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August 30, 2010

MLBleakgate Watch: More outrage over Marlins' profits

The Florida Marlins financial document firestorm just won't die. In the latest flareup, the Miami Herald reported on Saturday that, shockingly, the Marlins have been turning a profit solely on revenue-sharing payments from the rest of baseball:

The Florida Marlins reaped more from Major League Baseball's revenue sharing than the team paid for player salaries the last two years -- a disparity fueling the $52 million in operating income the franchise pocketed in that time, previously secret financial records show.
The team secured its profit -- which exceeded that of five other franchises whose books have also been leaked -- as it won hundreds of millions of dollars in public money for its new stadium, the records show.

Now, there are two potential reasons to be upset about this. One would be if you're opposed to low-revenue teams profiting by getting a share of high-revenue teams' cash - but then, this is all that the revenue-sharing plan was ever reasonably expected to accomplish, as it was never going to do much to reduce disparities in how much teams were willing to pay for players. As I wrote for Baseball Prospectus at the time:

Baseball is left with what might be called the "Don't make Bud come in there rule": Teams are supposed to make every reasonable effort to compete, and not just sit back and collect revenue-sharing checks. (Not too obviously, anyway.) It's a typically old-school approach for the old-boys cabal: Don't sweat what the rules and regulations say; we'll handle our own.
We'll know more about the full effects of the new CBA once the lawyers actually finish putting the general agreements made at the negotiating table into hard-and-fast rules. (There have already been some reports of things that were agreed on by the negotiators, but scrapped once they couldn't be translated into legalese.) But if you're a Royals fan hoping that "overhaul of the revenue-sharing system" means your team will finally have an incentive to spend with the big boys, don't hold your breath.

The more legitimate gripe is that Marlins owner Jeffrey Loria covered up his profits in order to cry poor in stadium negotiations with the city of Miami. Unfortunately, it seems unlikely that there's much to be done about that now after the fact, though some local electeds are trying.

South Florida Sun-Sentinel columnist Michael Mayo, meanwhile, goes so far as to say that the fault lies not with Loria's shrewd bargaining on the stadium deal but with the government "enablers" who let him get away with it:

The Marlins simply did what every sports team — and any shrewd business — could do. They milked the public to the max. They'll pay a fraction of the overall cost yet keep nearly every dollar in revenue from the stadium, which will ultimately cost taxpayers billions in bond repayments. ...
"The Marlins aren't to blame for this," said Norman Braman, the Miami auto magnate who sued unsuccessfully to stop the project. "The fault lies with the politicians."
Politicians like Miami-Dade Mayor Carlos Alvarez and former Miami Mayor Manny Diaz, who could have at least demanded to see the Marlins' books before agreeing to such a lopsided deal.
"If you read the depositions in the suit, you'll see they never even asked," Braman said. "Alvarez said, 'I didn't think it was necessary.'"
That's just bad business, and bad leadership.

While I get Mayo's point, there's plenty of blame to go around here; one doesn't have to let Loria off the hook just because all the other kids were doing it. There's plenty of blame to go around here, both for those who hid their finances, and for those who didn't think to look at the books.

Meanwhile, Marlins president David Samson's insistence that the team's profit wasn't really profit — it was for improved minor-league facilities, see, and saving up for the team's share of stadium costs — rings increasingly hollow as more news outlets uncover line items in the team's finances that make it look like Loria was simply pocketing money. The Herald reports that in addition to $16 million in cash that Loria took out of the team in 2008 and 2009 (Samson insists this was repayment of a loan), the Marlins paid $5.4 million over those two years to the Double Play Company, a separate company owned by Loria and Samson.

All this is likely to raise eyebrows not only at Miami city hall, but in Major League Baseball, whose other teams can't be happy that they're sending money to Florida just so that Loria can fatten his wallet. Normally I'd say that you'd expect the other teams would have had access to this information already — if the insurer who's thought to be the source of the document leak had it, then surely it was available to baseball insiders — but as we've seen this week, sometimes people have to be slapped across the nose with numbers before they notice what they mean.


Someone still needs to explain to me -- slowly, if necessary -- why the Marlins can't be sued for fraud here. They lied to get money; it's really that simple.

At this point, as a simple PR move, you'd think the Marlins would see why they should at least voluntarily increase their payments. Otherwise, I'd just stop going to Marlins' games. If we know they're that dishonest, why do business with them?

Posted by MikeM on August 30, 2010 11:53 AM

If fans stopped going to Marlins games in protest, how could you tell?

Posted by Neil on August 30, 2010 12:27 PM

MikeM's point makes sense, but the Marlins aren't run like a typical business - the community's goodwill means nothing to them as long as they have the revenue sharing money - but I can't believe MLB will act as imperviously as the Marlins. Our poor attendance mitigates the effect of any type of boycott, but all sorts of factors come into play the more people become aware of what the Marlins have done. Since all their actions are implicitly condoned by MLB - MLB could get exposed here in terms of how they encourage communities to build stadiums under threat of relocation - Buster Olney came out for government inquiry today - The Marlins don't care, but I think MLB might

Posted by Jorge Costales on August 30, 2010 06:31 PM

Here is how the Marlins and other MLB teams should be protested.

1. Any protest should start about two hours before game time.

2. All protests are to be peaceful and not take place anywhere but the outside of the home ballpark or stadium of the team being protested. This means that all team officials, players, officials from either team, the stadium workers, and fans who want to attend the game must be allowed entry into the stadium. If the cause is just, and in the case of Marlins fans it is, the protest will receive attention on Sportscenter.

3. The protest must not enter the stadium itself and must continue for about 1/2 hour after the final play of the game.

4. The protest organization must have a web site.

5. Finally, protest rallies should be held at least once a week. Maybe during a Friday home game or right before kickoff of a weekend home football game if the ultimate goal is to get a head coach fired.

Posted by Jessy S. on August 31, 2010 01:13 AM

The idea of a boycott may not make a difference. some teams have a clause in the lease agreement that guarantees a certain percentage of seats sold, if not the city/county will pay the team for the empty seats.

Posted by Craig R. Colgate on August 31, 2010 11:53 AM


The Marlins could be sued for fraud. The question is whether any court could or would find in their favour.

If the public stories are to be believed, the city of Miami failed utterly in it's due diligence. They signed a funding contract that gave the team a massive subsidy at great cost to the taxpayer (now and in future) and didn't even ask to see the books (not that the Marlins would have agreed to show them, they just would have threatened to move...somewhere... without being too specific, since there isn't another city in NA that could reasonably be expected to support an MLB team).

Had they made the subsidy contingent on proof of loss, the subsidy never would have occurred, because the Marlins likely could not prove loss to any reasonably skilled accountant.

Put another way, if I willingly give all my money to a passerby for no reason at all, it's unlikely I could successfully sue him/her for robbery...

Posted by John Bladen on August 31, 2010 05:43 PM

this is an enlightening perspective ! Is this revenue sharing also roughly why an owner that wants a new stadium can afford to field a team that has no chance of winning (and therefore does not cost much in salary) and blame the low attendance on the derelict facilities, whilst still making a decent profit ?

Posted by erw on September 3, 2010 05:14 PM

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