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Edmonton Oilers' owner Daryl Katz speaks to the media and employees during a news conference announcing the NHL team's new owner in Edmonton July 2, 2008. (Dan Riedlhuber/REUTERS)

Edmonton Oilers' owner Daryl Katz speaks to the media and employees during a news conference announcing the NHL team's new owner in Edmonton July 2, 2008.

(Dan Riedlhuber/REUTERS)

Hockey lawsuit exposes grimy underside of sports ownership Add to ...

Back in November, a few paragraphs of an Associated Press wire story out of Erie, Pa., made their way into Canadian newspapers and websites. The item noted that Sherry Bassin, owner and general manager of the major-junior Erie Otters of the Ontario Hockey League, lost a $4.6-million (U.S.) judgment to Daryl Katz, owner of the NHL’s Edmonton Oilers.

On the face of it, is seemed just another business-deal-gone-bad – the settlement amount was for a loan Katz advanced to Bassin, plus interest, nearly three years earlier. It was before the Otters had drafted the bankable teen phenom Connor McDavid, and Bassin needed the money to prop up the financially struggling franchise. Then, for reasons that weren’t made clear in the wire story, Katz called the loan. Bassin couldn’t pay, so off to court they went.

But a closer look at the dispute and what led to it reveals the indecorous underside of sports franchise ownership, not to mention the fickle relationships between teams and their communities, and the fragile “partnerships” between owners in various leagues. So much for the honour in pro sports.

The details will follow, but in short, Katz made the deal with Bassin not because he was interested in the welfare of fans in Erie. Instead, if he could quietly buy the Otters, he could move them to Hamilton and take control of his ultimate prize – the hockey lease at Copps Coliseum – even though a fellow NHL owner, Michael Andlauer, was the existing leaseholder at the Hamilton arena. Andlauer, who made his fortune in the transportation and logistics industries, has a minority stake in the Montreal Canadiens and also owns their American Hockey League farm team, the Hamilton Bulldogs.

Bassin agreed to be his front man in the Hamilton transaction because Katz insisted on a low profile. No one is saying it straight out, but the timing of Katz’s move on Copps in late 2012 suggests he may have been interested to use the Copps lease as leverage to get more public funding in Edmonton in a deal to build a new downtown arena for his Oilers.

Despite Katz’s efforts to be discreet, rumours quickly spread in Hamilton civic circles that he was the power behind Bassin. Some city councillors and power brokers were happy to play along because, as always, Hamilton longed for an NHL team. And there were rumours that Andlauer might deprive the city of any professional hockey by moving the Bulldogs to the Montreal suburb of Laval when a 10,000-seat arena in that city was completed.

City officials kept Bassin’s identity hidden at first, which angered Hamilton Mayor Bob Bratina. He wanted to know why it was taking so long to renew Andlauer’s lease at Copps. Bratina, who did not run in the 2014 municipal election, said he was initially told the delay was due to a potential new tenant whose identity was confidential. But once he learned it was Bassin on behalf of Katz, Bratina had no doubt about what was happening.

“My sense was [Hamilton] was going to be used against the City of Edmonton as leverage for their deal,” he said in an interview. “That’s my opinion.”

Through the fall of 2012, when it looked like Bassin just might grab the lease to Copps, Katz maintained his hard line with Edmonton council. But in December, Hamilton Entertainment and Convention Facilities Inc. (HECFI), the agency that then managed city properties, voted to negotiate a lease exclusively with Andlauer.

The HECFI vote came on Dec. 7, 2012. Five days later, without Hamilton’s leverage, Katz agreed to go back to the table with Edmonton along with a mediator in a final attempt to make an arena deal. With the rhetoric suddenly turned down, Katz and Edmonton reached an agreement on the new arena in January.

However, that was not the end for the other people in this story.

Bassin, now 75, had wanted to sell his hockey team to Katz to pay his debts and ensure his own financial well-being. But he became collateral damage. The Oilers called his loan in June, 2013, demanding he sell the team to pay them back. Even though the Otters have a rebuilt arena, and McDavid’s star power has boosted the team’s attendance to more than 4,700 fans per game (fifth-best in the 20-team league), Bassin didn’t earn enough from operations to pay back the Oilers.

In pushing for a quick sale, the Oilers were still intent on taking over the Otters. Documents show that Katz’s people interfered with Bassin’s attempts to get a new arena lease in Erie in 2013. Katz himself wrote a letter to OHL commissioner David Branch in October, 2014, threatening to make the legal dispute with Bassin public if he did not transfer ownership of the Otters from Bassin to him.

In yet another twist, the Oilers’ ambitions may also have been to keep the Otters away from Andlauer who, ironically, is now in position to be the saviour of the OHL team. He is one of at least two parties negotiating with Bassin to buy the Otters, and it’s apparent the Bulldogs will move to Laval no later than 2017. Andlauer’s lease at Copps, since renamed FirstOntario Centre, calls for him to provide a hockey team as a tenant, without specifying it must be an AHL team.

In early December, a U.S. District Court in Erie overturned the earlier judgment against Bassin that called for an immediate auction of the Otters. The Oilers must now proceed with a conventional civil action to recover their $4.6-million, which allows Bassin time to sell the team on his terms.

Citing the ongoing litigation, Bassin declined to comment on the matter in detail. “I owe [the Oilers] the money and we want to pay them back,” was all he would say.

Through an Oilers spokesman, Katz also declined to be interviewed. Pat LaForge, president and chief operating officer of Oilers Entertainment Group, who handles the Oilers’ business affairs and was Bassin’s primary contact with the NHL team, did not respond to requests for comment. Andlauer did not respond to interview requests either.

But documents filed as part of the Oilers’ lawsuit against Bassin in the U.S. District Court provide many of the details of what happened between Katz, Bassin and the City of Hamilton. The story began on Dec. 29, 2011, when Bassin signed a loan agreement with Katz’s Ontario Major Junior Hockey Corp.

At the time, the Otters were having trouble staying afloat financially – the average Erie crowd in 2011-12 was 2,855, among the smallest in the OHL.

The loan agreement spelled out Katz’s interest in buying the Otters, moving them to Hamilton and getting control of the Copps lease. The loan was to be for a total of $6.25-million (U.S.) at 6-per-cent interest, and came in two parts. The first was for $3.5-million, and with that money, Bassin was to buy out his existing partners and pay off any team debts.

The second part, $2.75-million, was to be paid once Bassin had received OHL approval to transfer the Otters to Hamilton and transfer the ownership of the team from Bassin to Katz. It also stipulated that Bassin had to secure an agreement from Hamilton “to grant an exclusive first right of negotiation of a lease of Copps Coliseum.”

The agreement also spelled out specific items Bassin was to get in the Copps lease, such as exclusive rights for all hockey teams except for the NHL, although there is no doubt Hamilton officials would have welcomed Katz had he arrived with the Oilers.

“Certainly that’s attractive,” Hamilton city councillor Lloyd Ferguson said of Katz’s NHL connections. Ferguson and fellow councillor Terry Whitehead met with Bassin during the negotiations.

Andlauer also offered a connection to the NHL through the Canadiens, but to Hamilton officials, Katz may have been the more attractive suitor on the tiny chance he might follow through on a threat to move the Oilers.

In the midst of all this, Katz was pilloried in late September, 2012, for staging a clumsy public visit to Seattle. Along for the trip was Wayne Gretzky, who allowed himself to be used to send the obvious message to Edmonton politicians – here is a city that wants us.

The backlash was so severe that Katz issued a public apology. He was lucky, though: Edmontonians would have been even more enraged had they known about his then-ongoing dealings in Hamilton. His intentions there were earlier outlined by LaForge in an e-mail to Bassin on Aug. 23, 2012. In the e-mail, which was later entered in the court documents, LaForge noted “we are all working on our plan to get the Otters relocated to Copps Coliseum” and “[the Oilers] will get the hockey opportunity we have been looking for in that market.”

However, LaForge also complained to Bassin about the Otters’ “miserable financial performance” in Erie. Eventually, the loan to Bassin grew to $4.2-million from $3.5-million.

But then, thanks in part to Bratina’s support, Andlauer won the HECFI vote and eventually signed a three-year lease in March, 2013, with an option for two more years. His only obligation is to provide Hamilton with a hockey team, and he retains the rights to the Bulldogs name if they move. In April, 2013, he said he would like to buy an OHL team and build a new arena in downtown Hamilton; some consider FirstOntario Centre, which opened in 1985, a worn-out facility. Andlauer also admitted to talking to Bassin about buying the Otters, who only have to pay a maximum of $76,000 (U.S.) to get out of their Erie lease.

After losing the Hamilton battle, Katz called Bassin’s loan in June, 2013. Things took a nastier turn in 2014 when the Otters’ lease at the rebuilt Erie arena came up. After failing in an attempt to prevent Bassin from signing a new lease, Katz wrote a letter to Branch on Oct. 9, 2014, demanding that the Otters be turned over to him.

“As matters transpired,” Katz wrote, “I am now very concerned you have not taken a leadership role in finding a hockey solution that will keep this from becoming a very public legal dispute. If this is not resolved, unfortunately, Sherry Bassin, the OHL and all the sponsors and fans of major junior hockey will witness a public legal dispute instead of looking forward to the 2014-15 hockey season.”

Katz ended the letter with a most unsubtle remark. “I am providing references of my partners in other hockey organizations,” he told Branch, and listed NHL commissioner Gary Bettman, Hockey Canada president Tom Renney, AHL commissioner Dave Andrews, Western Hockey League commissioner Ron Robison and East Coast Hockey League commissioner Brian McKenna. Court documents filed by Bassin’s lawyers indicated Bettman and the other leaders were all sent a copy of the letter.

Branch did not officially respond. He felt this was a private dispute between Bassin and his lender which did not affect ownership of the team. There was no further word from Katz.

“I thought it was, ah, I was surprised,” said Branch, who still seems bemused by the letter. “I didn’t choose to pursue it in any way, shape or form.”

Branch admits he has talked to Andlauer about joining the OHL, and not necessarily with the Otters. “The other thing that cannot be overlooked is, as a league, we think Erie is a very good hockey market,” Branch said.

Bassin said the same thing about Erie, but he needs to sell the Otters to pay the debt. So it’ll be up to the new owner to decide if Erie, the innocent bystander caught in the Katz/Bassin/Hamilton crossfire, will get to keep its team.

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