It's Closing Time in McCourt Trial, but Will TV Money Save the Dodgers?

LOS ANGELES -- In a week of scorching weather and blistering testimony on the witness stand, Frank and Jamie McCourt's divorce trial is now literally at the boiling point – and there are no signs of a cool down in the couple's battle over ownership of the Los Angeles Dodgers.

Despite a day-long session with a mediator last Friday, the couple is as far apart as ever on a potential settlement, even as more distasteful details emerged in a case that has already damaged their reputation and raised serious questions about the future of one of baseball's iconic franchises. On Wednesday morning, lawyers for the estranged spouses will give their closing arguments in Los Angeles Superior Court.

Barring a settlement, control of the Dodgers will be determined by Judge Scott Gordon, who will have until late December to decide if the Dodgers should be Frank's separate property or should be owned equally by both McCourts. At the center of the dispute is couple's marital property agreement, which was signed shortly after the McCourts purchased the club in 2004 from News Corp. for $430 million. Frank believes the MPA makes him the sole owner of the Dodgers in the event of a divorce, while Jamie contends that it should be invalidated because the couple signed two conflicting versions of the document.

The McCourts' former lawyer in Boston, Larry Silverstein, has already testified that he doctored a signed and notarized version of the agreement that made the team "community property," and inserted a page containing a clause that gave Frank sole control of the Dodgers.
The most straight-forward settlement option would be for Frank to pay Jamie off with an infusion of cash from Fox Sports Networks, which owns the Dodgers TV rights and whose contract with the club expires after the 2013 season. An extension from Fox – with a large upfront payment – would scuttle the McCourts' plans to create a Dodgers-centered regional sports network, but it would also help defray the McCourts' massive debts on the club and pave the way to a settlement.

Earlier this week, FSN signed a 20-year, $1.6 billion TV deal with the Texas Rangers that begins after the 2014 season. The pact includes an advance "signing bonus" payment of nearly $80 million that's scheduled to be paid after this season. The Dodgers currently receive about $40 million annually from FSN for their TV rights.

FanHouse has learned that Frank has only had "preliminary" discussions with FSN and has had no discussions with the company in the last week about a new media deal, according to three people close to the discussions. "There's nothing hot and heavy" with Fox, said one person familiar with the situation, who declined to be identified because Judge Gordon has issued a gag order barring settlement discussions with the media.

The TV money is significant because the McCourts have long viewed a Dodgers sports network – or "DTV," as it was called in discussions among club executives – as the club's potential financial savior. In court documents, the couple outlined plans for a robust sports channel on par with other team-owned or controlled channels such as the New York Yankees' YES Network and the Boston Red Sox's New England Sports Network. But those channels were launched in a different era for media investments – and more importantly, it's unclear now who would partner with the Dodgers to create the channel.

Fox already has two regional sports channels in Los Angeles, while Time-Warner, the dominant cable system in Los Angeles, has shown little interest in launching local sports channels. Comcast, FSN's primary competitor for local pro sports TV rights, operates channels in Chicago, Philadelphia and the Bay Area, but has no plans to launch a channel in Southern California, according to a Comcast spokesman. More broadly, it's hardly guaranteed that a Dodgers channel would automatically be available to viewers, as everyone from ESPN to the National Basketball Association to the National Football League has learned in protracted negotiations with cable operators.

The upshot: there are significant obstacles to the Dodgers launching their own channel, especially without the cooperation of another local pro team to provide year-round programming. In Southern California, FSN currently has the rights to all of the major pro franchises, including the NBA's Los Angeles Lakers, who are by far the most-watched local team.

Frank is also apparently dead-set against giving his ex-wife a small stake in the team or a percentage of future revenues in return for ending the lawsuit. The Los Angeles Times has reported that Frank offered Jamie around $100 million, spread out over many years, in pre-trial negotiations, while Jamie's attorneys countered with a request for nearly $400 million. A person close to Jamie's side told Fanhouse that both figures are "bogus."

The other viable settlement option would be for Frank to sell a stake in the Dodgers to an outside investor and use the money to settle the divorce suit. That appears even more unlikely, according to sports industry experts and representatives for both spouses. "There's no way you're going to find anyone stupid enough to give McCourt money without getting control of the team," said a financier who's worked on several sports transactions. According to court documents, Frank has been turned down three times in the past year by potential investors, including an entity in China.

In court on Monday, a consultant who advised the McCourts on their 2004 purchase of the Dodgers made the first on-the-record mention of Jamie's alleged affair with her driver. Corey Busch, a former San Francisco Giants executive who helped the McCourts develop their initial business plan for the club, testified that he "sympathized" with Frank after hearing reports that Mrs. McCourt was romantically linked with Jeff Fuller, her driver and security guard. Later, the Dodgers' chief financial officer, Peter Wilhelm, told the court that Jamie advised her ex-husband against buying the Dodgers.

Jeff Ingram, the chief operating officer of the holding company that owns the Dodgers, said the McCourts' extravagant lifestyle choices had been a persistent problem for their businesses.

As far back as 2001, three years before the acquisition of the Dodgers, the McCourts' profligate spending threatened to extinguish their cash reserves within six to eight months, according to an e-mail sent by Ingram. Two years later, in an e-mail with the subject line "Whoa, Nellie," Ingram warned the couple that could run out of money in three months, in part because they spent lavishly on items such as custom tables, plasma TVs and a purported office mural by a "renowned (sic) artist."

Later that year, Ingram again scolded the couple – the e-mail's subject line was "Here we go again" -- noting that they were planning to spend nearly $500,000 on home landscaping and a bar mitzvah party for their youngest son Gavin.