FPPC Lawsuit Against Loeb and Loeb
The person bankrolling the signature drive to try and stop the new Sacramento arena for the Kings has tried to stay anonymous.
Unfortunately for it / him / her / Maloofs / Hansen the law firm Loeb & Loeb paid $80,000 on June 21, 2013, a mere nine days before a mid-year cutoff. This required a public disclosure of who paid the $80,000 by July 30th.
No disclosure was made.
Update: Chris Hansen has been disclosed as the secret funding source. He just lost his chance to bring an NBA team to Seattle.
If Loeb and Loeb had waited ten days to make the payment (July 1st) no disclosure would have been required until December 31st.
This is not the first time Loeb & Loeb has violated California law and been afoul of California's Fair Political Practices Commission. A quick review of the FPPC website found several references to violations, although it was not immediately clear if the multiple references related to one violation or multiple instances.
The documents the FPPC has filed in Sacramento Superior Court to force Loeb & Loeb to comply with the law and disclose who paid the $80,000 for signature gathering:
FPPC motion paper outlining the legal violation – http://lawzilla.com/content/kings/loebmotion.pdf
FPPC request for emergency hearing on Monday – http://lawzilla.com/content/kings/loebexparte.pdf
FPPC declaration in support of its motion – http://lawzilla.com/content/kings/loebfppcdec.pdf
Prior: Anaheim Royals Battle
Quick Summary
Will the Sacramento Kings be moving south to become the Anaheim Royals? Will the City of Sacramento try to stop the sale?
Has there been a coverup in dealings and issues involving the Kings and Sacramento?
Have the Kings ever been financially viable in Sacramento?
Judge for yourself.
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Review
According to the various documents listed further below ...
The Kings moved to Sacramento from Kansas City in 1985. At the time a temporary arena had been established that was not up to NBA standards.
Since the NBA was imposing a deadline for the team to move from a temporary arena to a permanent facility that met NBA requirements. Arco Arena was "poorly constructed, hurriedly built and designed primarily as a basketball facility." (Grand Jury King's report, ppg. 67-68.)
The Kings' owners received an $8M loan to help finance the arena.
In 1996 the owners threatened to move the team and sought a major sports complex for the Kings to play in.
Per the Grand Jury report, in 1997 the Kings and Sacramento reached an agreement with the following terms:
- Sacramento would provide the Kings with financial assistance to continue operating for at least 10 years.
- The financial assistance included:
- $70M 30-year loan
- Fee credits
- Deferrals for future infrastucture
Repayment of the loan was to be from arena revenues and ticket surcharge revenues.
Bonds were issued for $70M and an addition $8.5M in notes were issued so the Kings could make the first seven years of payments on the loan. The notes were repaid in 2005.
According the Grand Jury report if the Kings repaid the $70M loan by June 2007 they could leave Sacramento. Unfortunately, it is not stated under what conditions they could leave if repayment was not by 2007. Or if repayment was never made.
In 1999 the Maloofs acquired controlling ownership interest of the Kings.
In November 2006 a whopping 80% of Sacramento voters voted to reject a sales tax increase to pay for a new arena. But by the time of the vote even the Kings were not supporting the proposal.
In 2007 the Sacramento Grand Jury concluded the City of Sacramento had "not been forthright with the citizens of Sacramento" in the ballot proposal and had withheld the 1997 loan documents from the public. (Grand Jury Report, p. 72.)
In response, on June 12, 2007, in a response approved by the Sacramento City Council, the City of Sacramento represented to the Presiding Judge of the Sacramento Superior Court that:
"The Kings are entitled to leave Sacramento under the 1997 agreements only if they satisfy other obligations under the agreements, the most important of which is the obligation to pay off all outstanding bond indebtedness and costs."
In early 2011 the NBA stated it was done trying to obtain a new Sacramento arena.
A short time later it was learned that the Kings were negotiating with Anaheim to move the team.
On March 29, 2011, the City of Sacramento wrote to Anaheim stating that:
"In July 1997, to help refinance existing debt on the arena where the Kings now play, the Sacramento City Financing Authority issued $73,725,000 in lease revenue bonds. in return, the Kings agreed to writing to pay off the outstanding bonds if the Kings relocate to another city before 2027. The outstanding amount owed under the financing is approximately $77 million, and as of today the City has no assurance that the Kings intend to abide by their agreement and pay off the bonds in full before relocating."
The 'Big Fraud'
You have probably seen politicians promote bills, such as the Save The Acme Project Bill, which they then tout showing what a great person they are.
No one actually pays attention to the bill, which starts "The Acme Project is hereby repealed."
Politicians lie and government cannot be trusted. But you already knew that.
As a child we learned this lesson as the wolf in sheep's clothing.
In the law, it is called fraud.
What does this have to do with Sacramento and the Kings? Pay very close attention ...
Sacramento obtained a $70 million dollar loan for the Kings which the Kings are obligated to replay.
Then a SEPARATE agreement called a "Relocation Assurance Agreement" was entered into. The Relocation Assurance Agreement recites that the Kings were given the money so they would stay in Sacramento.
"The City has enlisted the assistance of the Sacramento City Financing Authority ("Authority") to ensure that the National Basketball Association ("NBA") team known as the Sacramento Kings (the "Kings") remains in Sacramento, rather than moves to another venue."
"A material condition ... was the Team owner's commitment to keep the Kings in Sacramento for up to 30 years or until the City Obligation is Satisfied."
"The Team Owner hereby covenants and agrees it will not relocate the Kings from Sacramento, California to another venue if the City Obligation is not Satisfied."
Looks good! The Kings have to stay in Sacramento.
But watch out, here comes the wolf ...
The City then agreed to these terms:
- If the Kings breach the agreement (i.e., move to Anaheim) then Sacramento's sole damages are the amount of the loan less the market value of the arena and related property.
- and Sacramento cannot pursue any assets of the Kings owners beyond the value of the arena property and the Kings
- and ... get ready to be kicked in the teeth ...
- These damages "SHALL BE THE CITY'S SOLE REMEDY IN THE EVENT OF A DEFAULT BY THE TEAM OWNER, IN LIEU OF ALL OTHER REMEDIES THE CITY MIGHT OTHERWISE HAVE HEREUNDER AT LAW OR EQUITY. THE CITY WAIVES ANY RIGHT TO AN ACTION FOR SPECIFIC PERFORMANCE OF ANY PROVISION OF THIS AGREEMENT."
Better read that again so it sinks in.
Instead of "Relocation Assurance", the City gave away the farm and agreed not only is there no assurance, but the City waives its right to force the Kings to stay in Sacramento.
Not only can the Kings leave, but the City is left holding the bag with agreed upon limited damages and limited assets to pursue to pay off those damages.
And then apparently per an agreement with the NBA the City basically waived its right to pursue the value of the Kings to pay off the amount owed.
So the Kings leave and the City gets the value of the Arena property, substantially diminished due to the loss of the Kings, a limited value minority interest in the Kings, and that's it. No recovery of profits from the Maloof casino. Probably no recovery of profits generated from the Anaheim arena.
Instead of a "Relocation Assurance Agreement" Sacramento may have been better off with no contractual "assurances" at all. The City could have retained a legal weapon to force the Kings to stay and relied upon all the promises by the Kings that is what they would do. Remember, the Kings were already obligated to pay back the $70 million. So the "assurance' agreement is waived around by the City as some type of 'guarantee' the Kings will stay, the fans are happy, but until now the agreement has not been publicly scrutinized (although there were warnings by the Grand Jury that the city poo-poo'd).
Is all lost because of this deal?
Not necessarily. It is possible Sacramento's waiver is not legally enforceable. It is not an "assurance" as the public was promised. It could be illusory as the Kings were already obligated to repay the loan and thus did not give the city any real additional consideration for the loan. It may simply be against the public interest. Interestingly, a legal opinion by the Kings' attorneys about the agreement specifically declined to state that this waiver was legal and enforceable.
Questions
Have the Kings ever been viable in Sacramento?
Loans to build an arena. Loans to pay the loan on the arena. Loans from the NBA. A low, if not the lowest payroll in the NBA. Now loans to move to Anaheim.
Has the team made money?
After 14 years of loan payments how is it that a $70M loan now $77M? Reportedly, the loan amount is still $67M and there is a $9-10M prepayment penalty.
Was Sacramento forthright in the conditions for Kings to leave?
If Sacramento's 2007 representations to the Sacramento Superior Court were correct, the city could simply enforce the contract or request an injunction preventing the Kings from moving to Anaheim if the $70M had not been repaid. The city said the Kings could "only" relocate after satisfying numerous conditions including repayment of the bond.
Apparently, that is not the situation.
It has been reported the Kings could leave and Sacramento's recourse is to take ownership of the arena and receive a $25M ownership interest in the Kings.
Even worse then, Sacramento's security for the loan may not be worth much at all. Especially after the city subordinated itself to the Kings' NBA debts.
Have the fans been defrauded?
If the Grand Jury was correct that the loan was to be repaid by ticket surcharges, what have the fans been surcharged for if the loan was not being repaid?
Could be the Kings are already in breach of the agreement and potentially precluded from relocating.
Maybe the fans have a class action suit against the Kings for fraudulent charges for 14 years.
Documents
April 7, 2011 - Sacramento Letter to Kings (as arena owner) requesting response to how the Kings will payoff their loan.
April 7, 2011 - Sacramento Letter to Kings (as NBA team) wanting explanation as to how and when Kings expect to payoff their loan.
April 1, 2011 - Kings Letter to Sacramento rejecting promise to payoff the loan.
March 30, 2011 - Sacramento Letter to NBA requesting that the Kings payoff their loan before the league approves any relocation.
March 29, 2011 - Sacramento Letter to Anaheim claiming violations of state environmental laws related to Kings move
March 29, 2011 - Sacramento Cease and Desist Letter to Anaheim
March 29, 2011 - Anaheim draft resolution to approve sale of bonds
March 29, 2011 - Anaheim CEQA Environmental Report Exclusion for Playing Basketball
March 29, 2011 - Anaheim Finance Department report re issuing $75M in bonds
March 29, 2011 - Anaheim First Supplemental Indenture of Trust
March 25, 2011 (date file was created) - Contract for NBA Team to Play at the Honda Center (large file may take time to download)
March 21, 2011 - Anaheim Bond Purchase Agreement
March 1, 2011 - Anaheim Memo of Understanding for NBA Team to Play in Honda Center
March 1, 2011 - Anaheim Arena Management Agreement (large file may take time to download)
September 7, 2010 - Sacramento resolution ratifying 2003 agreements - Labelled an administrative matter to make sure 2003 amendments increasing Sacramento's security interest in the Kings is valid. Possibly an early indication city was concerned about Kings leaving.
June 12, 2007 - City of Sacramento Response to Grand Jury Report
June 2007 - 2006 / 2007 Sacramento Grand Jury Report - The report about the Sacramento Kings begins on page 65. To skip all the Grand Jury reports and see just what was said about the Kings and the City of Sacramento, Click Here.
May 5, 2003 - Sacramento subordinates the Kings loan to NBA loans. To allow the Kings to get loans from the NBA, Sacramento agreed that the $70M the Kings owed the city was subordinate and junior to loans the Kings received from the NBA.
April 28, 2003 - Kings agree to increase Sacramento's security interest from $20M to $25M
April 10, 2003 - NBA letter confirming Sacramento's security interest in the Kings is increased from $20M to $25M.
July 31, 1997 - Sacramento $70M sale of bonds and disclosures (large file may take time to download)
July 31, 1997 - Legal opinion by Kings' attorneys
July 30, 1997 - NBA agreement granting Sacramento a second security interest in the arena if the Kings relocate
July 1, 1997 - Kings agree to Sacramento security interest to secure bonds issued by the city
July 1, 1997 - Team Owners Relocation Assurance Agreement. This is a KEY CONTRACT where the Kings promised to stay in Sacramento, but then the city gave away it's ability to enforce the promise.
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