Who are the new would-be owners of the Padres, and are they fit to own the team? Recent documents unearthed from city hall under the California Public Records Act suggest that City officials may not be doing enough to find out.
The public face of the Padres’ new ownership is ex–sports agent and former Arizona Diamondbacks co-owner Jeff Moorad. But Moorad has declined to say who else is buying the team with him.
The question of ownership is critical to San Diego taxpayers, who subsidize Petco Park to the tune of $11 million a year, as well as to baseball fans, who want to make sure the new owners have enough money to build a winning team.
The need for information has become more urgent as rumors have grown about whether Moorad and his unidentified partners have the financial wherewithal and business acumen to run a successful team over the long run.
But does the City even have the right to ask about such matters? Section 13.3 of the Petco Park Joint Use and Management Agreement between the City and Padres, L.P., dated February 1, 2000, addresses that issue:
“The Padres have the right to transfer ownership of the Padres’ franchise during the Term to the extent permitted by Major League Baseball, without the City’s consent; provided, however, that in connection with such sale, the new franchise owner must (i) concurrently acquire all of the Padres rights and obligations in, to and under the Franchise and this Agreement, and (ii) concurrently agree in writing, in form and substance reasonably acceptable to the City, to assume all of the Padres’ obligations under this Agreement for the remainder of the Term.”
That seems simple and reasonable enough. The new owners, whoever they are, must furnish the City with a signed statement agreeing to shoulder the same financial obligations to San Diego taxpayers as the previous owner, John Moores, had agreed to. If they don’t, there’s the very real possibility that they might walk away at any time, leaving the taxpayers high and dry.
But the new owners may not be asked to make that written commitment. In a letter dated February 17, Katherine K. Pothier, executive vice president of the Padres, asserts that “neither Section 13.3 nor Section 28.17 applies to the Transaction.”
She goes on to say, “The Transaction involves the sale of partnership interests in the Padres, which will continue to own, operate and manage the Franchise. There is not and will not be any new franchise owner or entity to assume obligations under the JUMA.”
In other words, Pothier, a lawyer, makes a lawyerly argument that Padres L.P., a Delaware limited partnership that technically owns the Padres franchise, remains the owner of the team — even though the partnership’s old owners are being exchanged for new owners, as yet to be identified.
At the bottom of her letter, Pothier provided a signature line for the City to attest that it has “Accepted and Approved” her interpretation of the contract. On the copy of the letter furnished by the City that line remains blank.
If Pothier’s interpretation prevails, the City won’t be able to find out anything about the financial wherewithal and business reputation of whoever is buying the team. Will the City take on the Padres and its new buyers in order to defend the integrity of its agreement with the team?
Apparently the jury is still out.
There is one more wrinkle. The city charter contains Section 225, which requires that anybody doing business with the City must make complete disclosure of the names and identities of those direct and indirect owners.
Tim Moore, City ballpark administrator, says the City hasn’t yet decided whether it will invoke Section 225 and ask for that information.
“No transaction has taken place yet,” Moore said in a telephone interview last week. “It [Section 225] may not be relevant to this transaction.” City emails released under the Public Records Act show that Padres vice president Pothier has been lobbying hard against any disclosure under Section 225.
In a February 12 email to Moore and deputy city attorney Brock Ladewig, she wrote, “I reviewed Section 225 of the City Charter and do not think it applies. The right and the lease have already been granted to the Padres L.P. and is not being altered. No additional rights are being granted. Padres L.P. continues to hold the interest.”
That drew a quick response from Ladewig. “Katie, I must respectfully disagree with your analysis. I believe new persons will be gaining some ‘right, title or interest arising out of a contract’ when the new partners are installed. If the issue becomes a problem, we can look at this more closely.” Reached by phone this week, Ladewig said he has had no further contact with Pothier.
Bruce Henderson, a former city councilman and longtime critic of the 1998 deal between the City and John Moores that created Petco Park and surrounding developments, says there is no question that Section 225 should be applied to the latest transaction.
“Section 225 is a very important rule that government is supposed to be following. Right in its title it says that it is mandatory. And the purpose of 225 is very simple: council members, the mayor, city staff should know whose economic interests are before them in order to be certain there is no conflict of interest, and the public needs to know the same thing, so if there is a conflict of interest they can blow the whistle on it.
“That’s why 225 was passed overwhelmingly by the voters in 1992. There was no real opposition to it. It was added as a charter amendment, not just a section of the municipal code but a mandatory provision of the charter.”
San Diego’s history of finance-related political scandals — including the Valerie Stallings case, in which the city councilwoman was forced to resign after receiving gifts from Padres owner Moores — makes enforcement of Section 225 critical.
“If something is going to be acted on by the city council, staff should at the very outset find out whose economic interests are directly or indirectly affected,” Henderson says. “That way as staff works on it and as the matter works its way up to city council, everyone knows whose economic interests are involved. If you get the disclosures right in the beginning it helps you avoid potential conflicts of interest.”
Henderson adds that scrutiny of those seeking to take over the Padres is also needed to make sure that the franchise is free from any criminal taint. “There are lots of reasons why you need to know who you are doing transactions with. They could be convicted felons.
“If somebody comes in and says, ‘I’d like to do a transaction with the City, but, by the way, I won’t tell you who I represent; you can just do the transaction in my name, although I’m not really the person who is responsible for all this,’ charter Section 225 in effect says, ‘No, you can’t do that.’ ”
Henderson says that the argument made by Padres vice president Pothier that the baseball team would continue to be owned by Padres L.P. doesn’t wash. “The essence of 225 is that you know who the economic interests are that you are dealing with. So if the owners of an entity are changing, you need to know that.
“Just the fact that the entity hasn’t changed, if you think about it, doesn’t really answer the question of who is the City doing business with.
“Is their money dirty, or do you have reason to believe it’s dirty? Is it drug money? You don’t want to do business with people who have drug money.
“But more than that, even if it’s clean money, it’s very important for you to know who’s involved. Councilmembers need to know, are any of these people contributors to their campaigns. That way, if there is an appearance of impropriety, they can address it right up front.
“Secrecy is power. The fact is that Major League Baseball may very well over the years have developed a policy that they want to provide confidentiality so that people really don’t know who owns baseball teams.
“They say it’s just the Padres. If you allow them to get away with that, you never know that local powerbrokers who are influencing legislation at the local, state, and national level have interests that they are pursuing. That’s what corporations and partnerships are often used for, to hide the real economic interests that are involved.
“Obviously those people with economic interests would like to keep things secret. They’d like to be able to stand in front of the council and say, ‘I’m just a concerned citizen, I have no economic interest whatsoever, I just want good government.’
“In fact, that’s the last thing they want, many of them. They want some special decision that will help them economically, and the public be damned. That happens all the time when you don’t have full disclosure.”