Insider Questions Arise With Glendale And Reinsdorf

((HT: Phoenix New Times/Fenske))

Something is rotten in the city of Glendale.

That's my conclusion after poring over bankruptcy files for the Phoenix Coyotes, reading hundreds of pages of municipal records, and getting an earful from some insiders.

I can't say for sure what's happening — Glendale officials are using the specter of litigation to dodge key questions.

But I can tell you this: It smells pretty damn bad.

The record suggests, in fact, that Glendale City Manager Ed Beasley is trying his best to hand over the Coyotes to his friend, lobbyist John Kaites, and Kaites' Chicago buddy, Jerry Reinsdorf. The deal might well suck for the team's current owners (who stand to lose millions) and its creditors (who suggest they're getting a raw deal). And never mind that the Valley has never shown much interest in driving to Glendale for games: Beasley has been working for months to make a deal that would give Kaites and Co. the franchise and force the team to stay in town.

Some of my sources insist that's okay. As a good city manager, Beasley has to do whatever he can to keep the Coyotes in Glendale. That's the only way to save Glendale's multimillion-dollar investment in Jobing.com Arena.

But it's one thing to fight to save a team. It's another thing entirely to fix the playing field for connected insiders.

And that, I think, is exactly what's happened here. Even more than Phoenix, where Frank Fairbanks rules the roost, Glendale is a town run by its city manager, Beasley. And city records suggest that long before Beasley let on to the city's elected officials that the Coyotes were in trouble, he was helping to wire the deal for Reinsdorf and Kaites.

And that begs the question: Was Beasley trying to find the best ownership deal for the team or favor some longtime associates?

Here's what I've learned:

In the fall of 2008, Coyotes owners Jeff Shumway and Jerry Moyes began explaining to City Manager Beasley just how bad the team's financial situation was. They asked the city to sweeten the pot and give them incentives to help the team stay in Glendale.

Instead, in October, Beasley inked a deal with a small Massachusetts firm, Beacon Sports Capital Management. (Because Beasley kept the contract below $50,000, he didn't need the city council's involvement. To date, Beacon has come in just under the threshold, at $48,175.)

Beacon was ostensibly hired to assess the Coyotes' finances. Its report, filed in January, has become Exhibit A in the city's argument that the current ownership screwed up and that another group could do a better job. That, of course, opened the door for Reinsdorf and Kaites.

But get this.

Beacon was in Glendale for just three days. And during that time, according to Beasley's own calendar, the sports analysts actually had a meeting with Kaites and Reinsdorf!

To understand how shocking that is, you have to understand the timing. Kaites and Reinsdorf weren't being talked about by anyone as prospective buyers at that point. At that time, in December, as far as owners Shumway and Moyes knew, they were asking City Hall for help — not a buyer.

Some of the best investigative reporting on the Coyotes situation has come from Channel 12's Brahm Resnik. But even Resnik doesn't put Kaites and Reinsdorf into negotiations with the city until February.

Yet Beasley's calendar shows that the Reinsdorf and Kaites were in the loop as early as December.

And some new information makes me suspect that Beacon's hire was little more than a setup to bring in Reinsdorf and Kaites — which puts the duo in the picture even earlier.

Michael Reinsdorf, who is Jerry's son, had been hired to help manage the Arizona Cardinals' stadium in 2004. (His firm, IFG, got the contract as a joint venture with Global Spectrum, a Philadelphia-based firm that just happens to employ John Kaites as a lobbyist.)

In the fall of 2008, Glendale hired Michael Reinsdorf's IFG to assess stadium operations at the Coyotes' home, Jobing.com Arena. It was IFG — which, again, is Michael Reinsdorf's firm — that suggested Glendale hire Beacon, as city officials confirmed to me.

The Reinsdorfs have a long history of working with Beacon. In fact, court records show Beacon was sued in Los Angeles by a client who claimed Beacon had leaked a confidential report to, yes, Michael Reinsdorf.

So when the Coyotes ran into trouble, Ed Beasley brought in Michael Reinsdorf's firm. At the suggestion of Michael's firm, he brought in a second company, one that had a history of dealing with Michael Reinsdorf. Then he stood by as that firm secretly met with Kaites and Jerry Reinsdorf.

And now we're supposed to look at the firm's analysis as neutral, looking out for Glendale's best interests?

I simply don't buy it.

In May, the Coyotes filed for bankruptcy. Its current owners want to sell to an investor who'd move the team to Canada; it's their only hope to recoup even part of their investment, they say. Meanwhile, for reasons that are still unclear — to me, at least — Kaites and Reinsdorf have become the NHL's pick.

There's more... keep going... it's an interesting read...

Issues With Glendale- More Than One

((HT: Arizona Republic/Watters-Sanders via Howard Bloom))

Glendale claims it would be financially devastated should the Phoenix Coyotes bolt to Canada. But should a bankruptcy judge rule that the team stays, Glendale will likely be pressed to cough up more money for the struggling hockey franchise.

Court filings show the team and the National Hockey League for the past year have pressed for concessions. Attorneys for potential Coyotes buyer Jim Balsillie used Glendale's plight to push to relocate the team to Hamilton, Ontario.

In U.S. Bankruptcy Court this week, attorney Susan Freeman painted a dismal picture for the Coyotes in Glendale without city concessions.

She cited a survey conducted by the team that said 72 percent of Glendale residents would rather see the Coyotes leave than have the city make such concessions. The request for concessions put the city in a tough spot, politically and financially.

Glendale is making the payments on the $180 million borrowed to build an arena for the Coyotes off Loop 101 and Glendale Avenue. But there's little wiggle room.

Meanwhile, the Phoenix-based Goldwater Institute, currently litigating a case before the state Supreme Court involving a $100 million subsidy that Phoenix offered at the CityNorth shopping center, sent a letter to Glendale on Monday to let city officials know it is watching.

"As an organization dedicated to curtailing excessive government intervention in private economic matters, the Goldwater Institute has been paying very close attention," the letter read.

The institute cites media reports of a $15 million annual concession and the possibility Glendale would offer $25 million it has set aside for a parking facility.

Glendale City Manager Ed Beasley has repeatedly said concessions are not up for negotiation.

But court documents filed by team associates say Beasley was repeatedly asked, and eventually agreed, to forfeit city funds to the financially struggling franchise.

Beasley did not return a call from The Arizona Republic seeking comment.

Gary Husk, contracted to speak on behalf of the city during the bankruptcy proceedings, said that Beasley never agreed to the concessions.

"The city can't agree unless it's publicly acted on," he said.

Husk said Glendale is willing to talk about opportunities to enhance revenue, not concede money from the city.

"If you can bring more money into the pot, that has an equal economic impact," Husk said.

Along those lines, the city hired Gerald Sheehan with Beacon Sports Capital Partners, who said the team already had a lucrative contract with the city.

He identified ways for the team to reduce expenses and generate revenue.

But the Coyotes still asked, according to court documents:

Former Coyotes CEO Jeff Shumway said he visited Beasley in June 2008 to seek more-favorable lease terms for the team to collect parking revenue at Jobing.com Arena. By July, he said, he asked for $12.5 million in annual concessions.

Shumway said that by fall, the specter of the team's bankruptcy was raised to Beasley.

In a November meeting with team officials and NHL Commissioner Gary Bettman, Beasley proposed the team add a ticket surcharge to collect more funds. Bettman said that wasn't a viable option and got Beasley to agree to as much as $15 million in concessions, although only with new ownership in place, Shumway's filing says.

By March, Beasley told Coyotes owner Jerry Moyes and his attorney, Earl Scudder, that "he had determined methods by which Glendale could provide an annual subsidy of $14.6 million," Scudder said in a court filing.

Scudder said Beasley told them a buyer needed to be identified before he would take the proposal to the City Council.

By April, Scudder said, the team's request for concessions rose to $20 million. "I pointed out to Mr. Beasley that this was the same amount requested by Jerry Reinsdorf," Scudder said in the filing.

Reinsdorf, who owns the Chicago White Sox, is one of four potential buyers identified as interested in keeping the team in Glendale.

Scudder said the city manager told him a subsidy of that magnitude couldn't be approved by the City Council and would require a vote of residents.

Council members say they were not updated on negotiations between the city and the team until May 5, the same day that Moyes filed for bankruptcy.

Glendale City Manager Ed Beasley is being accused in a court filing of aiming to destroy a sensitive document to keep it out of the public eye.

Former Coyotes CEO Jeff Shumway claims Beasley said he would "tear up" a letter from Shumway and "pretend that he never received it," according to a sworn declaration Shumway filed with U.S. Bankruptcy Court recently.

Beasley said the letter, sent to him and the city attorney, had "caused problems for Glendale," the declaration states.

Glendale spokesman Gary Husk, hired by the city to speak on Coyotes matters, denied Shumway's account. He declined to specify which parts were untrue.

"At best, he (Shumway) has a poor recollection of events," Husk said. "At worst, he has distorted the truth in order to protect his own interests."

Shumway's letter, dated September 14, 2008, said he had requested repeatedly over several months to restructure the team's lease at Jobing.com Arena, but that Beasley had not agreed to begin those negotiations. Shumway claimed the team was losing millions of dollars each year because of the arena lease, which included giving the city as much as $2.5 million annually from ticket revenues.

"When things weren't progressing at all and Ed wouldn't even say, 'No,' I sent that letter," Shumway said in an interview.

After threatening to "tear up" the letter, Beasley asked Shumway to "withdraw" it, according to the court filing, "so that he could approach the City Council in his own way."

Shumway consented, but Beasley did not notify council members. They learned of the city's negotiations on May 5, the day the team filed for bankruptcy.

Destroying Shumway's letter would have been illegal under Arizona public records law. It's not clear what Glendale officials did with the letter after Shumway's meeting.

Even if Shumway had retracted the letter, Glendale would need to keep a copy and note its withdrawal, said Liz Hill, the state's assistant ombudsmen for public access.