Back to the (arena) future

Private emails between the NBA and the Maloofs reveal arena negotiations rife with mixed messages, political maneuvering

It appears that the Maloofs were never bargaining in bad faith. Perhaps when it comes to business deals, the Sacramento Kings owners are just bad.

But maybe the city of Sacramento, led by Mayor Kevin Johnson, understood that the city and the National Basketball Association could never truly seal a new arena deal with the family.

So, in lieu of forging an honest pact, did the city and the NBA mix up their messages and lure the Maloofs into a public-relations nightmare?

Private emails between George Maloof and the NBA, which SN&R obtained last week, reveal that while the Kings owners went along with the February 27 Orlando handshake deal—tears and all—the arena pact was anything but “game over.”

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Consider: Less than 48 hours after the Orlando press conference, NBA executive counsel Harvey Benjamin, a liaison to both the city and the Kings during the year-long arena negations, wrote to a concerned Maloof family that there would still be a chance to say no to the deal.

The private email reads: If “things are not worked out to your reasonable satisfaction, you will have the opportunity to pull out” of the agreement.

The timeline of the deal’s unraveling goes back to the morning of Wednesday, February 29. Sacramento officials were busy preparing a term sheet for city council’s approval in a week’s time. Joe and Gavin Maloof were actually sleeping, according to George Maloof, who was up, awake—and hastily firing off an email to the NBA:

“The following represents our responses to our meeting in Orlando. These need to be addressed in the term sheet with the city,” George wrote. “Hopefully I included everything.”

George’s private email included 13 points of concern—not unlike the items in the oft-cited “redlined term sheet,” which the mayor called “deal breakers” last week.

NBA counsel Benjamin, however, didn’t describe these concerns deal breakers. In a February 29 email reply from Benjamin to George, he repeatedly stated that the family’s issues—pertaining to collateral on the 1997 loan, cost overruns, predevelopment expenses, Comcast’s TV deal, VIP parking spaces, the zoning of the Natomas land and even an NHL team coming to Sacramento—still would have the chance to be “ironed out.”

The NBA’s assurances come in direct conflict with Mayor Johnson’s statements that the arena term sheet was non-negotiable.

In fact, the NBA’s email states that almost all the Maloofs’ “redlined” sticking points could still be worked over. Even collateral on the existing Maloof loan with the city.

Benjamin wrote: “[W]e hope we will be able to put off a final decision regarding the [loan] collateral until some time in 2014, by which time the City will be so far down the road on the project that they will be reasonable regarding the collateral, especially if AEG is well into the sales process and the City sees that the arena revenue streams are very real.”

The mayor and the city, meanwhile, have scoffed at any possible negotiation pertaining to collateral on the 1997 loan.

To follow up this NBA-Maloof email exchange on February 29, attorney Scott Zolke, of Loeb & Loeb in Los Angeles, sent an official memo to the NBA outlining the Maloofs’ concerns with the term sheet. Specifically, Zolke wanted to formally identify “material terms” for further “discussion, clarification, compromise and mutual agreement.”

In other words, continued negotiation.

Of course, none of the Maloofs issues cited in the February 29 email were included in the nonbinding term sheet that was approved by city council on March 6.

As cited in last week’s SN&R, Benjamin explained that the city did not want the Maloofs’ provisions in the term sheet “for political reasons.” (See “Let’s fake a deal” SN&R Frontlines, April 19.)

Speculation as to what these “political reasons” might be run the gamut.

Some say that including the Maloofs’ concerns in the March 6 term sheet would have rendered the deal too shaky, which might have doomed its passage at city council.

But one city official, who spoke with SN&R on background last week, opined that the term sheet was streamlined without the Maloofs’ concerns so as to get it passed by council and discourage any opponents from running against Mayor Johnson, who is up for re-election this June.

The council vote approving the arena pact was March 6. And the deadline for candidates—Deborah Ortiz, in particular, was still in the mix at this time, according to reports—to register to run for mayor was March 8.

Assistant City Manager John Dangberg told SN&R last week he had never seen any of the Maloofs complaints before April 13, and that he was “shocked” by the brothers’ laundry list of concerns. He called them “obvious deal breakers.”

Dangberg would not comment on the NBA’s use of “political reasons.” A spokesperson from the mayor’s office also would not comment on the email. NBA vice president of marketing and communications Michael Bass did not return SN&R’s multiple calls.

The Maloofs argue that the city and the NBA ignored their term-sheet concerns for weeks and finally had to fight back. The standoff came to a head the week of March 26, when the Maloofs refused to pay $3.26 million in predevelopment expenses.

On April 12, Mayor Johnson wrote in a letter to the Maloofs that, despite assurances from the NBA, “under no circumstances will the City make material adjustments to the current terms of the deal.” And the next day, Friday, April 13, in New York City, the arena deal officially fell apart.

For now.