Originally created 08/07/02

Doubleday accuses baseball of attempting to manufacture 'phantom losses'



NEW YORK -- A co-owner of the New York Mets accused baseball commissioner Bud Selig of conspiring with a former Arthur Andersen accountant to "manufacture phantom operating losses" in the sport's books.

Nelson Doubleday, in papers filed Tuesday in federal court in New York, said the commissioner's office was "in cahoots" with Fred Wilpon, his co-owner, to put an artificially low value on the team. Wilpon is attempting to buy out Doubleday under the provisions of an agreement they made when they bought the team in 1986.

"MLB orchestrated a sham process that not only mistreated Doubleday and betrayed his trust; it actively favored Wilpon and engineered a result that served MLB's other and conflicting interests," Doubleday's lawyers said.

Last month, the former limited partner of the Montreal Expos sued Selig under federal racketeering laws, claiming he conspired to dilute their investments.

Selig isn't a defendant in the Doubleday suit, but he was accused of trying to inflate losses as part of his strategy in labor talks with the players' association. Selig claims the 30 teams had $232 million in operating losses last year and that the sport needs widespread changes in its next labor contract, currently under negotiation.

Wilpon sued Doubleday last month to force him to accept a buyout based on a $391 million evaluation made in April by Robert Starkey, a former Arthur Andersen LLP partner who left in 1999 to form his own company, one that is a consultant to major league baseball.

In June, Arthur Andersen was found guilty of obstruction of justice for its work for Enron Corp.

Selig and Bob DuPuy, baseball's chief operating officer, did not return telephone calls seeking comment, and Starkey refused comment. Wilpon's spokesman, Richard Auletta, said his client would respond later Tuesday.

Doubleday and Wilpon became 50-50 owners of the team in 1986 and agreed that if either partner wanted to sell, he would offer his half to the other at a price set by an appraiser.

Doubleday exercised that provision in October, and at baseball's urging he accepted Starkey in December as the appraiser.

After Starkey put a $391 million value on the team in April, Doubleday balked at going through with a sale and Wilpon sued him last month.

"Unbeknownst to Doubleday, MLB was at the same time engaged in a systematic effort to undervalue baseball franchises as part of its labor-relations strategy," Doubleday's lawyers said Tuesday in an answer filed to Wilpon's suit. "In short, MLB - in a desperate attempt to reverse decades of losses to MLB's players' association - determined to manufacture phantom operating losses and depress franchise values."

The suit accused Starkey of not disclosing to Doubleday the extent of his work for baseball and of not disclosing until March the scope of work done on the appraisal by Dean Polenz, then of Arthur Andersen - a firm that Doubleday said does accounting work for Wilpon.

"Starkey was taking direction from major league baseball as to the valuation process both with respect to the Mets and all other MLB teams," Doubleday's lawyers said.

The papers referred to a March 7 letter to baseball owners from Selig saying baseball would start to enforce its 60-40 rule, which requires teams to have at least 60 percent of its value in assets and no more than 40 percent in liabilities.

Doubleday said Starkey worked with Selig and baseball labor lawyer Rob Manfred on the letter, which said a team's value would be set at twice its 2001 revenue.

In 2001, the Mets had revenue of $182 million. Under the method outlined in the letter, the Boston Red Sox would be evaluated at $321 million, less than half the $660 million the team was sold for this year, and the Montreal Expos would be valued at $68 million, nearly half of the $120 million the other 29 clubs paid to purchase the Expos this year.

"This project created an extreme personal and professional incentive for Starkey to undervalue the New York Mets," Doubleday's lawyers said. "Starkey did not disclose to Doubleday the full scope of his current work for baseball, or the fact that his work for and with baseball had created a direct conflict with his role as independent appraiser to the Mets."

Doubleday said Wilpon offered to buy the team in June 2001, putting a $500 million price tag on the Mets. Doubleday would have received $200 million, with the difference his share of the team's debt.

Under the new evaluation of the 60-40 rule, a team's longterm player contracts would be counted as debt, but longterm broadcasting deals would not be counted as assets.