On the surface, Markham city council is to vote Tuesday night to approve or rescind the financing plan for a $325-million arena that will serve the Greater Toronto Area.
However, what is really at stake is the opportunity to chase a second NHL team for the GTA, a team that some hockey and executives and sports business experts believe would instantly rank among the league’s most valuable franchises. While NHL commissioner Gary Bettman consistently says there are no current plans to expand or relocate an NHL team to the GTA, where the Toronto Maple Leafs hold territorial rights under NHL bylaws, or even Quebec City, that has not stopped people connected with the league speculating about expansion fees of more than $600-million (U.S.).
Graeme Roustan, the former chairman of Bauer Performance Sports Ltd., who is promoting the proposed 20,000-seat arena with the financial backing of prominent developer Rudy Bratty, is careful to say they are not pursuing an NHL team. But Roustan also likes to make announcements about arena partners that generate that kind of excitement, such as hiring Delaware North to handle the concessions. Delaware is owned by Boston Bruins owner Jeremy Jacobs, the chairman of the NHL board of governors.
Roustan also plans to have a couple of prominent hockey people lobby Markham council on his behalf Tuesday night, former NHL Players’ Association executive director Paul Kelly, who is now practising law in Boston, and Hockey Night In Canada broadcaster Glenn Healy. Roustan, who declined to speak directly to The Globe and Mail on Monday, said through a representative he is not paying Kelly for his services.
The current financing plan calls for the private partners, companies controlled by Roustan and Bratty, to cover half of the $325-million loan. The city is to pay for its $162.5-million through a volunteer levy on developers for new housing, parking revenue and surcharges on event tickets. But if the arena fails, which could happen without a major tenant such as an NHL team, the taxpayers could be stuck with the cost.
There is also the question of whether or not Roustan, 52, is the right person to lead that chase. He has a list of controversial business dealings in the arena and hockey businesses behind him, including two lawsuits that resulted in civil judgments against him for statutory fraud and against a company he was involved with for fraud.
In addition to the motion about financing, council will be asked to conduct due diligence on the arena promoters, a motion made by councillor Jim Jones after questions about Roustan’s business dealings came up last fall.
Roustan said he is not afraid of any background check and has already turned over a credit report and information about the two U.S. lawsuits to Markham officials. A judgment against him in Texas following a soured arena deal in Fort Worth was partially overturned by an appeal court and the judgment against him for statutory fraud is being appealed to the state’s Supreme Court.
In the second lawsuit, a New Jersey court issued a default judgment in August 2010 against Roustan’s company, Roustan United LLC, also known as PR Commercial Refrigeration, for fraud and fraudulent inducement. This concerned the failure of ice-making equipment at an arena in Kuwait.
Roustan said this was a contract he inherited when he bought a struggling ice-making company in Johnstown, Pa., and was the responsibility of a sub-contractor, Trane Inc. He also provided a letter from a Trane official acknowledging its responsibility. Trane reached its own settlement with the Kuwati company. Roustan also said he was not the managing partner of the company, just an investor, and blamed his lawyers for not defending the case initially because they believed Trane would cover their damages.
However, in dismissing the request of Roustan’s lawyers to set aside the judgment of $482,000 (U.S.) against Roustan United, Judge Stanley Chesler of the United States District Court wrote that Roustan’s “attempt to shift the blame does not constitute a meritorious defence.” That decision was upheld by a second judge in January, 2012.
Roustan says he plans to sue Trane for the $482,000 if the company does not cover the award against Roustan United. His lawyers issued a demand to Trane’s lawyers a week ago and Roustan said they are still waiting for a response.
Given what is at stake, it is not surprising Roustan reacts aggressively to criticism, usually through a letter from one of his lawyers warning of legal action. Jones received such a letter, as did The Globe and Mail, and so did Anton Thun, a prominent NHL player agent who lives in Markham.
Thun heard from Roustan’s lawyer after he sent an e-mail to Markham Mayor Frank Scarpitti and the councillors about Roustan’s claims he was a finalist to buy the Montreal Canadiens. Thun said former Habs owner George Gillett was willing to come to Markham to refute that claim. Gillett eventually met with some Markham councillors last weekend along with Bratty and his message was it is not a good idea to build the arena unless you have an NHL team.
In addition to hearing from Roustan’s lawyer, Thun said he also received a call from an NHLPA lawyer asking if he had a financial interest in the Markham arena situation. The implication was a potential conflict of interest. Thun said he does not have any financial motives, just the desire to see the city avoid a bad deal. He also believes the call from the NHLPA lawyer “was no coincidence.”
Thun has his doubts about Roustan as well as the financing plan. “I have no confidence in his ability as a businessman,” Thun said.