SBJ/May 11 - 17, 1998/No Topic Name
MLB’s word on Marge: Patience
Published May 11, 1998
Major League Baseball owners who long ago grew weary of Marge Schott’s antics almost certainly will be rid of her within three years – and the beauty of it is that all they need to do is sit and wait.
The clock is ticking on Schott’s reign as managing partner of the Cincinnati Reds, but it’s as a result of a clause within her own partnership agreement, not because of any pressure that might be exerted by the rest of Major League Baseball.
The agreement, reached in 1981 when Schott was a limited partner holding only one of 15 shares, calls for the partnership to be dissolved on Jan. 1, 2001, if the shareholders can’t agree on terms that would extend the agreement, said Schott’s lawyer, Robert Martin.
Schott, 69, won’t be able to remain as managing partner unless at least one of the other seven partners agrees that she should, and only two of those partners – an insurance company and a trust – hold enough share-power to support Schott on their own. Sources within the partnership say it is unlikely that the partners will rally behind Schott, who is serving her second suspension from baseball in the last seven years.
Even if Schott wanted to stay in control beyond 2000 and convinced the other partners to allow it, the change in the partnership agreement likely would put Reds ownership up for approval by Major League Baseball again, Martin said.
More than one ownership source doubts the Reds could get that approval with Schott as managing partner. Rather than face the legal minefield that would go along with attempting to hijack ownership of the Reds from Schott, the owners who govern baseball will wait to see if her own partners will do it.
Major League Baseball and the National League are trying to distance themselves from the matter. Each referred questions regarding the legal issues of ownership transfer to the other.
"It’s pretty much up to the partners of the Reds to take care of it," said Katy Feeney, senior vice president of the National league. "If the partnership expires, that would be an issue we’d have to look at. But it’s a ways away and we’re not looking at it yet."
By all appearances, Marge Schott is a sitting duck.
"I’ve talked to her many times about how we’re going to proceed on this, but there’s been no suggested resolution [from Schott]," said Martin, who has represented Schott through her 13 years as the Reds’ managing partner. "We have to have a new organization put together by . Otherwise, what you end up with is 15 interests not covered by any kind of document. That’s not a very pleasant thought."
Dissolution of a baseball team, as called for by the unorthodox partnership agreement, isn’t as simple as the dissolution of a company that manufactures goods or provides services.
Players are among the Reds’ primary assets – assets that, in fact, are depreciated each year on the corporate books.
How would the partners distribute those assets?
"If we get to that point, I say ‘Which one of you guys wants to take Barry Larkin and his family into your house?" said Martin, chuckling at the absurdity. "We joked about that a long time ago. Now it’s getting to the point where it’s no longer a joke. Something has to be done."
Schott took control of the Reds in 1984, when she escalated her stake in the club from one share to 6.5 shares at a cost of $1.6 million per share. The other partners, according to Team Marketing Report: the Louise Dieterle Nippert Trust (two shares), Great American Insurance Co. (1.5 shares) and – holding one share each – Karl Kroch, American Laundry Machiner, Frisch’s Restaurant, William Reik Jr. and Gannett Inc.
Frisch’s put its share up for sale last year, caving in to the demands of two board members who insisted that the club was a poor investment. But it hasn’t found a buyer.
"Don’t get me wrong, I love baseball," said Barry Nussbaum of Wolverine Investment, one of those Frisch directors. "But I was looking at this as a fiduciary responsibility. The right thing to do for them is sell it now and make money.
"Major League Baseball says it doesn’t want to get involved in deciding who runs the [Reds]. They say they’re going to leave it up to the partners. Well, that’s going to be a real cat fight."
Perhaps the absurdity of the situation shouldn’t come as a surprise, considering the turns that Schott’s story has taken.
Last year, she lost a Chevy-Geo dealership when General Motors accused her of falsifying sales records in order to meet GM quotas. That could impact her standing in baseball because she allegedly used the names of seven Reds employees, including acting CEO John Allen and General Manager Jim Bowden.
GM dropped its case against Schott when it took the dealership from her. But that doesn’t mean baseball is ready to let the matter die.
Schott’s status will be discussed when the owners’ 12-member executive council meets in Seattle in June. If Schott and the partners haven’t resolved ownership issuers by then – and it’s not likely they will, Martin said – owners could consider extending her suspension.
National League President Leonard Coleman has denied that the league will do anything to pressure her into selling the team.
Instead, it will allow a puzzling aspect of the partnership agreement to run its course. Martin said he’s often questioned the wisdom behind assigning an expiration date to a partnership agreement. "Hobby" Hobson, the attorney who crafted the document and could best explain its origin, has since died.
"It was viewed as pretty normal back when we signed it," said George Strike, whose American Laundry Machinery Company has held a share since the partnership was created. "Nobody could’ve predicted that things would happen as they have."