Seven questions about the Vikings stadium deal that need answers

Minnesota Vikings

I admit it: I’m a worrywart. I can contemplate no action or plan, whether it’s getting a teeth-cleaning, walking around Lake Calhoun or traveling to Brazil, without envisioning car accidents, sprained ankles, malfunctioning dental drills, kidnapping by drug lords or, at the very least, gastric distress.

Most times, my fears come to nothing, but, like a broken clock, I am occasionally right.

Lately, my personal worry machine has been spitting out warnings about the Vikings stadium deal. Michele Kelm‐Helgen, chairman of the Minnesota Sports Facilities Authority, has stated that groundbreaking will definitely occur this fall—though the date has slid from October to November. But it seems as though some things are going sideways—like the failure of electronic pull-tabs, which were supposed to fund the state’s piece of the financing, to produce more than 10 percent of what’s needed.

The Legislature patched that up with a corporate tax that should produce $20 million a year. But then came another bombshell from left field (yes, I know that’s baseball)—the New Jersey civil suit against Vikings owner Zygi Wilf and family. As you recall, the lawsuit, which had been going on for 20 years, ended recently with the judge finding that Wilf, his brother Mark and cousin Leonard had committed fraud, breach of contract and breach of fiduciary duty. On top of that, they violated New Jersey’s civil racketeering statute. Damages have not yet been determined, but the Wilfs’ family enterprises could be on the hook for $100 million or so. That would take a major bite out of Zygi Wilf’s fortune of $310 million, as estimated recently by Sports Illustrated.

All of this makes me think that maybe we should bide our time before tearing down the Metrodome. At least until we get a few questions answered.   

1. Shouldn’t somebody in state government have known about the Wilfs’ New Jersey lawsuit?

It wasn’t exactly a secret. Two years ago, a local newspaper with major offices in downtown Minneapolis made mention of “a long-running New Jersey lawsuit” in which “former partners in a large apartment complex accused Zygi and Mark of cooking the books to cheat them out of millions of dollars—a charge the brothers have denied.” If somebody did know, shouldn’t he or she have brought it up in the conversation when the Legislature was debating the stadium deal last year?

2. How do we know that the Wilfs will really put the $477 million they’ve pledged into the stadium?

Alarmingly, in testimony before the court, Zygi Wilf said that one reason he reneged on the New Jersey contract signed by his uncle back in the 1980s was that the plaintiff got “too good a deal.” It’s hard to say whether he’ll feel that way about the stadium deal at some point in the future. Earlier this year, I estimated that the Vikings would garner about $50 million to $60 million from selling seat licenses to season-ticket holders and $20 million a year for 20 years for naming rights, which would come to an upfront payment of about $91 million. Then too, there are sponsorships and income from sales of nachos and hotdogs—though some of that has to go to pay for team expenses. The NFL is pledging a $50 million grant and a loan of as much as $150 million.

That still leaves as much as $126 million to finance. Presumably, the Wilfs could borrow that much based on their equity in the team, but in the aftermath of the lawsuit, not every bank might be eager to sign on—although I am certain that one financial institution or another could find an interest rate that will offset its fear of loss. If the Wilfs can’t get a loan, they’ll have to sell some of their shopping centers or apartment buildings to raise some cash, and I suspect (but don’t know) how thrilled they would be to do that.  

3. If the Wilfs do renege, couldn’t the state sue the NFL? Surely the league checked them out when they bought the Vikings back in 2005, right?

You’d think. But judging by recent events, maybe its due diligence is not that diligent. Example: Jimmy Haslam III, CEO of Pilot Flying J, an empire of truck stops and travel centers, bought the Cleveland Browns for $1.05 billion last year. An FBI affidavit released a week or so ago contends that his company engaged in a scheme designed to keep money it owed to customers. Haslam hasn’t been charged and says he’s not involved in any wrongdoing—though much of his spare time in the coming months will be spent giving depositions. The investigation had been ongoing for two years. Meanwhile, the NFL has said that it has no plans to ask Haslam to step down. I called the league to find out how it vets owners, but nobody provided an answer. If I get one, you folks will be the first to hear.

4. Is there any way that we can get the real story on the Wilfs?

At Gov. Mark Dayton’s urging, the Sports Facilities Authority recently launched a belated due-diligence effort. They retained Peter W. Carter, the co-chair of the securities litigation and enforcement practice at Dorsey & Whitney, one of American Lawyer’s top 200 law firms. Also hired was FTI Consulting, a Palm Beach company that lists as one of its specialties forensic accounting. They’ll be examining the New Jersey case, hunt for other Wilf lawsuits, perform background checks, review the NFL owner application and the due diligence the league performed and conduct “financial due diligence.” When this was first announced a few weeks ago, I asked Jennifer Hathaway, communications director for the Sports Facilities Authority, whether the investigation would require the Wilfs to open the books of their business, which is not a public company. I am still waiting to hear the answer.

5. Are the taxpayers on the hook to pay for the investigation?

The Sports Facilities Authority says it will bill the Wilfs—and that should be some bill, since the lawyers may be charging as much as $500 an hour. The Wilfs, however, have not yet said that they’ll ante up.

6. Is Dorsey & Whitney the right firm to conduct the investigation?

Well, it already represents the Sports Facilities Authority—a job that brought it $1.2 million in revenues last year. Serving as special counsel is former U.S. veep and Democratic presidential candidate Walter Mondale. His son Ted is the CEO and executive director of the Sports Authority. That’s a pretty cozy arrangement, and while the Mondales have reputations of purest rectitude, the temptation to downplay any adverse information may be floating in the ether. Maybe the Authority should have recruited a law firm uninvolved in local politics.

7. Could we back out?

At this point, yes. So far, the only written agreement is the legislation that was signed by the governor—all the terms that were negotiated were subsumed into the law. And, of course, laws can be changed. If Dorsey & Whitney turns up something ugly, our legislators would have cover to back out. Taxpayers would still lose money. According to the Associated Press, the Stadium Authority has signed nearly two dozen contracts, the largest of which is with architects for $34 million. My suspicion is that everybody will plod forward, no matter what. After all, consider the alternative: the taxpayers and Wilfs could become embroiled in a Jarndyce v. Jarndyce-style lawsuit for the next 20 years, with the stadium site turning into a large surface parking lot and the Vikings playing in perpetuity on the field of a charter school in Eden Prairie.

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Comments (25)

  1. Submitted by Brad James on 08/23/2013 - 10:38 am.

    Back out

    The State and City should definitely back out at this moment. Far too many shenanigans at this point.

  2. Submitted by Adam Miller on 08/23/2013 - 10:45 am.

    Hold on a second

    One of the main complaints from stadium opponents was that the Wilfs weren’t “really” putting in any money because the new revenues generated by the stadium, via seat licenses and the like, plus loans available from the league for new facilities, were more than enough to cover the teams’ contribution.That wasn’t a great criticism of the deal because the whole point was to improve the attractiveness of keeping a team hear with a new stadium that generates more revenue. But it remains true that the new stadium should more than pay for the Wilfs’ share.

    So I don’t see a lot of reason to be worried about their ability to pay.

    • Submitted by Sean Olsen on 08/23/2013 - 02:13 pm.

      Agreed

      There’s plenty of revenue available to the team (even without the new building) in order to finance their portion of the stadium’s construction. This investigation is largely a sideshow designed to show that the politicians are “getting tough” with the Wilfs.

      Not to mention the fact that the stadium bill itself requires the Wilfs to have their financing in place for the total $477 million amount at the time the agreement is signed. So the chances of the us getting to midway through construction of the facility and suddenly the Wilf’s money goes away is pretty small.

      • Submitted by chuck holtman on 08/23/2013 - 06:19 pm.

        Frankly,

        I’d be a lot more interested in a due-diligence investigation into the legislative plan for the public funding portion. Still haven’t seen any evidence that Mr. Dayton, Mr. Rybak or the legislature did any due diligence before pledging the full faith and credit of my state, city and family to Mr. Wilf and his bondholders.

  3. Submitted by Gregg Larson on 08/23/2013 - 10:57 am.

    Stadium Authority CEO

    Ted Mondale does not fit the description of “…the Mondales have reputations of purest rectitude.” It’s already been reported in the Minneapolis paper earlier this year that Mondale borrowed a significant amount of money from convicted ponzi king Tom Petters, and then refused to repay the entire debt when the attorney representing Petters’ creditors sought clawback of the money. Ironically, his behavior is very unlike what you would expect, given his name and father, and much more resembles the Wilf business practices.

    And then there are the press releases of Kelm-Helgen, who can only be characterized as prejudging the investigation results by stating in their recent press release that “We do not expect this to affect the overall project timeline, as progress continues between the Minnesota Vikings and the MSFA.”

  4. Submitted by Arnie Hillmann on 08/23/2013 - 11:03 am.

    Wilfs & NFL

    We are complicating this matter! Instead of all the posturing we should remember that the NFL pressured the State into doing the new stadium deal. JUST HAVE THE NFL GUARANTEE THE WILF’S COMMITMENT. After all $200 million of the $477 million commitment is NFL money.

  5. Submitted by Steve Titterud on 08/23/2013 - 11:06 am.

    Here’s a few more questions to add to the list, Marlys…

    8. IF there are other civil lawsuits pending, in any jurisdiction, against the Wilfs or the Vikings, what are the cumulative potential liabilities of those lawsuits ? These could contract their assets, as the NJ Court’s order will do. Neither the courts nor the litigants accept IOUs in these types of matters, so far as I know – they must be paid in cash money or in assets, seized if necessary.

    9. Apart from civil actions, are there any criminal investigations underway involving the Wilfs, in any jurisdiction ?

    10. Will the findings of Mr. Carter and FTI Consulting be released to the public domain, as Gov. Dayton has rightfully insisted ? Or will the MSFA seek to hide some of it from the public ?

  6. Submitted by Greg Gamradt on 08/23/2013 - 01:01 pm.

    Don Beaver may come to the rescue!

    Don Beaver, a businessman from North Carolina, may put up $100,000 in escrow to ensure the Wilf’s share of a half billion dollars toward the stadium costs. The state may add appendages to the electronic pull tabs to replicate the paper variety. Don’t worry, all is well!

  7. Submitted by Ed Felien on 08/23/2013 - 01:05 pm.

    Another thing to worry about

    For those of you still living under a rock, there is very real possibility that the voters of Minneapolis will get an opportunity to vote on whether they want to contribute $600 to $900 million to the construction of a monument to head injuries and gladiatorial combat to benefit a New Jersey developer who was just found to be guilty of swindling a partner out of $21 million.

    Judge Phillip Bush took the matter under advisement and will issue a ruling sometime early next week. He asked petitioner Doug Mann for further clarification on some points. Doug Mann is a candidate for Mayor and a member of the Green Party and the Farmer Labor Association.

    If Judge Bush rules in favor of the petition, grants the Writ of Mandamus and orders the City to hold a referendum on whether City money should be used to support the new stadium, it will stop the construction. The City would most certainly appeal the ruling, but in the meantime no bonds could be sold. Who would buy bonds when there was no clear agreement they would be paid by tax revenues? And, along with the faltering contribution of the State, the stadium bubble would pop.

    The implications of this are profound.

    Citizens of Minneapolis have twice amended the City Charter to demand the right to vote on whether funding a sports stadium is more important than basic services. They have demanded the right to be heard on this question. A practical nurse with only slight training as a paralegal, Doug Mann has taken on this challenge. His first oral argument before a district court (in what Judge Bush called “not Law School 101, but more a graduate course”) was brilliant and courageous.

    If you believe in the rule of law, if you believe in the people’s right to govern themselves, then you must applaud Doug Mann’s struggle, no matter how you feel about the Purple People Eaters.

  8. Submitted by Rod Loper on 08/23/2013 - 01:28 pm.

    There you go again

    Ah Marlys. Like your questions on why they need to carry guns at thecapitol, few will give you and honest answer. Thanks for asking.

  9. Submitted by Tony Carideo on 08/23/2013 - 01:31 pm.

    Questions about the stadium? But why?

    And so, from the land of 10,000 stadiums, we trip happily down the road toward the construction of another basilica dedicated to the world of professional sports, looking like a bunch of reactive hayseeds arriving at the altar with little or no idea of who we’re marrying, what we’re buying, and whether we all can really pay for it. It all would be kind of humorous if it didn’t involve a $1 billion structure, built essentially for ten football games a year (oh course, we’ll have the high school tournaments there, too–so that makes it all worth it). Unbelievable; literally.

    These are excellent questions, Ms. Harris, remarkable in the fact that the majority of them haven’t been asked–and definitively answered–a long, long time ago.

    Yet this seems to be the norm–one not restricted to the upstanding people of Minnesota. Stadiums, particularly those of the NFL, seem to collectively blind communities. Reason is set aside; due diligence–vigorous financial analysis, the kind that subjects funding plans (Electronic pull tabs? Please.) to sober-minded scrutiny and a strong dose of common sense, and that carefully examines the financial viability of the private partners in the deal–is either glossed over or ignored.

    I was living in St. Louis in the early 1990s, when the NFL dangled the possibility of a franchise in front of the city. A so-called Gang of Eight, led by former U.S. Senator and erstwhile vice presidential candidate Thomas Eagleton, bound together corporate giants ranging from Boatmen’s Bank, Edison Electric, Budweiser and others to round up their own $1 billion to build a palace for the Rams, whose clearance to move to St. Louis, a city with a perpetual inferiority complex, was announced in the St. Louis Post-Dispatch in 120-point type (really, it was). So the stadium was built, plopped within blocks of the crushing poverty that still grips the city and within several miles of East St. Louis, a city that at the time looked more like a bombed out Beirut–with the obvious irony of the stadium’s cost and its location completely lost in the euphoria surrounding the arrival of Kurt Warner and his steroidal compatriots.

    What is it about the NFL and their attendant owners that blinds public officials to the crowding out effect these projects exert on a community? What happened to the Minnesota that built the Metrodome? I can remember, quite vividly, our civic pride–much more in keeping with the character of this state–at our ability to build a stadium for $55 million. Frugal. Creative; half below ground. Functional. $55 million. How cool is that? (Still another irony: That the Humphrey family is either directly or indirectly involved in tearing down a structure that bears the family name.)

    This whole situation is deeply troubling. New Jersey Real Estate Developer. Just that job description alone should give someone pause.

    • Submitted by Steve Titterud on 08/23/2013 - 02:55 pm.

      The brain injury litigation could have a huge impact…

      …on the public image of the NFL and, if successful, even its business model.

      Maybe it will cause some of the teams’ cities to wake up to what kind of business people they are dealing with when they collaborate with the NFL.

      “As of June 1, 2013, there are more than 4,800 named player-plaintiffs in the 242 concussion-related lawsuits. Including the players’ spouses, there are more than 5,800 plaintiffs, total.” (see http://nflconcussionlitigation.com/?page_id=274)

      Take a look at that site & you will find a link to a database (last updated July 19) of all the plaintiffs who are suing the NFL in these matters. The sources for the information are indicated. Their cumulative count of plaintiffs differ slightly – 4,447 vs the 4,800 quoted in the source above. Either way, that’s a lot of ex-players with concussion issues.

      You can filter by team – and filtered for players who played at least part of their career with the Vikings, it shows 256 ex-Vikings as plaintiffs.

      Who knew ? This could change the desirability of NFL franchises, in the public mind.

    • Submitted by Jackson Cage on 08/26/2013 - 08:16 am.

      This is just sad…

      Look, I’m not a supporter of public financing for ANY project (unlike the hypocrites who rationalize Guthrie subsidies), but this ship has sailed.

      Do you think any business deal is done between virgins? Good Gawd people, grow up. These are just pathetic excuses because you don’t like the stadium deal. We get it, now move on! Statements like “crushing poverty that still grips the city” would be humorous if they weren’t so trite. So WHAT exactly are we allowed to build before poverty is cured, Tony? Geez, we hand over more and more money in entitlement payments and even then the poverty level continues to rise. We get that MinnPost readers don’t like subsidizing the Wilfs. Can we devote some time to CURRENT issues?

  10. Submitted by Keith Summers on 08/23/2013 - 03:09 pm.

    Fuzzy Math

    If the naming rights are worth an estimated 91 million up front and the NFL is good for 200 million in loans and grants that would leave 477 million – 291 million = 186 million as the Wilf’s remaining responsibility.

    Wait, this just in: Vikings announce seat licensing plan for the 18,600 tickets on the lower level between the 20s: $10,000 per seat.

    New update: New Jersey Judge awards 50 million dollar penalty against Wilfs in real estate fraud trial.

    Breaking news: Vikings announce supplemental seat licensing of $1,000 per seat on remaining 50,000 seats in new stadium.

    What was the problem again?

  11. Submitted by David Fehlan on 08/23/2013 - 03:22 pm.

    Question No. 8

    Will the Minnesota politicians who voted YES for the stadium return the $74,000 they received as ‘thank-yous” from the Wilfs in 2012?

    The list is here: http://oi41.tinypic.com/2eeyfkx.jpg

    The names in scarlet should be extra ashamed because they’re already wealthy and can self-fund any campaign (Dayton, Rosen) or they’re the party “leaders” who shoved through a terrible deal in the middle of the night, or they’re Mpls representatives sticking their constituents with extra taxes from 2021 to 2046, by which time the to-be-constructed stadium will probably be demolished and we’ll be paying for TWO football palaces at the same time.

    • Submitted by Fern D on 08/24/2013 - 07:13 pm.

      I don’t really think “the woman in red” went for $1000

      It’s not that much.Our legislators may have acted for personal gain, but I don’t think the officially reported campaign contributions are the sum total. Chances are, sadly, we will never know. There may have been things other than cold cash in play, too. Remember, these are people who are perfectly willing to do business with racketeers from NJ, using MN tax dollars. That’s not something we should take lightly.

  12. Submitted by Steve Titterud on 08/23/2013 - 07:41 pm.

    Fresh off the presses, the investigative team of MSFA…

    …also have some questions for the Wilfs – which the Wilfs apparently prefer not to answer !

    Here’s what Peter Carter’s statement says “to set the record straight”, in response to Lester Bagley’s claims that the Wilfs have cooperated with the investigation and have already secured the financing needed.

    This is reported at http://minnesota.cbslocal.com/2013/08/23/vikings-unexpectedly-break-off-stadium-negotiations/:

    “The Vikings have stated that they have provided the MSFA with detailed financial information in our due diligence review. We have received no such information. The MSFA, through our attorneys, have made multiple requests for more cooperation from the Wilfs. To date they have refused to provide us with any personal financial information that our advisors need to obtain comfort that the New Jersey court case result will not impact their ability to meet their financial obligations.

    We look forward to receiving the financial information from the Wilf’s so that we can conduct our due diligence. The people of Minnesota deserve to know that the team can finance their part of the stadium construction budget – without delay.

    A meeting with US Bank took place but Mr. Bagley was not present and the unequivocal reassurance he refers to was never provided. The Wilf’s have required us to sign a confidentiality agreement that precludes our advisors from discussing what was said.” (end of quote)

    So in spite of all Mr. Bagley’s bluster, when the VIkings broke off negotiations, one had to wonder whether it was actually the investigation ITSELF that was causing the Wilfs discomfort, not any of Mr. Bagley’s nonsense about having a “partner”.

    Mr. Bagley and the Wilfs might try BEING an honest partner in the investigation. There is something very smelly in their behavior here.

    • Submitted by Sean Olsen on 08/23/2013 - 10:13 pm.

      It makes perfect sense from the Vikings perspective to stop the negotiations. First, it puts the pressure on the MSFA to hurry up the due diligence. Second, it takes away any leverage the MSFA had in trying to negotiate final terms (because the end result of this is going to be that there are ample resources available to the Wilfs to finance their portion of the stadium).

      • Submitted by Steve Titterud on 08/25/2013 - 10:04 am.

        Ample resources ?

        It seems obvious the Vikings do NOT have the financing in place, even after all this time. So obviously, there are some serious problems.

        The NJ Court’s final judgement and awards may put some real constraints on the Wilfs’ freedom of action with regard to their assets, even if they appeal. For example, maybe they won’t be able to pick and choose their own preferred collateral to back up loans they’ll need. I wouldn’t think they’d be able to pledge property as collateral that is already subject to a claim. Maybe this is part of their problem in lining up financing.

        I see your point about putting pressure on the MSFA, and it seems to be working in a certain sense on Michelle Kelm-Helgen, who has painted herself into a corner in a death embrace with the project. She and the MSFA must see that they have to be willing to walk away from this entire deal, if it is based in fraud.

        She does not see that the MSFA, in truth, holds all the cards. The NFL and the Wilfs need Minnesota vastly more than we need them – if we need them at all. This is true whether they can or cannot get the financing they need.

        As far as hurrying the due diligence, I would be very surprised if Peter Carter or FTI Consulting will be pushed around like this, easily stonewalled or bullied into doing a half arse, horsesh*t job by the likes of the Wilfs. They have dealt with much bigger fry than these guys.

        • Submitted by Sean Olsen on 08/26/2013 - 08:51 am.

          Based on what I’ve heard the remaining issues left to be negotiated have nothing to do with the Wilfs’ ability to finance the project, but rather over control of the property around the facility.

          • Submitted by Steve Titterud on 08/26/2013 - 10:02 am.

            If the whole deal collapses on the basis of any of the causes…

            …I’ve cited elsewhere in these comments, there is nothing to be negotiated.

            I can see that you think this is virtually impossible, but then we haven’t seen what further outrages the investigation into the Wilfs will produce, have we ?

            The Wilfs appear to be terrified of full disclosure.

  13. Submitted by Jarrett Smith on 08/23/2013 - 09:15 pm.

    Well said

    The Jarndyce v. Jarndyce reference is priceless. A bleak house indeed for the Vikes!

  14. Submitted by John Clouse on 08/23/2013 - 09:26 pm.

    Don’t build it!

    Never could understand the state’s eagerness to build this stadium. We already too many new stadia and the Dome works fine for football.
    If Wilf and the NFL want a new stadium, let them build it.
    The Wilfs were never going to fund this with their own money but that is all the more reason to stop it. We thought we couldn’t trust them, now we know for sure.

  15. Submitted by Frances Haeberli on 08/24/2013 - 11:12 am.

    One More Question

    Why do the owners of the Viking team believe that the public should subsidize their private profitable business by providing any funding to the stadium at all? What other private businesses are we citizen’s required to fund? Please let me know if you can think of any This seems a strange surreal world we live in.
    At a generous lifetime estimate of the new stadium at 20 years and a estimate of $1,000,000,000 (that is 1 Billion dollars) the cost is $50,000,000 per year (50 million per year) for the stadium.At ten games a year that is a cost of $5,000,0000 per game. Who will own the stadium and pay for the maintenance and upkeep?
    Sports teams like the Vikings pay players millions of dollars a year and by paying for the stadium we subsidize those unreasonable salaries as well. And yet we allow the team owners to plead “poverty” so that the citizens fund this fiasco?
    Unbelievable.
    Please bring this to a citizen’s vote.

  16. Submitted by Paul Udstrand on 08/27/2013 - 07:54 am.

    Don’t you people understand?

    We’re doing all of this for the jobs! Rep. Ryan Winkler made the impassioned plea that all the arguments against the stadium deal were right but despite that fact; and the fact that he’d been telling his constituents for years that a stadium deal was impossible given the states budget problems, he was gonna vote for it. Why? The jobs of course.

    Listen, without the largest public subsidy in MN history as many as two dozen year round full time jobs might disappear… FOREVER. We’re preventing an economic catastrophe here people so suck it up and quit yer whining. Obviously no amount of money is too much if we’re preserving jobs… Unless we’re talking about teachers, firefighters, state workers, etc. but who’s talking about those guys? This is a sports franchise darn it!

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