From: snichols@adobe.com (Sherri Nichols)
Subject: Re: Doubting Thomases (and Teds and Roberts and ...)
Keywords: Independent auditors, fraud, finances
Organization: Adobe Systems Incorporated
Date: Sun, 20 Dec 1992 03:27:32 GMT

In article <kbanaian.120.0@bernard.pitzer.claremont.edu> kbanaian@bernard.pitzer.claremont.edu (King Banaian) writes:
>But I think collusion may be where the problem is.  Since your affiliation 
>is in law, be a source for this:  when did the collusion settlement figure 
>(about $10 mil a team, right?) become known to all?  And when did the teams 
>book the costs of settlement?  If they booked it in 1991, the teams cooked 
>the books, and all these non-player op costs are overstated by that amount.  
>I seem to recall that 1991 was the year it was done, but I thought those 
>numbers would be screened out by FW.  I have to believe now that they 
>probably weren't screened if they were present.  (If I'm computing franchise 
>values off revenue streams, that collusion settlement will be factored into 
>franchise selling prices.)

A settlement for collusion damages of $280 million was reached on December
21, 1990.  The first installment payment of $120 million was made on
January 2, 1991, with the balance scheduled in 4 equal payments on July 15,
1991, September 15, 1991, November 15, 1991, and April 15, 1992.

I don't know how other teams handled the booking of these costs, but we
have details on how the Pirates handled it.  In 1989, the Pirates' revenue
from MLB's central fund was reduced by $2.176 million as a set-aside on
future collusion payments.  In 1990, the Pirates wrote off $8 million for
the eventual collusion settlement.  In other words, the Pirates wrote off
their entire collusion obligation before any payments began.  There was no
reporting of any interest income on this $10 million that they wrote off,
but had yet to spend.  

The source for the above is _Baseball and Billions_, by Andrew Zimbalist,
published by Basic Books, ISBN 0-465-00614-0.

Zimbalist also points to a number of problems with the reported non-player
expenses.  He looks at Noll's analysis of the summary data MLB released to
the players as part of the 1985 CBA negotiation.  In 1984, the Yankees
reported a book loss of over $9 million.  

	But the Yankees' reported loss is suspect.  It includes $500,000 in
	charitable contributions; travel expenses of double the league
	average; administrative expenses far in excess of the league
	average in practically every category; hidden expenses from the
	team's Tampa hotel and unusually high interest expenses.  

The A's in 1984 reported a book loss of $15 million.  

	Part of this came from a capital loss of $831,000 in purchased
	stocks and/or bonds.  Front office personnel salaries totaled $1.25
	million, $400,000 above league average.  Team replacement expense
	included $800,000 in signing bonuses, compared to an average
	$80,000, and $1.7 million in amortization of deferred compensation.
	An additional $800,000 loss from the sale of player contracts was
	claimed. The A's sales and promotion effort is either highly
	inefficient or overstated on its books.  In 1980, the A's spent
	$663,000 on marketing with game revenues of $6.59 million.  In
	1984, they spent $4.16 million on marketing, and game revenues grew
	to only $7.49 million.  

There were more, but these were the most detailed.

Sherri Nichols
snichols@adobe.com