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.