For a Few Dollars More
The Sale of the Red Sox, Dec. 21, 2001
After 68 years of ownership by Yawkey family interests, the Boston American League Baseball Club was put up for sale by John Harrington, trustee of the Jean R. Yawkey Trust and chief executive officer of the ballclub.
Prospective buyers had to be given initial approval by Major League Baseball. They were originally bidding for the JRY (Jean R. Yawkey) Trusts 53% share (worth about $300 million?) of the Red Sox, plus Fenway Park and 80% of New England Sports Network. The new owner would have to be approved by the limited (minority partners) and by Major League Baseball.
The original bidders, with their business, ranked in order of resources:
The first major move was by Dolan, who offered to buy out the limited (minority) partners as well. John Harrington allowed this offer (he was controlling the auction). The stakes were now doubled. McCourt, Aramark, and Jeremy Jacobs folded. ODonnell-Karp and Werner-Otten were in need of more financing if they wished to remain in the game.
Along came John Henry, who was well known to be Commissioner Bud Seligs man. If Henry could get control of the Red Sox, he could sell the Marlins to Jeff Loria, who in turn could sell the Expos to the commissioners office. Henry began having dinner with various bidders around town, Harrington was supposedly ready to recommend a new ownership team of ODonnell and Henry to the minority partners. At least thats what was being reported in the press.
However, Harrington had been playing footsie with the general partners. First of all, JRY Trust itself had some limited partner shares. Second, Mrs. Yawkey had given one share to John Harrington in appreciation for his services. Then Harrington extended the contract of Dr Arthur Pappas, the teams medical director and a limited partner. Finally, he extended the contract of Aramark, the concessionaire at Fenway Park and the largest limited partner.
When Joe ODonnell heard about the Aramark deal at the last minute, he was upset. Joe is in the concession business himself, and had expected to be making some money off that end of the business. Then Joe learned that John Henry didnt want to just come in as a partner, he wanted to run the team. These two factors caused ODonnell to drop out right before the final poker hand.
John Henry then went to Werner & Otten, and basically said, Look, whoever gets me as a partner is going to win, because I am Bud Seligs man. You guys will never win on your own. They agreed and John Henry joined Tom Werner, and Les Otten faded to the background.
The final bids were Prentice $790 million, Dolan $700 million, Henry-Werner $700 million. (All amounts include $40 million assumed debt.) The limited partners chose Henry, or that was the way John Harrington told it. Actually the power to choose was always his; the limiteds only had veto power. Harrington had enough votes in his pocket to deliver the team to Bud Seligs man, so that Buds grand scheme could come to pass.
Afterwards Prentice and Dolan were angry and tried to reopen the bidding. The Mass. Attorney General is supposed to watch out for public charities. He said, the JRY Trust profits are all going to charities, and the charities are not getting all the money they could get because Harrington rigged the sale. No one was quite sure what the AG could do about it, but he could sure as hell embarrass Harrington and make his life difficult. He even wired the MLB owners and asked them not to vote on the Red Sox sale until a few little matters were cleared up. Eventually he came to an agreement with Harrington & Henry. The charities would get a few dollars more. The JRY Trust, which was growing from $30 million to $400 million, would get some additional trustees and be run in a more professional manner than was heretofore the case.
Presently, the JRY Trust has four trustees: Harrington, Bill Gutfarb, Ed Kenney, and Mr. McGuire. The last two are straw men. Harrington is a wily accountant who put nothing into the team but was making money every which way possible. The Trust hires a management company to take care of its business. The management company is operated (surprise) by John Harrington and Bill Gutfarb. The Trust also hired John Harrington to run its baseball team, of course. And his single limited Partner share of the Red Sox (given as a gift) came to be worth $12.5 million. Or maybe only $12 million after AG Reilly takes some off the top for charity.
The Boston Globe stepped into the ownership picture for the second time in the clubs history. Globe reporters obtained copies of the bid documents under a Freedom of Information Act request (!). These show Henry was prepared to contribute as much as $300 million of his own money. Tom Werner was down for $50 million, and the New York Times Co parent of the Globe pledged between $50 million and$75 million. Arthur Nicholas, San Diego attorney, pledged 12 big ones. Three Boston investors, Ed Eskanderian, Marty Trust, and Ben Cammarata, together accounted for $25 million.
John Henry has been trying to reduce his stake in the club by taking in more partners. As part of his sales pitch, he offered to take in the limited partners from the old ownership team. John Kaneb, Thomas DiBenedetto, members of the Alfond family, and Samuel Tamposi were reportedly ready to come aboard. For tax reasons, they will sell their shares to Henry and then buy into the new organization. Henry received a pledge for a loan of up to $200 million from FleetBoston Financial Corp.
As part of a three-way transaction, Major League Baseball is buying the Montreal Expos from Jeffrey Loria for $120 million. (This is above market value.) The money comes from a little-publicized central fund which the Commissioners Office has been accumulating over the years from merchandising and TV revenues. Chris Isidore of CNN Money quotes Rob Manfred of MLB, The central fund holds a tremendous amount of cash. It can be $200 million to $300 million at any point.
Loria then purchases the Florida Marlins for $158 million. The $38.5 million difference between what Loria is getting for the Expos and paying for the Marlins will be loaned to him by major league baseball, according to ESPN. Loria must pay off the Expos current debt, but if the Marlins do not obtain a new ballpark within five years, Loria would have to pay back only $23.5 million of the loan and would not have to pay interest. If the team does get a ballpark, baseball would get 20 percent of the teams operating profit during its first five years in the new stadium.
Papers were passed on February 27, 2002. Larry Lucchino, who previously ran the Baltimore and San Diego ballclubs, will take over as President and CEO of the Red Sox.
Office of Attorney General Tom Reilly
FOR IMMEDIATE RELEASE
JANUARY 16, 2002
AG REILLY ANNOUNCES AGREEMENT TO BRING $30 MILLION MORE TO CHARITIES FROM SALE OF RED SOX
Settlement Includes Governance Agreement for Yawkey Foundation II
BOSTON -- Attorney General Tom Reilly today announced a settlement that will bring $30 million more to charities in Massachusetts as a result of the sale of the Red Sox and institute a landmark governance agreement over the Yawkey Foundation. The agreement concludes Attorney General Reillys review of the sale of the team and clears the way for the Red Sox to put the Henry-Werner groups offer before Major League Baseball owners for approval at their meeting this week in Phoenix.
This is a good day for the charities of this state, AG Reilly said. My goal from the beginning has been to get more money for the charities that stood to benefit from this sale. Today, I am proud to say that we got that done. The limited partners and John Henry have stepped up to make charities in this state $30 million richer than they would have been under the original deal.
Under the settlement, the Red Sox limited partners have agreed to direct an additional $10 million to the Yawkey Foundation and New England Sports Ventures, the Henry-Werner group, will contribute $20 million to establish their own foundation.
AG Reilly also announced that the Yawkey Foundation has entered into a governance agreement with his office establishing an expanded board and new policies and procedures subject to review by the Attorney General.
The Yawkey Foundation is clearly headed for a new day with more than $480 million in charitable assets, AG Reilly added. Based on our review, we felt it was necessary that as the Yawkey Foundation quickly develops into one of the largest charitable institutions in Massachusetts, it is vital that it do so under a changed structure and professional management. This agreement and oversight by my Public Charities Division will help ensure that they are prepared to meet these new obligations.
The governance agreement, an extraordinary agreement for a foundation of this size, is designed to ensure that the foundation operates appropriately in light of its enlarged funds. Provisions of the agreement include:
* The number of trustees will expand from four to nine. A professional search firm will identify potential new trustees.
* The Attorney General will determine whether new trustees meet qualifications established under new agreement.
* Qualifications for new trustees include preference for candidates familiar with the late Jean and Tom Yaw keys charitable goals, including healthcare, education, athletic, environmental and conservation and social services programs.
* The new Board will elect a chair who may not serve for longer than one year.
* The new Board will draft bylaws and policies and procedures for dealing with conflict-of-interest issues, grant-making policies, filling board vacancies and investments.
* The new policies and procedures will be subject to review by the Attorney General.
* The Foundation will be required to submit written status reports on the agreement to the Attorney General on March 31, 2002 and September 30, 2002.
Previous Sales of the Sox
Here you will find sales being rigged by the league president, high bidders not chosen, complaints in the press, lawsuits in court in other words, business as usual.
President Ban Johnson was seeking Major status and major markets for his American League. To get the league off the ground financially he turned to Charles Somers, a millionaire from Cleveland whod made his fortune in coal, lumber, and Great Lakes shipping. Somers made loans to the White Sox and the Athletics, had a piece of the Cleveland team, and controlling interest in the Boston American League Baseball Club. The team was sometimes called the Somersets in his honor.
Ban Johnson wanted a local owner for the Red Sox, but still couldnt find one. Milwaukee lawyer Henry Killilea stepped in. The club was managed by Killileas Milwaukee associate Joe Smart.
In the Spring of 1904 Killilea put the team, with a fresh World Championship to its credit, up for sale. He was inundated with offers. Mike Sullivan of the Royal Rooters led a syndicate. Aspiring politician John Honey Fitz Fitzgerald thought he had a deal, but Johnson nixed it at the last minute because he thought Fitz would be too independent. In April the team finally went to John I. Taylor, son of Boston Globe publisher General Charles Taylor. John I had the title, but the money was the Generals. Honey Fitz cried foul to the Boston Post, to no avail. Three years later Fitzgerald, grandfather of John F. Kennedy, was elected mayor of Boston. The possibilities are intriguing To be mayor of Boston and owner of the Red Sox? How could one man have handled so much power?
With the lease running out on Huntington Avenue Grounds, the Taylors planned to build a new ballpark, sell the team to pay for it, and rent it out to a new owner. In September 1911, Taylor agreed to sell half the ballclub to James McAleer and Robert McRoy for $150,000. McAleer was manager of the Washington Senators, where he was making $7500 a year. McRoy was Ban Johnsons personal secretary, not a high-paying job. It was common knowledge that Ban engineered the deal. Either he was putting up the cash, or the new owners were allowed to buy the club with profits. Jake Stahl, the new manager, was later revealed to be a partner as well. All were friends of Ban.
Fenway Park construction got under way, and the deal was closed in early 1912. Taylor remained as vice president and supervised construction but took no part in operation of the ballclub.
Jake Stahl won a pennant in 1912. Jim McAleer fired him during a slump in July 1913, bringing a stinging rebuke from Ban Johnson. In the off-season while Jim was on a world cruise, Johnson announced that (surprise!) McAleer and McRoy had sold their interests in the Red Sox. The new owner Joseph Lannin was a real estate tycoon who was born in Quebec, moved to Boston as a teenager, and built an empire of hotels, apartment houses, and golf courses. After divesting himself of minority shares in the Boston Braves, Lannin paid $200,000 for the controlling shares in the Red Sox.
It was said that the Taylors offered $220,000 to regain control, but Johnson turned them down. The family still held bonds on Fenway Park, and John I. Taylor was still vice president with minority interest.
Joseph Lannin had gradually taken over the Taylor interests, including the ballpark, though the Taylor family still held preferred stock and bonds. Joes three-year profit on the team was said to be $400,000. He was a baseball fan, but he discovered that owning a Championship team was more headache than fun. He had a bad heart, and Ban Johnsons constant interference wore him down. Lannin let it be known that if the price was right, he would sell.
Several Boston and New York investors tried to put together syndicates, but Lannin chose Harry Frazee, a millionaire Broadway promoter. The choice was a surprise to many, and Frazee reportedly did not have the blessing of Ban Johnson. Harry and his partner Hugh Ward offered $675,000. They paid half in cash, and Lannin took the rest in notes. The deal was closed in November 1916.
Ban Johnson spent seven years trying to get rid of Harry Frazee, who sided with the Yankees in Johnsons frequent clashes with Pinstripe management. Bans power was curtailed when baseball hired its first Commissioner, Judge Landis. But Ban eventually had the Boston press on his side, as the ballclub sunk further in the standings.
At the start of the 1923 season, Bob Quinn, business manager of the St. Louis Browns, asked Frazee to name his price. Harry said $1.5 million. Quinn began putting together a syndicate, the most important member of which was Palmer Winslow, a glass tycoon from Indiana. The new group had Ban Johnsons full support. The deal was closed on August 1, 1923.
1933- T. Yawkey
Bob Quinn had several misfortunes, the main one being the death of Palmer Winslow and the ballclubs subsequent lack of capital. The team was bad, attendance plummeted, part of the ballpark burned down and Quinn had no money to rebuild it. Then came the Great Depression.
Thomas Austin Yawkey bought the Boston American League Baseball Club from the unfortunate Quinn in February 1933 as the Red Sox drew close to bankruptcy. Reports of the purchase price range up to $1.2 million; some say that Quinn got enough to erase his $350,000 debt. Yawkey also paid off the New York Yankees mortgage on Fenway Park (a legacy of Harry Frazee) and other interests including those of Taylor family.
Yawkey, heir to an enormous timber and mining fortune, was a Yale graduate with roots in New York and Michigan. Though he owned the Red Sox for 43 years, he never owned a home in Boston. He divided his time between a suite at the Ritz-Carlton in Boston, an apartment at the Pierre in New York City, and a plantation in South Carolina where he hunted and fished. In November 1944 Tom divorced his first wife, Elise, and a month later married a fashion model and sales clerk at Jay Thorpe, an exclusive womens clothing store in New York. She had been born Jean Remington Hollander, and shed been divorced after a brief marriage to a man named Hiller.
Neither Tom nor Jean had much family, or many friends outside of baseball. People employed by the Yawkeys became part of their family. There were many longtime employees from the early days of Tom and Jeans marriage: Ed Kenney, Helen Robinson, Johnny and Vince Orlando, Don Fitzpatrick, Joe Gildea, Jim McCarthy, John Donovan, Al Forester, George Digby, Danny Doyle, John Kiley, Eddie Popowksi, Johnny Pesky...
1976 J. Yawkey
Tom Yawkey died of leukemia on July 9, 1976. Hed made no plans for the disposition of the Red Sox, supposedly telling GM Dick OConnell, I want to own the Red Sox until the day I die, then Ill decide what to do with them. A few days after his death, the Red Sox issued a statement in the name of Jean Yawkey that the team would continue to be run as it was during his lifetime.
The estate that Yawkey left was shrouded in mystery. Hed once been worth hundreds of millions, but in the years before his death to avoid estate taxes hed transferred or otherwise divested himself of most of his holdings in timber, oil, coal, and iron. His estate when he died was valued at $57,000,000, including the ballclub, the estate in South Carolina, securities, mineral holdings, and land in various states. According to one source, $10 million went to a charitable foundation, half a million went to bequests for former employees and associates, and a small amount went to an adopted daughter by his first marriage. Half of the remaining estate went directly to Jean, and the other half was put in a trust from which she would receive income.
The Red Sox were run until April, 1977 by a trust controlled by Jean Yawkey, longtime business associate James Curran, and executor Joseph LaCour.
1977 JRY Corp / Sullivan / LeRoux
In April 1977 The Red Sox were put up for sale. The bidding groups included:
Reportedly, A-T-O bid $18.75 million. Despite a low bid of about $16 million, Haywood Sullivan, former catcher, and Buddy LeRoux, former trainer, were the buyers chosen -- they pledged about $200,000 of their own money, with the State Street Bank to supply a loan of $8 million. A-T-O sued and Dom DiMaggio complained bitterly about a fix, both to no avail. But in December 1977 the American League owners rejected by a vote of 11-3Sullivan & LeRouxs highly leveraged proposal.
Jean Yawkey stepped back into the deal with her name, her money, and Fenway Park. She, Haywood and Buddy would be General (voting) Partners. This new arrangement was approved, and the trio took the reins in May 1978.
Jean Yawkey was the key to the deal. Through her J.R.Y. Corporation, the Red Sox matriarch bought one of the three general partnership shares for $1 million. She also bought a limited partnership share for $500,000; gave the partnership the land under Fenway Park, valued at $5.5 million; and loaned Haywood Sullivan $1 million to buy his share. Buddy LeRoux bought the third general partnership share, as well as four limited partnership shares. Kentucky coal magnate Rogers Badgett invested $5 million in ten limited partnership shares, with the remaining 15 divided among six purchasers. The new deal was valued at $18 million, with nearly half the total -- and all of the increase coming from Jean Yawkeys pocket. Doug Pappas, Boston Baseball
1987 JRY Corp / Sullivan
On June 6, 1983Tony C. NightLeRoux, limited partner Al Curran, and Kentucky coal baron Rodgers Badgett attempted to take control of the team. They claimed to have control of 18 of 30 shares, and that they were re-organizing the general partnership. Dick OConnell, who had been fired by Mrs. Yawkey, would be returning as GM. The case went to court and ultimately a judge ordered the LeRoux faction to sell its partnerships to the Yawkey/Sullivan faction. This sale took place in 1986, but management was stalemated because Buddy LeRoux still held a General Partnership. Finally on March 31, 1987 Jean Yawkey bought out LeRouxs partnership. She now had, in the name of the JRY Corporation, 2 votes to Sullivans 1.
1992 JRY Trust
Jean Yawkey passed away in February 1992. This is how the ownership stood after her death:
After Jean died, there was talk that the Sox would be sold very soon, and that Haywood Sullivan might take control. Haywood was believed to have right of first refusal on the Yawkey shares. He already owned 1/3 of the general partner shares, it was reasoned, so he would only need another 1/3 to have control. He could get the Red Sox cheap -- very cheap considering his initial investment. He was lining up limited partners for support.
However, John Harrington had no intention of letting Haywood get the Red Sox. First of all, the right of first refusal didnt exist on paper. It had merely been a verbal understanding with Tom or Jean Yawkey, both of who were now dead. Second, Harrington let it be known how the sale would take place -- should the Yawkey interests decide to sell out, they would just be selling their stock in JRY Corporation, not the ballclub itself. This would not require the approval of the limited partners (since JRY Corp would still be the owner), and Haywood would still be a 1/3 minority.
Sullivan relinquished his share in November 1993 ($33 million?). By the following spring, the ownership share of JRY Corp had been transferred to JRY Trust -- probably for tax purposes. I dont remember this happening. The scenario for a sale was now different -- since Harrington couldnt sell the Trust as he could have done with the Corp. The Trust would have to sell the team itself. The sale would now require approval of the limited partners.
If Haywood had stuck around, he might have ended up with the team. But of course if Haywood hadnt left, Harrington would not have changed the ownership structure. He waited until Haywood left before changing to the Trust. Sullivan is said to have invested in Florida real estate, especially around Fort Myers, and done quite well.
According to Red Sox Media Guides, the ownership in 1992 was JRY Corporation (Jean Yawkey, Pres.) and Haywood Sullivan. In 1993 it was JRY Corporation (John Harrington, Pres.) and Haywood Sullivan. In 1994 it was Jean R. Yawkey Trust (John Harrington, William B Gutfarb). John Harringtons ascent was now complete.
Harringtons career included a Boston College MBA, the Navy, NASA, accountant in President Joe Cronins American League office, chief contract negotiator for the Red Sox 1973-1978, and running the states computers for Governor Ed King. He kept his hand in with the Red Sox, continuing to do some negotiations. He testified for three days in court in favor of Mrs. Yawkey & Sullivan, against Buddy LeRoux. This won him Mrs. Yawkeys gratitude. As she and Haywood became estranged, Harrington gradually got more involved in Red Sox affairs. By 1988 he was president of the JRY Corporation, Mrs. Yawkeys chief adviser, and de facto owner of the ballclub.