

"We as a city can't be jerked around," he said. "We can't keep having this issue flare up."
Johnson then indicated he wants the issue resolved by next week.

The NBA team owners will meet in New York next week, when league Commissioner David Stern is expected to raise the issue of the Maloofs' pre-development contribution. Asked if the city would seek new ownership for the team should the Maloofs continue to balk in New York, the mayor said, "We're not going to be a city that sits on its hands."

"Do we need to look at contingency plans? Absolutely," he said.
Can't be jerked around? Umm kay. This is a far departure from the kumbaya and all the hand holding with Kevin Johnson and Joe and Gavin Maloof in late February and early March. Needless to say, whatever the Maloofs intentions were they were not clearly to work with the city of Sacramento.

From the OC Register:

Anaheim's latest bid to attract an NBA team appeared to stall earlier this year when the Kings owners reached a tentative agreement with Sacramento and the NBA to stay in the state capital. But that deal encountered a hurdle recently when the owners balked at paying $3.3 million in "predevelopment costs" to build the $391 million arena.

Should the Kings team or another NBA franchise want to come to Anaheim, local officials want to be ready.

"The timing is coincidental – we (in Anaheim) have been working for years to become NBA ready and this is another step," said Councilwoman Kris Murray said in an interview before the meeting. The council approved the plan on a 5-0 vote with no comment after a short public hearing.
That's not coincidental to me. It smacks of the Maloofs wanting to stall a deal with Sacramento until they can convince the NBA's Board of Governors, which conveniently meets next week, that Anaheim is better. It's clear what the Maloofs want: To be in Anaheim. Anaheim is doing what any smart municipality does when they are seeking a pro franchise like a NBA team: They start clearing hurdles.

 Back to Sacramento now. Yesterday, in response to the Maloofs claims of various hurdles the city could not realistically clear successfully in the appropriate time frame, Darrell Steinberg, current Senate Pro Tem of the California Senate (also a former council member in the Sac City Council), claimed the Maloofs were not negotiating and in fact disingenuous. Here is Steinberg's real quote (via Tony Bizjak of the Bee):

"The Maloofs seem to be looking for every reason not to proceed as opposed to looking for ways to make it work," Steinberg said in an email to the Bee.

Read more here: http://blogs.sacbee.com/city-beat/2012/04/steinberg-maloofs-looking-for-every-reason-not-to-proceed-on-arena.html#storylink=cpYesterday Tom Ziller, of Sactown Royalty, made a quality point that should be remembered; Steinberg was a big proponent of Q&R, the failed sales tax measure that failed in 2006. Steinberg is commenting like a guy who has seen how this group of people, and how destructive they are when it comes to real progress (real progress they claim they want) in Sacramento. More importantly, Steinberg ran that campaign for the Maloofs and worked for them. From Ziller:
Tom Ziller, of Sactown Royalty, made a quality point on April 4th that should be remembered; Steinberg was a big proponent of Q&R, the failed sales tax measure that failed in 2006. Steinberg is commenting like a guy who has seen how this group of people behaves in such interactions, and how destructive the Family is when it comes to real progress (real progress they claim they want) in Sacramento. More importantly, Steinberg ran that Q&R campaign for the Maloofs as their chief consultant. From Ziller:
When Kevin Johnson expressed his frustration with the latest ordeal, I felt empathy. KJ is in this like we are in this, only with much more power and knowledge of the back-channel chatter. What I mean is that he's coming from our angle, the one that holds a new arena anchored by the Sacramento Kings as a holy grail. It was when Darrell Steinberg came out blazing on the Maloofs that turned my head. Steinberg isn't just a local politician or legislative power broker. In the short break between his Assembly tenure and Senate run, he served as a lawyer for the Maloofs on the Measure Q & R disaster! He's seen their ridiculous carpetbagging from the danged bird seat.

But I'm not finished. Not by a long shot. Not by a really danged fucking A long shot. That's how fucked up the Maloofs are these days. That's how little faith that anyone who knows how they operate has in their family.

Here is the finish to the blog post Ryan Lillis and Tony Bizjak did on the whole topic yesterday (that I've already linked to once):

But Kings co-owner George Maloof has disputed that arrangement, saying his family never agreed to pay the pre-development costs. He said it would be unfair for the team to cover those costs because it will be a tenant - not owner and developer - of the arena.

Those statements are clearly frustrating the mayor. Asked if he thinks the Maloofs are willing to follow through on their pledge to help fund the arena, he said their statements lately have "caused me pause, to be honest and to put it mildly."

"I expect them to honor their agreement," he said.

Johnson would not speculate whether the Maloofs' finances are playing a role in their decision not to pay the pre-development costs.

"It's not adding up from my vantage point," he said. "I've been dumbfounded."

Read more here: http://blogs.sacbee.com/city-beat/2012/04/with-council-vote-looming-mayor-johnson-lashes-out-at-the-maloofs.html#storylink=cpy

If you haven't read the letter that Scott Zolke, the Maloofs lawyer in these matters, sent to the Assistant City Manager John Dangberg, you probably should. You'll realize the Maloofs are trying to fight the timetable that the Maloofs themselves have said they need to stay in Sacramento. If that doesn't make sense, don't worry you haven't lost your marbles. The Maloofs just live on their own logic planet and make up the rules when it suits them.

Wednesday April 4th, Marcos Breton, a columnist at the Bee, wrote this:

Think about that for a minute: The Maloofs don't want to pay money while the clock is ticking on critical deadlines to do environmental review and site planning. Delays in this process will mean the arena won't open in 2015 as everyone wants.

So if there are delays, who is causing them? The Maloofs.

They obviously don't want to be here.

If they did, they would have reached out to Shirey and his staff quietly – instead of calling me and every other media person in town.

If they really wanted to be here, they wouldn't be throwing up roadblocks at the same time the Kings are supposed to be selling season tickets for next year.

You're behaving this way and want people to buy your product?

Lets face it, this kind of behavior fits a pattern of failure and dysfunction. The Maloofs lost control of their Las Vegas casino, they sold their liquor distributorship, the Kings are on losing season No. 6 in a row, they owe millions of dollars to Sacramento and the NBA.

Read more here: http://www.sacbee.com/2012/04/04/4389253/marcos-breton-maloofs-are-roadbock.html#storylink=cpy

Crickets. That's all I got. First off, it's one of Breton's best on the subject (and there have been a number of good one's for a long time dating many years now) and that says a lot.

The Maloofs sold their liquor distributorship, a liquor distributorship that sold many Coors and hard alcohol products EXCLUSIVELY in the state of New Mexico.

The problem? The Maloofs built a 2nd tower on the Palms in 2006, and when the credit economy crashed around them, most notably in Las Vegas and Sacramento among others, they were stuck with huge amounts of debt (roughly 420 million on the Palms) that ultimately was settled with a firm that bought the debt for 50 cents on the dollar. The Maloofs now own 2% of the casino, and still have debt on the casino they owe to this day (about 20 million worth).

So, and this is my point, I don't feel one iota of sympathy for a Family that sold their flagship business (the Coors distribution in NM) to solidify their personal fortune and infuse a small fortune into the Palms. Their business acumen, which has always been shoddy to be kind, is nothing short of atrocious.

It gets better. Aaron Bruski of many outlets including NBC's Pro Basketball Talk, wrote this on April 4th:

However you slice it, these are not the actions of an ownership group that wants to stay in Sacramento, and whether their motives are to get a concession now or down the road, or to jam up the deal so they can force a move down south – it’s time for the NBA to step up and mirror Sacramento’s efforts to clean up its own house.

The good news for Kings fans is that we’re already seeing indications of that happening. When news of the Maloofs backing out of their commitments hit last week, Stern immediately moved in to front $200,000 on the family’s behalf for pre-development costs. That was designed to keep the project moving until the BOG meetings when the matter will be discussed. And if Stern thought at all that the city should be held liable for those funds, he would have never showed a valued owner up over such a nominal dollar amount. Especially for guys who are viewed as having no money, paying $200,000 on their behalf just screams Natty Light (not that there’s anything wrong with that).
 Even though it's quotes and not analysis, Jon Santiago of Cowbell Kingdom has several awesome quotes from Kevin Johnson along with audio of Johnson talking.

This may be my favorite part of the piece. The Salt Lake Tribune came out on April 4th with a blog piece quoting David Stern, yes that one, on the Kings situation in Sacramento. From the exceptional Brian T Smith:

Stern on how he feels about the Kings staying in Sacramento, compared to when a tentative deal was reached during All-Star weekend: 

You know, I'm more hopeful than I am confident right now. I'm hopeful because the city of Sacramento has between last meeting and this, has been responsible for responding on a sponsorship basis, on a ticket basis and on allocating $250 million or so for a new arena. In basically a week — what's today? Wednesday — in a week, our owners will be coming in for meetings next Thursday and next Friday, and we'll be having the Maloofs in to talk with some group of them and we'll see where it's going. Very, very hopeful that it gets on track, because the owners have a respect for the Maloofs. And I think the owners also have an enormous respect for what Sacramento has done over the years in supporting an NBA franchise. And it's always been our first preference — particularly when government agencies or states are helpful — to keep a team where a team is if they're playing in a good facility.

So that's where we are at right now. The Maloofs have not shown any stability or working relationship with anyone. Not the NBA, who did the negotiating on their behalf including the now disputed "pre-development" costs that were negotiated before the NBA, the Maloofs and the City of Sacramento negotiated in Orlando over All-Star weekend.

Here's my absolute favorite piece of bullshit spouted by a Maloof. It's George Maloof responding to the LA Times article with Sam Amick of SI:

SI.com: The Sacramento Bee had published a copy of the non-binding term sheet and it certainly seemed as if the family had agreed to pay that portion of the pre-development fees. What am I missing here? It certainly seemed as if this was something was agreed on before.

Maloof: Absolutely not, and everybody knows it. And like I've told everybody today, if anybody says otherwise, then they're lying. From day one, that was an issue that we had. And there are other issues.
That was one that we were vehemently against, for a couple of reasons. No. 1: As a developer -- and I've developed lots of properties -- you're used to paying those types of fees, those pre-development costs and consultants or architectural fees. I've never passed that fee onto my tenant, so it didn't make sense. I'm sure someplace in the world, a tenant has paid for a pre-development cost, but the customary way is that they don't pay for that. Not only that, but [the city] asked us to pay for AEG's cost if the deal didn't happen, and that's just not a fair deal. "I" just didn't believe that was fair from day one.
So glad you didn't feel that was fair George. You probably didn't feel defaulting on 420 million of debt at the Palms was fair, and you probably didn't feel that a whole lot of other things was fair too. Like, Anaheim being taken away from you when you would have gotten that last chance to save the Palms, like, oh I don't know, like when you sold your beer distributorship that was absolutely 100% recession proof in the midst of the worst recesssion in 70 years, and that was smart. Right? This is George in case you've never seen his ridiculous mugshot:
When I get a DUI I do it right.

On Thursday April 5th, Dale Kasler and Tony Bizjak of the Bee wrote this:

Read more here: http://www.sacbee.com/2012/04/05/4392382/a-deal-that-really-wasnt.html#storylink=cpy
City officials described the "term sheet" negotiated that day as a nearly complete agreement. Attorneys would dot the I's and cross the T's in the coming weeks and write up contracts, they said.

The Maloofs, owners of the Sacramento Kings, however, say they disagreed with key elements of the term sheet from the get-go and that they had expected significant changes before any deal was signed.

City officials maintain they did not know of the Maloofs' misgivings until team owners told them at a March 20 meeting they would not pay a $3.26 million share of pre-development costs. The team wanted that stricken from the term sheet.

This is my favorite part of the piece Kasler and Bizjak wrote:

The fight over pre-development costs appears to be only one of several points of dispute. The team has disagreements with the term sheet involving parking issues, revenue streams, length of the deal and decision-making authority, according to people familiar with the issue.

Read more here: http://www.sacbee.com/2012/04/05/4392382/a-deal-that-really-wasnt.html#storylink=cpy
In otherwords, the Maloof want to be tenants (which isn't responsible for much granted) but want all the joys of ownership. Ummm, if that doesn't make sense to you, welcome to the Maloof world of utter and craptastic horseshit. They do think in exact opposites and then claim that it's logic. I don't get it, never will, and in truth have never liked their family. (Joe and Gavin in particular have been too much of a frontrunning group for my taste. But I'm assuming it's a family-wide issue. Had the Maloof family shown better ownership up until this point I also wouldn't care.) That said, I"m not upset at the Maloofs because they have made a mistake here or there. I'm really upset at them, more or less, because they know they can't walk away from Sacramento and they know they can't continue to own the team with the terms negotiated on the term sheet. Especially when the family (in my guesstimate without any real proof mind you; again I remind it's conjecture on my part with no proof) have recently been denied a loan. In late February, when the deal was struck, the Maloofs thought they could get a loan. Now? Well, yeah. It's obvious the Maloof family cannot get the loan needed to come up with the agreed upon Maloof 73 million share for a new arena in the Downtown Railyards of Sacramento. What are the Railyards? This lovely dump:

The Railyards have been this way my entire life. (I'm 32.) Name another urban infill project in a major city half this size (the acreage of the Railyard is 240 acres) and you probably can't. Welcome to Sacramento.

Yet, the story keeps going. (The Sacramento arena story is the shitstorm that keeps getting...wait for it...stinky.) This past Sunday Ailene Voisin came out with an article in the Bee questioning what exactly were the Maloofs doing? From the piece:

Again, what are the Maloofs thinking?

They gave their word. They said none of the detail issues were "deal-breakers."

What are they doing?

The alternatives appear obvious. They can address their concerns in a shrewd, but respectful, manner. If they don't have the cash, they can bring in a major investor and redefine their role. If they don't want to do that, they can sell to someone with deeper pockets.

One NBA owner recently informed me that Ron Burkle isn't the only billionaire intrigued by the prospect of landing a plum in the politically rich Sacramento environment.

Read more here: http://www.sacbee.com/2012/04/08/4398750/ailene-voisin-what-are-the-maloofs.html#storylink=cpy

One note on that billionaire: It's quite possible Larry Ellison is that guy. It's also quite possible it's not Ellison, but at some point Ellison may figure out (and already knows quite possibly) that San Jose is 100% off limits in the current NBA schematic. The next best thing for Ellison is buying a team like Memphis, New Orleans, or, and I think the Kings are a better alternative than the first two options I just listed, own a team in Sacramento that is a roughly 2 hour drive (traffic pending as always). If there is any one thing that is advantageous about owning a team, one is that you can own a team within a reasonable travel limit. Owners that tend to own teams on the other side of the country either A) are absentee landlords or B) slumlords after a buck any way they can get it.

On Monday April 8th, Dale Kasler of the Bee came out with another piece quoting George Maloof wanting to get this project "right back on track, and start negotiating this thing again." Which is kind of funny given, and I've said this what 5 times now(!?!?!), wasn't all of the real negotiation phase when KJ, Joe and Gavin all had tears and jumped in each other arms declaring there wasn't anyone else for them? Apparently, the Maloofs want a rather quick annulment.

For anyone who is not involved with the Kings, or Sacramento, it's probably a bit of a head scratcher. I'm from Sacramento, have followed this story (and voted against Q&R because I knew it wouldn't work if it had passed because the Maloofs wouldn't support it) for longer than I care to remember, and here we are. The Maloofs are back to their "We have concerns that we can't stamp our foot and be as petulant with bad haircuts for as long as we want to be" routine. In otherwords, welcome to another day in the life of being a Kings fan. Have I mentioned it gets better?

A former (now) minority owner, Bob Cook has hit such hard times recently that in bankruptcy proceedings his 7% share of the Kings will be going on the auction block. While this particular piece of news came out about a month ago, in of itself this was not necessarily major news. (Cook's bankruptcy has been known about for about 7 months now.) Now, with a potential sale looming from the Maloofs end, not only could the potential franchise value be determined from this auction, but, and this is more important from where I stand, a minority owner also has the first right of refusal to buy a team before the current majority owner (the Maloof family who owns 53% of the team) can sell the franchise to an outside bidder. Whoever gets Cook's percentage probably ends up with the Kings franchise. That's my bet. Perhaps the most important story is that not only did the Maloofs bid on Cook's shares, but neither did any other minority owner. If there was ever a NBA team ripe for a hostile takeover, this is it.

So why is this important? The Maloofs have a number of debts that need to be paid back sooner than later. There is money owed to the NBA (believed to be about 125 million), a city loan from Sacramento made to the Kings organization (not the Maloofs but they did inherit the loan--for what it's worth they've also paid the loan within the terms the loan was set at in 1997) around 67 million, and the newest arena negotiation from Orlando to be about 73.25 million. Add that up and that's roughly 265 million that a sale of the Kings would be at. The Maloofs probably won't sell unless they net some serious cash besides the assuming of debts by a new owner, and I would suspect that would cost at least 50 million for that honor.

One of the underlying themes that I've seen as a part of this whole ordeal is that the NBA, with David Stern leading this charge, is not only looking for monetary stability for the Kings franchise. Part of it is there are some unwelcome loans that Stern would like settled (the city loan with Sacramento especially) fairly quickly. A new ownership change, if the Maloofs can't service their debt, is the only answer to this problem the NBA has with the Kings at the moment. A significant portion of Mikhail Prokhorov's purchase of the Nets was servicing a massive debt load and this is nothing new. There probably hasn't been a NBA team sold that didn't include transfer of debt from one party to another.

If you haven't figured any of this out already, this is the reality Kings fans have lived since the news the Maloofs were looking to move to Anaheim. If you happen to stumble upon a cross and livid Kings fan, this is pretty much why. If this wasn't bad enough, the actual Kings basketball team is fairly terrible despite the talent and makes a Junior High team seem mature. The basketball issue is what it is, but at this point it's nothing but good riddance for the Maloof family. They have served their purpose at this point. It's time for them to sell, and move on with their numerous riches. Unfortunately we are talking about the Maloofs who wish to extract a pound of flesh from everyone for daring to care about the NBA team THEY own.

An end would be good. Hopefully this Friday offers the end to the story. It's about damn time. As much as anything else, I want an end to the story that I thought was starting to develop with the Maloofs and Kevin Johnson holding hands 5 weeks ago. Natch. Here we are again. The Maloofs can't let go, the NBA has only so many options for taking owners out of the equation, and the fans are left paying for it all.

The NBA: It's fannnnnn-tastic! Welcome to Hell.


Anonymous said...

Well written. Great summation of the situation, although you left out some details about Q & R and the Maloofs not backing the deal as it was coming out for a vote... but otherwise nailed the frustration of fans.

Nate Hughart said...

Anonymous I did that on purpose. I didn't want to bog it down, and in the first TPBT piece I mentioned, I wasn't trying to kick dirt on the Maloofs right then.

You are absolutely right that the vote was so lopsided in part because nobody believed that Q&R could actually pass without the Maloofs support. It turns out that their support wasn't to be had. They were just too crummy and dumb to be able to pull a real snake job off.

Jacob Noble said...

Fantastic Read!!! I felt so ignorant before, now I feel ready to sit at the table with all the players in this deal

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