-Caveat Lector-
---------- Forwarded message ----------
Date: Sat, 29 May 1999 21:32:15 -0500
From: Brenda C. Jinkins <[EMAIL PROTECTED]>
Subject: TAS: George's Road To Riches PART II
[Continued from PART I]
But Bush had a problem. He wasn't rich, at least not by the
standards of people who buy large interests in professional
sports teams. Still, he had something no one else had, at least
in quite the same way: a connection to Eddie Chiles. "On a
personal level, George had the most contact with Eddie," DeWitt
says. "I never really talked to him." DeWitt needed Bush to win
the owner's blessing for a sale.
As it turned out, Chiles was a fan of the Bush family. "Eddie had
lived in Midland and was very good friends with the Bushes,"
remembers Chiles's widow Fran, referring to the president and
Barbara Bush. Chiles recalls her husband referring to George W as
a "young pup" back in the 194o's and 50's. Bush's presence in the
ownership team, Fran Chiles says, sealed the deal for her
husband. "Eddie didn't want to deal with anybody else after
George got involved , she says. "He was delighted to turn the
team over to younger people and especially George Bush."
Bush was also helpful in bringing deep-pockets Dallas businessmen
Richard Rainwater and Edward "Rusty" Rose into the deal. Each of
them put in several million dollars -Texas dollars that would
please Ueberroth. Bush also brought in a big investor from New
York, an old college friend named Roland Betts, who had initiated
Bush into the Delta Kappa Epsilon fraternity years earlier at
Yale and went on to make millions financing movies.
It worked- Chiles and Ueberroth approved and the sale took place
in March 1989. The purchase price was $46 million. Bush, who
didn't have lots of cash available, borrowed $500,000 ("fully
collateralized," according to his spokeswoman) to put in the
deal, later adding a little more for a total investment of
$606,000. That bought him a 1.8 percent interest in the team. But
he had another agreement with his partners through which he would
be handsomely rewarded for his role in putting the deal together.
The contract called for Bush to be a managing general partner;
once all the partners recouped their investment with interest, he
would be given an additional ten percent interest in the team.
Then, instead of owning 1.8 percent of the Rangers, he would own
11.8 percent. It was the deal that would make Bush a rich man.
But first he had to get the money to pay off the loan he took to
make his initial investment. His largest single asset was the
chunk of Harken stock he had received in the merger. Through the
first half of iggo, the stock price was quite consistent, moving
between $4 and $5 a share. In June iggo, Bush sold two-thirds of
his stake --2l2,000 shares-- at $4 for a total price of $848 000.
At the time of the sale, Harken was moving into a period of
financial difficulties. In the months following Bush's sale, the
company announced a quarterly loss and the stock price went into
a long, slow decline; by the end of 1990, it was $1.25 a share.
Since Bush was not only a member of the board of directors but
was also on a committee assigned to study Harken's financial
situation, his decision to sell a few weeks before the slide
began led to accusations that he used insider knowledge to get
out when the getting was good.
Bush denies any wrongdoing and has often said he was unaware of
the difficulties within Harken. "He thought he was selling into
good news," spokeswoman Karen Hughes told TAS, adding that if
Bush had waited to sell the stock he could have earned
considerably more than he got. That would, however, have required
his waiting at least a year; it was not until June 1991 that
Harken got back up to $4 a share. By September 1991 it briefly
hit $8 a share.
In 1991 the Securities and Exchange Commission investigated the
sale and took no action against Bush or anyone else. "I don't
remember a lot about it, other than there wasn't a lot about it,"
says William McLucas, who was the SEC enforcement chief at the
time. "The facts just didn't support any judgment that this was
something that would result in a serious enforcement proceeding."
Nevertheless, Democrats brought the issue up in 1992, as
President Bush was running for re-election; it became part of
several news stories recounting allege business improprieties by
Bush family members. Texas governor Ann Richards revived the
story during the 1994 gubernatorial campaign and also suggested,
without evidence, that President Bush had rigged the SEC
investigation, which commission officials denied.
Whatever headaches the stock sale caused George W Bush, they were
minor compared to the business opportunity-the Rangers
investment-that the sale financed. And in the early 1990's, as
part of the team's new management, he began work on the biggest
deal of his life.
Ballpark Figures
Compared to other teams around baseball, the Rangers were not
exactly a money machine. The team was saddled with one of the
worst stadiums in baseball; Arlington Stadium, located between
Dallas and Forth Worth, was a former minor-league park, and
although it had been modernized in the 1970's, it had none of the
big-league amenities -like luxury boxes- that make present-day
sports facilities so profitable. For Bush and the new owners,
building a new stadium would be the first, and perhaps the most
important, step to success.
They envisioned a fabulous new facility, a beautiful retro design
like those being built in Baltimore and Cleveland. It would have
a great field, stores, places to eat, a museum -a real showplace.
But the cost of such a park was estimated at $189 million, and
even though they were among the richest men in Texas- and the
United States-the new owners didn't want to pay for it.
So they came up with what they called a public-private
partnership to finance the project. The deal was essentially
this: the Rangers supplied the team, and the city of Arlington
supplied the money. Bush and the other owners asked the city to
give them $135 million, by far the largest share of the cost of
building the stadium -and they hinted they might take the team
elsewhere if the city refused to pay. The team pledged to kick in
the rest.
Arlington Mayor Richard Greene aggressively promoted the deal,
saying it would bring $l00 million dollars a year in new revenue
to the city's economy. He proposed that the city get the money by
adding one-half cent to its sales-tax rate. And he promised that
the Rangers would put in $30 million "up front, like a down
payment on a house," to get the deal going.
A referendum was held in January 1991, and it was a smashing
success for Bush and the Rangers. Voters turned out in record
numbers to overwhelmingly approve the tax increase. Then it
emerged that the Rangers would not produce their money up front,
but rather over time, in the form of a $1-a-ticket surcharge,
paid by the fans. The Rangers also got a loan from the Arlington
Sports Facilities Development Authority, the government body that
handled the financing, to cover part of the rest. On top of that
the team negotiated what was in essence a rent-to-buy agreement;
the Rangers would pay about $5 million in rent and maintenance
each year for twelve years, but that money would be applied to an
agreed-upon purchase price for the stadium. Not by coincidence,
the agreed-upon price was $60 million, which meant that at the
end of the twelve-year agreement the team could buy the facility
for nothing.
And there was one more thing. Not only did Bush and the Rangers
want the deal to include the land that was home to the old
Arlington Stadium and its parking lot, they also wanted an
adjacent 200 acres for commercial development. They got that,
too. When the state legislature passed a bill okaying the use of
tax money for the stadium, it also gave the city the power to
condemn the extra land so it could be developed by the new team
owners. Normally the government has the power to take land only
for some compelling public need, but in this case, the land was
taken and given to a private interest -- Bush and the Rangers.
The new stadium was called The Ballpark in Arlington, and it was
just as beautiful as the owners had said it would be. It opened
to rave reviews in April i994, as Bush was running for governor
of Texas. Not surprisingly, he lavished praise not only on the
stadium but on the deal that created it. Everywhere he stopped,
he called it a "win-win" proposition for the team and the
taxpayers-and himself "Am I going to benefit off it financially?
I hope so," he told reporters. "But I also hope that the $ioo
million that comes into Arlington will help Arlington schools and
helps Arlington streets and police."
Today, five years later, there are real questions about whether
those wonderful benefits have actually materialized for
Arlington. Bush and his defenders point out that the city's tax
revenues have increased significanfly, so much so that the bonds
used to finance the stadium will be paid off early. But Mark
Rosentraub, a professor at Indiana University at Indianapolis and
author of the book Major League Losers, says the Arlington boom
wasn't caused by The Ballpark. "There have been no economic
benefits from the stadium," Rosentraub says. "In fact, if you go
to [north] Arlington and go to the area around the stadium, there
has not been much that has happened. The economic success that
people report is all the result of growth in south Arlington.
There has been no growth in north Arlington."
But even if one assumes for the sake of argument that the
Ballpark has been a big economic boost for Arlington, does that
mean the taxpayers should have paid for it? Since it was intended
for their own benefit, couldn't the owners have paid for it
themselves -borrowed the money, built a stadium, and made a
profit? It's a question the Bush campaign is not particularly
eager to answer. Asked by TAS, spokeswoman Karen Hughes
responded, "The Ballpark is a great example of a public-private
partnership that was a winwin relationship for everyone
involved." When the question was repeated, the answer was
repeated as well.
As popular as The Ballpark has become, there are still some
opponents to the way it was financed. "It was a sweetheart deal,"
says Bill Eastland, a businessman and anti-tax activist who led
the opposition to The Ballpark funding deal. (Eastland is also
the brother of TAS Publisher Terry Eastland.) "As the details
came out, it became very clear that the Rangers were being given
a ballpark completely paid for by the taxpayers." Adds Mark
Rosentraub, "The issue is whether or not private enterprise ought
to be subsidized to the extent to wh ich The Ballpark was
subsidized - and if that subs idy pro- duces immense financial
returns, to what extent the public ought to receive significant
financial returns."
However one chooses to frame the issue, it is indisputable that
The Ballpark had a huge impact on George W Bush. Last year, he
and his partners sold the Rangers to Dallas investor Tom Hicks
for $250 million. Bush's part was worth $15 million (it may
ultimately be even more, according to Hughes, because some
profits still have not been distributed). It was, to say the
least, a healthy profit on his original $6o6,ooo investment. But
why were the Rangers so much more valuable than they had been
when Bush and his group bought ffiem? Because ofthe Ballpark.
"The team's value is attributable to the revenue streams of the
new stadium," says Rosentraub. Bill Eastland says it more simply.
"When Hicks comes along and buys the team, do you know what he's
buying? He's buying the damn Ballpark."
The $135 Million Question
The details about Bush's business career, from the first
investors to the stadium deal, will undoubtedly become the basis
for questions in the coming campaign. After all, journalists will
reason, given the intense scrutiny given to Bill Clinton's past
financial dealings, shouldn't Bush face the same? That is, of
course, a misreading of what happened to Clinton -other than the
original Whitewater article in the New York Times, the
investigation of his financial affairs came largely after he
became president but the distinction is likely to be lost in the
political season.
Still, a healthy inquiry will be a good thing. Although each of
these issues has been reported in the Texas press, there is
undoubtedly still more to learn. And it will be useful to hear
how Bush handles inquiries about whether he believes that any of
the businessmen who offered him opportunities were also hoping
for a friendly tie to his father.
It's not an idle question. If one superimposes a timeline over
the Bush career path, one sees that his rise in business
coincided with his father's rise to the highest levels of
government. In late 1979 and 1980, for example, as the younger
Bush was seeking investors for Arbusto, his father was running
for the Republican nomination for president and, later, taking
his place as Ronald Reagan's running mate. Many of the people who
were investing with George W were also contributing to his
father's campaign, which may or may not mean they were trying to
buy a little good will in the White House. The Uzielli
investment, the Spectrum 7 deal, and the Harken merger all were
accomplished while the elder Bush was vice president. And the
Rangers sale went through very shortly after President Bush took
office.
But it may be that-provided no evidence of wrongdoing
emerges-there's little more to say than the obvious: of course
Bush benefited from his connections, but that's just the way the
world works. Rather, the real problem for Bush - certainly with
his fellow Republicans - may ultimately be not his family friends
but the stadium deal. It will be hard for Bush to deny that he
and the other owners happily accepted $135 million from the
taxpayers for their private benefit. Would he as president favor
similar large-scale federal "public-private partnerships"
financed by the taxpayers? A sweet deal like The Ballpark comes
once in a lifefime, but it leaves a front-runner with alot of
explaining to do.
=================================================================
Kaddish, Kaddish, Kaddish, YHVH, TZEVAOT
FROM THE DESK OF: <[EMAIL PROTECTED]>
*Mike Spitzer* <[EMAIL PROTECTED]>
~~~~~~~~ <[EMAIL PROTECTED]>
The Best Way To Destroy Enemies Is To Change Them To Friends
Shalom, A Salaam Aleikum, and to all, A Good Day.
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