Oilers and Otters: Snakes and Snake Oil

Back in November a story broke out of Erie, Pennsylvania that the Oilers were suing Otters owner Sherry Bassin for 4.5 Million dollars. You can find that story here and I would suggest reading more of Erie Times reporter Ed Palattella’s work as he’s followed the situation unfold over the past few months. He is no doubt the go to person for this information. Very recently the Globe and Mail ran a piece about that same legal battle written by David Shoalts that you can see here. The slant on the most recent article was about the seedy underside of sports and it portrayed Katz as something of a slimy figure. A snake in the grass. 

Is that fair? Is that accurate?

At the time of the original news I covered it briefly here, but I’ll go over it again. In 2011 the Oilers and Bassin (owner of the Otters) had a deal in place to sell the OHL team to Katz for at least 6.9 Million dollars. As part of the deal the Oilers loaned Bassin money to pay off his own debts. The Oil loaned Bassin something to the effect of 4.2 million dollars in advance of the sale.

That’s when things go pear-shaped.

Bassin was unable to get the OHL’s approval of the sale and ultimately was unable to complete the sale of the Erie Otters to the Edmonton Oilers. So the Oilers believed they were in the process of buying the Erie Otters, apparently with the intention of moving them to Hamilton, and then suddenly they had nothing. 

As per that initial report the Oilers gave Bassin two years (until December 26, 2013) to repay the loan or sell the team so that he would have the means to pay them back. That date came and went and the Oilers demanded their money (that they gave under the assumption that it was effectively a down-payment) back. They demanded the 4.2 million, another roughly 300k in interest and legal fees.

The Oilers, no doubt, felt cheated and wanted their money back. Keep in mind it’s 2015 and Bassin still owns the team well past the deadline for the sale. The sale of the team was supposed to be what allowed him to repay the loan so we are left under the assumption that he took 4.2 million dollars from the Oilers and has no way of paying it back even still.

SO WHAT HAPPENED SINCE?

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Well if we follow our man on the ground, Ed Palattella of the Erie Times, then we can see that the Oilers pushed the courts to force Bassin to sell the team, as it is his most valuable asset, in order to repay that 4.2 million dollars he took from the NHL franchise four years ago and has not yet repaid. Bassin, in turn, challenged to strike the judgement against him that he owed the 4.5 million to the Oilers. This was apparently done to prevent the forced sale of the Otters and (for heart-string tugging) to keep the OHL team in Erie.

It may not come as a shock to you, but since the Otters landed junior phenom Connor McDavid their bottom line has gotten much better. They are experiencing something of a resurgence these days, no doubt due to the fact that they have the most marketable kid in the entire Canadian Hockey League. Understandably, Bassin doesn’t want to part with his team now that he’s presumably making money.

As Palatella noted, a forced sale of the Otters would no doubt be at a lower price than could be had under normal circumstances. A sale of the team will also affect the community of Erie not just because they support the team emotionally, but because the Erie County Convention Center Authority runs the arena that the Otters play out of. 

In any event, in early December a judge ruled against the Oilers allowing Bassin to sell the team on his own terms instead via a forced sale. The Oilers were forced to pursue the matter in civil court. The process may take years to be resolved in this manner. Fans of the Otters and Ontario based writers may rejoice but the Oilers are still left swindled out of 4.2 Million dollars.

WHAT DID THAT NEW REPORT SAY?

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Shoalts’ article is inflammatory to Oiler fans because it focuses on the implied threat of relocation and the nasty politics of the Business of Sport. But Shoalts’ piece (linked at the beginning of this post) also starts off with a misdirection. He claims that all of this Erie/Oilers business started with a simple Associated Press article about the lawsuit.

On the face of it, is seemed just another business-deal-gone-bad – the settlement amount was for a loan Katz advanced to Bassin, plus interest, nearly three years earlier. It was before the Otters had drafted the bankable teen phenom Connor McDavid, and Bassin needed the money to prop up the financially struggling franchise. Then, for reasons that weren’t made clear in the wire story, Katz called the loan. Bassin couldn’t pay, so off to court they went.

Mr. Katz, big bad NHL owner and Western Billionaire, called in his loan suddenly with no reason given. Well, a very brief amount of work is all it takes to see that there has been much more in-depth reporting on this than a brief AP release and that the Oilers called in the loan two years after it was given and only after the deal to sell the Otters to Katz fell through and Bassin refused to sell his team to someone else so he could repay the loan.

But I guess “Swindler Playing With Other People’s Money Asked To Return Ill-Gotten Goods” isn’t the title he wanted for his headline. 

Actually, with the fact that the Otters are only operating today because of money given to Bassin by Katz conveniently removed from the beginning of the story it’s easy for Shoalts to paint Katz in an extremely negative light.

The very first place he goes, even acknowledging that nobody has actually said this, is to the suggestion that the Oilers were going to use their eventual landing of the lease in Hamilton as leverage against the city of Edmonton: 

Bassin agreed to be his front man in the Hamilton transaction because Katz insisted on a low profile. No one is saying it straight out, but the timing of Katz’s move on Copps in late 2012 suggests he may have been interested to use the Copps lease as leverage to get more public funding in Edmonton in a deal to build a new downtown arena for his Oilers.

The ugly and poorly executed arena negotiations that the Katz group fumbled through cost Katz a lot of public support and his group looked ham-fisted as they appeared in Seattle implying relocation talks were imminent. Katz looked like a buffoon and that was a serious gaffe, but there’s a serious leap from A) Attempting to buy an OHL team in Erie to Z) Acquiring the lease rights from under the nose of another NHL owner in a completely different city and twisting the knife in the backs of Edmonton’s city council.

Throughout Shoalts’ piece there are several indications that the connections made to Hamilton and leveraging the city are tenuous at best. First, there is the basic fact that even the writer admits nobody is saying for certain that Katz tried to do that. Second, there’s the stipulations of the initial loan agreement that clearly state Bassin was to get exclusive Hockey rights at Copps for all except NHL hockey:

The agreement also spelled out specific items Bassin was to get in the Copps lease, such as exclusive rights for all hockey teams except for the NHL, although there is no doubt Hamilton officials would have welcomed Katz had he arrived with the Oilers.

It would have been pretty difficult to leverage Edmonton city council with anything if the lease he potentially would have gotten in a deal that didn’t happen did not include the rights to NHL hockey. 

SNAKES

It seems clear the Oilers wanted an OHL team in Hamilton. Beyond that I have trouble connecting the dots the way Shoalts has laid things out. I fail to see how this situation displays the grimy underbelly of Professional Sports as the thesis implies.Or, at least, I fail to see how Katz is the one being grimy here.

Let’s question for a second why Bassin, who is strapped for cash, wouldn’t sell his OHL team. Throughout every story written about the Otters and this fiasco Bassin has always maintained that he’s going to sell the franchise. Even now he makes no attempt to hide his intentions.

He doesn’t even seem to care if the team stays in Erie. He continually says that whether they stay or move will be up to the new owner, whoever that is. So he is not committed to either the franchise or the city.

He had an agreement to sell the team. He has acknowledged that he borrowed money to make a sale possible. He acknowledged that he wants to pay the Oilers back. He acknowledged that he is still going to sell the team.

So why hasn’t he done it?

I think the answer is simple: in between when he initiated the sale process with the Oilers in 2011, and when he was supposed to have finalized the sale to repay the loan in 2013, Connor McDavid landed in his lap when he was granted exceptional status for the 2012 OHL draft.

Suddenly Bassin had the most marketable CHL player on the planet and enough money to effectively operate the team, even if it was borrowed under false pretenses. Today the Otters have the 5th best attendance in the OHL and McDavid sweaters are flying off the racks. 

He may not have made enough money to pay the Oilers back, but this stretch must have been the best he could possibly foresee as the owner of the team. It would not shock me in the least if, after this season is finished and Connor McDavid becomes an NHL player, Sherry Bassin finalizes the sale of the team to somebody.

Is Daryl Katz a snake in the grass? A ruthless businessman out for only himself at the cost of private citizens and civic governments alike? 

Maybe.

But in this scenario there are two high profile sports owners involved and only one cheated the other out of millions of dollars he refuses to repay, has backed out of opportunities to make things right, is trying to double deal lease agreements with Erie and Hamilton, and is profiteering from a marketable underage worker.

It isn’t Daryl Katz.

      • pkam

        I have a NHL team, if you have an arena, then we have a deal. No, I will find a city that has an arena. Sound reasonable?

        Why should I build an arena when there are so many cities willing to build an arena to attract a NHL team. Don’t you think it is unfair to those cities that are willing to build an arena for my NHL team if my team stays in a city that is unwilling to?

        My team goes to the city that wants it most, just like an item in an auction house sells to the highest bid. Not fair?

        Because I am a billionaire, I should ignore all the cities that are willing to build me an arena and build the arena here? That is not business, that is charity.

          • YEGFan

            Don’t believe for a second Hamilton would be stupid enough to hand Katz the same deal he got here. Hamilton would demand Katz pay to use their arena. They would demand an opportunity to profit from the team’s success. Those are the opportunities Hamilton would LOVE about having an NHL team.

            Teams have run into trouble trying to move to Hamilton for many reasons, the proximity to Toronto and Buffalo for one. This is a professional sports league, they are strategic and deliberate in choosing which teams relocate and where the can be located. pkam’s bubble world where Katz auctions the team off to the highest bidder is just a pure Katz fantasy.

          • pkam

            That is just part of the deal, other costs and revenue sources will play into the final business decision. In other words, the offer that generates the most projected profit should win the bid.

            Katz has been trying to help the city of Edmonton to win the bid. Of course, it means the Edmonton deal will give him the biggest profit. But he has a plan that helps the city of Edmonton to also profit from it, isn’t this called win-win?

            Didn’t we start to see the growth of investment in downtown?

            I look at the whole deal from a different perspective. Consider the city of Edmonton as a big corporation and Edmontonians as shareholders. Will you expect your CEO to go forward if our investment will generate reasonable profit in this joint venture, or rejects it because the other party is a billionaire and making more profit than we do because he owns the key piece of this joint venture?

          • YEGFan

            Your interpretation of the City’s opportunity to profit from it versus their risk, compared to Katz’s opportunity to profit from it compared to his risks, seems way off base.

            Of course the scenario you describe sounds good. I completely disagree that’s the situation we’ve found ourselves in.

            Investment in downtown has much less to do with the arena than people want to admit. It’s happening in cities across North America to increasing degrees, and it was happening in Edmonton before Katz decided to cash in on it.

          • pkam

            A joint venture doesn’t arise from a hostile proposition. No doubt edmonton is in this now, but there was no option if they wanted a hockey team.

            On top of that, the person proposing the idea intentionally bought potentially a Billion dollars worth of real-estate that surrounds the “joint venture” before forcing edmontons hand.

          • pkam

            What can you do if you want anything so badly? That is a major key factor in a negotiation.

            Nobody says that a joint venture must be fair to both parties, it just means a few entities agree to cooperate on a project, it doesn’t even guarantee that all parties can benefit from it. Actually I have witnessed joint ventures that the two parties tried to screw their partner all the way in the joint venture.

    • That’s not the issue.

      The issue is that it appears to be another potential scare tactic Katz was going to attempt to get a better arena deal.

      It’s also the letter where he talks about his big bad wolf of friends, which seems sort of insane.

      Had it simply been about him calling in his loan, no one would care.

  • oilerjed

    If Katz has the for-site to buy a hockey team for leverage in negotiations for building a rink..

    If he is truly sitting in his secret lair twiddling his fingers, thinking of ensuring his own personal and professional agendas..

    What part of his plan requires the continued ineptitude of the oilers?

    To call him a great businessman on one hand, then to say he keeps the worst nhl management team in the history of the sport, is somewhat contradictory.

    Is all this crap we are going through as oilers fans just part of some larger master plan that only Katz is privy to?

    • I would wager that there is something to that. We all wonder what the plan is because the press conferences are about nothing other than “It’s a process”. That said , does anybody expect Katz to pop out of a Jack In The Box in the new building with his face painted like QSB to announce I have been screwing you around all along and now I am going to hire competent people? The master plan probably has more to do with controlling real estate in downtown Edmonton and the massive profits available after the spike in 2008. The master plan certainly is not to ice a competitive team.

  • Deke Rivers

    It’s business people. The only real issue may have been why Katz’s people didn’t have a more iron clad contract when loaning the money. If the team was collateral then he’s owed the money or the team. Pretty straight forward. The why’s and the how’s are incidental. He stills owes 4.2 million

    I’m pretty sure if i didn’t pay my bank when I said i would i wouldn’t be living in my house for very long or I’d have to sell the car or my first born. If they couldn’t get my house they’d come after everything else. That’s life.

    As far as Katz and the arena negotiations go, get over it people.

  • O.C.

    If you have a mortgage and plan not to pay it for two years, you won’t make it two years before you are homeless.

    Mr. K. has been much more lenient than standard lending practices.

  • toprightcorner

    I read the Globe and Mail article and was blown away by how one sided it was and targeted the guy who just happens to be rich. Then I started reading comments and how everyone bought into the incorrect version of the truth I was actually upset enough that I registered just so I could leave a comment myself. I am not a Katz fan but everyone should be judged by facts not in the light someone wants to put you in

    Here is my post to give more perspective to the readers of the Globe and Mail.

    “Media can twist words however they want to sell more copies and who doesn’t love a Davis vs Goliath story. So here is an analogy of the facts without David and Goliath and you then decide who is the crook and who is the victim.

    So you want to buy a house from someone but they need money to get it to pass inspection in order to sell that house to you. You give him the money up front to fix his house so he can sell it as part of an agreement that he would sell that house to you once it was fixed so you put a dead line as to when he has to sell the house to you or repay the loan with interest. The house gets fixed but in the meantime a celebrity moves next door (his name is Connor McDavid) so that now the current owner doesn’t want to sell you his house. Unfortunate for you but at least the agreement was that if he didn’t sell his house to you that he would have to pay back the loan with interest so at least you didn’t lose anything but your time and your expectance to own a new house.

    The problem is that now that home owner won’t pay back his loan because he doesn’t have the money to do so. The only way he can get the money is to sell the house. He could easily sell it to you, the person who originally wanted to buy it and gave him the money to fix it in the first place, but he won’t. He now likes his home because of the celebrity that lives next door so not interested in selling it.

    You are not happy about not being able to buy the house that by contract you should already own because you loaned the current owner money to fix it. Just like in any business situation you ask a judge to force him to sell the house so you can get your money back you just want all parties to uphold a legal binding agreement. but now it has been 2 years since the home owner was supposed to pay you back he thinks he can sell his house for more money so wants to take his time and every day he waits he makes more money because of the celebrity living next door so basically he just wants to stall as long as he can and all you want to do is get your money back and are now so mad that you will do anything to get your money back because the owner of the house used your money to make more money where if you did not even help him the bank would have probably repossessed the home already.

    So are you the greasy swindler be wanting your money back or is the guy how borrowed money from you and promised to sell to you or pay it back but has failed to do so and is now making more money because of the money you gave him and who is not making any effort whatsoever to pay back the money you gave him?

    Good thing the home owner didn’t borrow money from loan sharks or he would likely never be seen again.

    Another prime example of how media will pick the bad guy before even writing the story and then write it to sell copies.”

  • pkam

    So owning 2 teams in the CHL is fine?

    having a WHL team, a OHL team, and a QMJHL team is no conflict of interest?

    owning 2 WHL teams is probably not allowed right?

      • YEGFan

        Uh, I missed that. My sense was he was supportive of Katz’s work to spark the new arena, and clear that an upgraded facility would be needed in the short to medium future. He was far more diplomatic about keeping the team in Edmonton than you’re implying.

        • pkam

          “Not only am I supportive, it’s obviously essential that the Oilers have a new arena,” Bettman said between periods of the Oilers’ matinee game against the Atlanta Thrashers.

          “And actually it’s not only essential that the city of Edmonton have a new arena, as well. This building is obviously outdated and for this city to continue to attract concerts, family shows, conventions, having a new state-of-the-art arena is important. Equally important, this team, the Edmonton Oilers has to have a new arena. There’s no question about it, they’re not going to stay in this building.”

          Not sure how you interpret this comment by Bettman. It is pretty obvious to me.

          • YEGFan

            I guess we aren`t really disagreeing about this?

            It just never seemed to me like the threat of moving the team came from Bettman. I know I’m giving Bettman the benefit of the doubt (and with the cronyism that goes on I probably shouldn’t), but this quote could be interpreted as a warning to Katz as well. I paraphrase: “Work out a deal for a new arena Daryl because it has to happen.”

            Bettman said a new arena was essential. The City sat at the table, put more than their fair share of money on the table, and negotiated how to achieve that. Katz crossed his arms and refused to negotiate a deal that could benefit both parties equally.

          • pkam

            Not sure how you come up with such conclusion.

            If Bettman wants to send a message to Katz, he doesn’t have to and shouldn’t go public. This is the stupidest move a CEO can ever do to his own corporation.

          • pkam

            First, how do you determine if the deal benefit both parties equally?

            Second, why must the deal benefit both parties equally?

            If I have a project that I need a partner to joint venture, one offer is to equally share the profit, another offer is willing to take only 25% and give me 75%, which offer should I take? The 50/50?

  • YEGFan

    Total conjecture on my part, however, if OEG is in the business of operating arenas, and other venues, could this have been the scenario:

    OEG.. holds the lease rights to Copps Col.About the time this business deal took place, the owner of the Hamilton Buldogs was seeking to move the Dogs to Laval [ sub. of Mtl.], which would have left Copp without a major lesse.

    Katz being the dummy that he is [joke], see’s a failing OHL franchise.. buys it, moves it into the Copps in Hamilton. Kills two birds with one stone, and ends up owning a OHL franchise at half the cost.

  • YEGFan

    People in Alberta may or may not have heard of him, but Sherry Bassin is one of the good old boys in Ontario and Canadian hockey. If you’re looking for an explanation for Shoalts’s hatchet job on Katz, it’s this: Katz can list all the hockey people he knows, all the higher ups he thinks are on his side, and it will never match the buddies Bassin has in sports media and hockey across the country and beyond. Shoalts’s piece is a warning to Katz: back off. Bassin can pretty easily destroy Katz’s reputation, or what’s left of it, in hockey circles, and no matter how many times Katz says he knows Gary Bettman and Wayne Gretzky it won’t mean anything. He was a bad guy to get into business with, which Katz surely knows by now. Katz should probably just write off his money now, Bassin will pay him back when or if he feels like it.

    • Katz should probably just write off his money now, Bassin will pay him back when or if he feels like it.

      One of the most absurd suggestions I have ever seen. “he should walk away from millions because the billionaire should be intimidated by the regional hockey guy”.

  • Spaceman Spiff

    The issue I had with Shoalts’ story wasn’t so much the allegations of the allegedly greasy business practices and/or threats by Katz … it was the fact that it contained a little bit too much speculation for my tastes.

    Shoalts suggests that “no one is saying it straight out, but the timing of Katz’s move on Copps in late 2012 suggests he may have been interested to use the Copps lease as leverage to get more public funding in Edmonton in a deal to build a new downtown arena for his Oilers.”

    It’s a huge leap to make that “suggestion.” And, I’m sorry, but he needs more than the mayor’s quote from it: “My sense was [Hamilton] was going to be used against the City of Edmonton as leverage for their deal,” he said in an interview. “That’s my opinion.”
    That’s conjecture, pure and simple. No jury would ever convict on that.
    Heck, if it even went to trial, the Crown prosecutor would have to explain why the City of Edmonton should possibly feel intimidated by Katz getting hockey rights to an outdated building in a city that the NHL has rejected for expansion teams repeatedly (to the point of handing a franchise to Ottawa instead) and would never receive league approval for a franchise-transfer from Edmonton. People in Edmonton lived through the various threats-to-move during the last days of the Pocklington era in the 1990s, and they know that holding up Hamilton as a possible destination is about as lame as it gets in 2015.

    If Shoalts and the mayor of Hamilton believe Katz was threatening to move the Oilers to Hamilton to extort more money out of the City of Edmonton … then by that logic, Mr. Shoalts probably also believes Katz would be dumb enough to threaten to move the Oil Kings to Wainwright to extort more money out of the City of Edmonton. Ridiculous.

    Honestly, when Katz dragged Gretz to Seattle, that move was at least a bit more credible, because it’s no secret that the NHL would dearly love to put a team there. But even that was a foolishly desperate ploy – no way in hell Gary Bettman would ever allow a Seattle team to be a transfer from Edmonton.

    No, I think the logical explanation is the boring, non-controversial one – Rexall Sports wanted a foothold in the Hamilton market for an OHL team and/or an AHL team and they figured Sherry Bassin could help pull it off. It would have been a move entirely consistent with their sports-business model they’ve been expanding.

    And, as Matt notes here, it’s also important to note that the deal wasn’t rammed down Bassin’s throat. In the end, as odious as the terms of the deal were, Bassin signed it and didn’t deliver. Katz’s sabre-rattling doesn’t look good but he’s within his legal right to do it.

  • Like many fans I was optimistic about the Oiler’s future after the Pocklinton/EIG era was closed. Both groups had serious financial issues for various reasons. When the big talk and promises began to circulate from the Wrecksall gang my creep sensor went off. The arena negotiation was a real eye opener for me. I don’t like Katz’ business style.

    I would never do business with him for a ticket, an over-priced beer or sub-standard food. Since he took over ownership of the team the Oil have become a laughing stock and embarassment to me. His stubborn cronyism and pathetic performance has driven me away. It matters not to anyone but me but that’s where I come out on this whole mess.

    My guess is that Lowe and Mact never are replaced. Ownership doesn’t seem to care what fans think. These are dark days with no end of bad judgement and gross incompetence anywhere in sight.

  • I have not read the other articles to get the whole story but perhaps this is some karma Katz deserves. It was his business decision to provide the money (unsecured) probably in attempt to make huge business gains due to the borrowers vulnerable position. We lose our houses when not paying our mortgage only because the property is used to secure the loan – which is the only way we can borrow large sums at very low interest rates (plus CMHC insures the loan). Katz made a business decision / gamble and now he has to deal with it. I hope he gets screwed on this in part for screwing every Edmonton tax payer for his new downtown arena. And also for screwing every Oiler fan by making us suffer with this pathetic so called team his buddies have put together. Screw you Katz. How about hiring some real hockey managers so we can be proud of our team again.

    • I have enough reasons to be upset with Katz and the management of the team that I don’t need to focus on things that didn’t actually happen.

      He made a deal thinking he was getting an OHL team and got swindled. I don’t even think that’s disputable right now.

      When you see me talking about how under Katz’ visionary leadership the Oilers made themselves the model of success, that’s when you know I started taking hush money from the Oilers.