The City of Glendale, Ariz., has taken aim at Wayne Gretzky in the battle over the future of the Phoenix Coyotes and wants to examine Gretzky under oath about the club's operations.
In a court filing yesterday, the Phoenix suburb also challenged Gretzky's claim that the Coyotes owe him $9.3-million (all currency U.S.), alleging he is not a creditor.
The city's move is the first direct challenge to Gretzky since Coyotes majority owner Jerry Moyes put the club into Chapter 11 bankruptcy protection on May 5 and announced a $212.5-million bid by Jim Balsillie to buy the team and move it to Hamilton.
Glendale built the arena where the Coyotes play and has fought Balsillie's proposal, alleging the city will lose millions of dollars if the club moves. The NHL also opposes the offer from the Research In Motion co-CEO and prefers a $148-million bid from Chicago businessman Jerry Reinsdorf, who would keep the team in Phoenix.
Gretzky has avoided taking sides in the dispute even though he owns 1.5 per cent of the Coyotes and is the team's head coach. "It's not my fight," he told The Globe and Mail last month. That could change now that Glendale has dragged him into the legal wrangling.
In yesterday's filing, Glendale asked bankruptcy court judge Redfield T. Baum to force Gretzky, Moyes and six others to submit to examinations under oath. The city said it wants to question Gretzky and the others about the financial state of the Coyotes.
Moyes has argued the club has never made money since moving from Winnipeg in 1996 and that he has lost more than $300-million since taking control in 2006. Glendale argues Moyes's statements have been "inconsistent and generally unsubstantiated".
The city alleges Moyes has cited different figures, claiming in one filing that he invested more than $380-million and in another that his current investment is $240-million.
"To date, neither Glendale nor any other interested parties have had the ability to determine if these assertions are accurate," the city says.
The city has also challenged whether Moyes and Gretzky are true creditors. Glendale alleges that in return for their investments, Moyes and Gretzky received ownership stakes and possibly dividends and other distributions. Typically in Chapter 11 cases equity holders rank below creditors, meaning Gretzky and Moyes would likely receive nothing.
Documents filed in court show that Gretzky was entitled to receive a 14-per-cent cut of profits earned by the club, although it's not clear he received any payments. He was also paid $8-million a year to coach the team and received a 1-per-cent share of the club's revenue. Gretzky is listed as one of the Coyotes' largest creditors, owed $9.3-million directly and another $428,000 for his pension plan.
Glendale "believes that the claims of Wayne Gretzky, the alleged second largest unsecured creditor … are subject to material defenses and set-offs and may be subject to certain restrictions or limitations under the bankruptcy code," the city alleged in its filing.
It added that examining Gretzky and the others "is critical to eliminate misconceptions or false assumptions regarding [the Coyotes']actual financial situation and alleged claims".
The NHL and Reinsdorf, who also owns the NBA's Chicago Bulls and Major League Baseball's Chicago White Sox, have also questioned Moyes's standing as a creditor. Moyes has repeatedly defended his position in court filings, and in a recent statement he called Reinsdorf's bid illegitimate.
In the statement, Moyes alleged Reinsdorf's offer "fails to provide funds to pay creditors" and is contingent on negotiating agreements with several creditors, including reaching a new arena lease with Glendale.
Moyes's lawyer, Earl Scudder, added that he tried to negotiate a sale to Reinsdorf before the club filed for protection "in an effort to attract a bid to keep the Coyotes in Glendale." However, Scudder added, the "effort failed when no offer involving cash to creditors was forthcoming."