Court feud yields a rare look into Canucks' backroom dealing

 

The Canucks may be out of the playoffs, but local hockey fans can get a front-row seat on NHL backroom plays at the Vancouver Law Courts.

 
 
 

The Canucks may be out of the playoffs, but local hockey fans can get a front-row seat on NHL backroom plays at the Vancouver Law Courts.

For a week now in the province's most secure courtroom -- built at tremendous expense for the Air India trial -- allegedly underhanded business dealings are the order of the day rather than terrorism.

Want to know how much CCM pays to outfit the fast-skating stars with jerseys and equipment?

Apparently $30 million US over the next 10 years -- of which the Canucks get roughly $900,000 a year.

At issue in this massive B.C. Supreme Court civil suit is ownership of the Canucks and their home, GM Place.

But the proceedings also afford us an intimate view of one of North America's premier professional sports leagues and a glimpse of how commercial dynasties, modern-day magnates and their minions do business.

It's a world dominated by sharp lawyers and imaginative accountants who are as valuable to the team as a legendary leader with Stanley Cup rings on two hands.

Tom Gaglardi and Ryan Beedie -- sons of prominent, wealthy B.C. business clans with vast financial holdings -- thought they struck a $250-million deal with John McCaw, Jr., to buy the NHL team and its rink. The reclusive American tycoon, though, jilted them and instead sold the team -- seemingly on near identical terms, on nearly the same day -- to Francesco Aquilini, former partner of Beedie and Gaglardi and heir to another notable B.C. family fortune.

The deal collapsed in acrimonious recriminations punctuated with profanity in November 2004.

Gaglardi and Beedie allege Aquilini breached his fiduciary duty as an erstwhile partner and used his insider knowledge to surreptitiously bargain with McCaw. They claim McCaw negotiated in bad faith and encouraged Aquilini's misconduct.

Aquilini and McCaw deny the accusations, however, and they have not yet had an opportunity to answer the charges in B.C. Supreme Court. They must wait until Beedie and Gaglardi present their case.

Regardless, the public is getting a rare insight into how NHL teams do business and how McCaw's right-hand man in Vancouver, Stan McCammon, apparently tried to shaft the two young scions.

From the moment the two sides began talking about the sale in November 2003, Gaglardi said McCammon was seen as an "impediment" to a deal.

But there were many other wrinkles.

The NHL, for instance, is a non-profit association owned by the 30 teams, who divide the cost of running the league.

The court heard this week that commissioner Gary Bettman tithed each team $1.05 million to pay for expected NHL head office expenses during what became a lockout.

So in 2004 when this deal was coming together, the big concern was the looming player strike or lockout and which side would pick up the costs (perhaps as much as $16 million) when the Canucks weren't generating revenue.

Although we haven't heard all the details (Gaglardi, the first witness, remains on the stand), the business affairs of the league and the Canucks are Byzantine.

Canadian tax laws are such that the team is apparently able to write off player contracts within two years of signing and take advantage of other provisions to generate balance-sheet losses that are incredibly valuable to owners with diversified portfolios.

But players such as retired superstar Mark Messier and others often have contracts that represent multi-year liabilities for the team's bottom line, which complicated the sale.

Messier, in this case, was owed $3 million US due to be paid in 2007 -- even though the celebrated power forward has long since hung up his jockstrap.

Similarly, the contract of former General Manager Brian Burke (who is expected to testify) contained a clause that could have repercussions on the sale of the team. Gaglardi said McCammon didn't want a deal done before June 30, 2004, because that would entail a "substantial payment" to Burke.

At the same time, the Canucks' asset basket had tremendous real-estate potential because GM Place sits on five acres of primo downtown real estate that is worth a fortune if it can be developed as condominiums.

In his testimony last week, Gaglardi explained at length the year-long process that led to the final bid he and Beedie made for the team in November 2004, and their due-diligence process of parsing the finances.

Dealing with McCammon, he said, was infuriating.

Gaglardi said they would resolve issues only to find McCammon ignored those resolutions in subsequent documents.

Gaglardi said he considered the behaviour "outrageous." He said he had the feeling McCammon was trying to see if they were asleep.

The Orca Bay chief even tried to get the prospective buyers to pay for previous financing deals the club negotiated, Gaglardi complained: "Preposterous!"

Gaglardi painted a picture of two young men interested in buying a hockey team being danced down the garden path for a year by McCammon only to be dumped at the 11th hour in favour of Aquilini, who was hiding in the bushes. That might be true -- we must hear Aquilini's, McCaw's and McCammon's version of events.

Their legal team late Monday assailed Gaglardi's credibility and memory -- forcing him under cross-examination to confront apparent contradictions between his testimony last week and statements he made earlier about telling McCaw and McCammon in March 2004 that Aquilini had dropped out of the partnership. He will be grilled again today.

imulgrew@png.canwest.com

 
 
 
 
 
 
 
 

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