((HT: Bloomberg via Howard Bloom))
Steven Belkin, who is suing his former co-owners of Atlanta’s professional basketball and hockey teams, manipulated the process for valuing his stake in a bid to force partners to buy him out at an inflated price, their lawyer said.
Jim Shea, representing seven owners who wanted to buy Belkin’s 30 percent stake in the Atlanta Hawks and Thrashers, said today that Belkin “carefully screened and selected the appraisers” and pressured them to come up with the highest possible price.
Belkin “directed the appraisers to just look at the assets, not the obligations,” Shea told Judge Durke Thomson in closing arguments of a three-month trial in state court in Rockville, Maryland.
Belkin agreed in August 2005 to sell his stake, sparking a 3 1/2-year legal battle over how much it’s worth. Citigroup Inc. first estimated the value at $288 million. JPMorgan Chase & Co. later put it at $463 million. Attorneys for the partners argued at trial that the stake was worth much less than Citigroup’s estimate when debt and other obligations were included.
Shea said Belkin unfairly benefited from his manipulation of the process, including being “tipped off” on the timing of the e-mail transmission of the Citigroup estimate. Under terms of the buyout agreement, this allowed Belkin to be first to object to the valuation, giving him the right to select the second appraiser, JPMorgan.
“Neither party contemplated even the possibility that both parties would object” to the valuation, Shea said. “They missed it, your honor. They just didn’t see it. There was no meeting of the minds.”
Shea asked the judge to send the parties back to the negotiating table to work out an acceptable price based on a new, impartial valuation.
John Fabiano, an attorney for Belkin, told the judge that his client had lawfully followed the rules on selling his stake in Atlanta Spirit LLC, the group that owns the National Basketball Association’s Hawks and National Hockey League’s Thrashers. Belkin shouldn’t be punished for acting more quickly than his onetime partners, Fabiano said.
The owners “are millionaires many times over, not unsophisticated widows and orphans,” he said. “It is simply not persuasive that they did not read the documents with care” including an e-mail message from Citigroup informing them that the appraisal was about to be sent, he said.
Fabiano asked the judge to use the JPMorgan valuation and order the partners to pay Belkin $143 million plus interest for his stake. The judge declined to say when he will rule.
Bernie Mullin, former chief executive officer for Atlanta Spirit, testified during the trial that the Hawks’ revenue was among the NBA’s lowest in the 2004-05 season, when the team lost 69 of its 82 games.
Atlanta Spirit lost $13 million and would have lost as much as $31 million had the Thrashers played that year, when the NHL season was canceled because of a labor dispute, Mullin said.
Belkin, who was once the lead investor in Atlanta Spirit, was forced out after he temporarily blocked the Hawks from acquiring guard Joe Johnson from the Phoenix Suns in 2005. He sued United Communications Group co-founder Bruce Levenson and the other owners, demanding that they buy his stake in the teams and in Philips Arena, where they both play.
A Time Warner Inc. unit was ordered in December to pay $281 million in damages to a Texas businessman for reneging on an oral agreement to sell him the Hawks and Thrashers.
Jurors in Atlanta found that Turner Broadcasting System improperly canceled a 2003 accord to sell the teams to David McDavid, a former Dallas car dealer. The teams wound up in the hands of Atlanta Spirit, a group of investors that included the son and son-in-law of TBS’s billionaire founder, Ted Turner.
The case is Belkin v. HTPA Holding Co., 266748-V, Montgomery County Circuit Court (Rockville, Maryland).
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