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Legal maneuvers by the Detroit Red Wings may have screwed the city of Detroit out of possibly tens of millions of dollars in cable TV revenue from the publicly owned Joe Louis Arena, Joe Guillen reports in the Free Press:
The city of Detroit may have missed out on millions of dollars from Olympia Entertainment as part of revenue from the Detroit Red Wings cable TV agreements, according to documents obtained by the Free Press.
A 1999 sublease between Olympia and the Detroit Red Wings states that the Red Wings would be responsible for paying the city a 25% share of the team’s annual cable TV revenues, under certain conditions.
During years of contentious discussions before a 2014 settlement, Olympia consistently maintained that it owed the city no TV revenue...Legal experts say the existence of this sublease might have weakened Olympia’s claims.
(Detroit Red Wings photo)
With the 1999, lease it would seem pretty straightforward: The Red Wings needed to fork over millions to the city from cable revenue.
But there was a catch.
The city may not have been aware of the 1999 sublease for the Joe Louis Arena that required the team to pay the revenue, Guillen writes. Apparently, the document was not on file with the city even though the Ilitch organization was required to submit it.
What apparently was on file with the city was an amended 1980 lease which said "Olympia," not the Red Wings, would pay the city 25% of annual cable TV revenues over $1 million.
So with what looks like a lot of legal manipulation, the llitch family bypassed the 1999 sublease, and instead relied on the 1980 documents. It argued that it owed nothing because the Red Wings team - not Olympia -- was getting the TV revenue, according to the Freep report. Both companies, Olympia and the Red Wings, are owned by the Ilitch family.
Still, it's not clear why the city had no record even if the Ilitch organization didn't file the 1999 agreement.
Guillen writes:
Detroit officials may have never known about the sublease as the city and Olympia, for a period that stretched seven years beginning in 2007, debated cable TV revenue payments. Neither Olympia nor the Red Wings ever paid Detroit a share of the team’s cable TV revenues.
The accumulation of any debt Olympia or the Red Wings had with the city from their decades-long occupancy of the publicly owned Joe Louis — including any missed payments for cable TV revenues — was settled in 2014 during the city’s bankruptcy, under the direction of then-emergency manager Kevyn Orr, for $5.2 million.
Olympia’s response during the settlement negotiations was consistent with that of previous years when Detroit asked about the cable TV payments: Olympia owed nothing because the Red Wings are a separate legal entity, despite Mike and Marian Ilitch’s common ownership of both companies. Although the Wings are not part of the master lease, the sublease between Olympia and the Wings raises new questions.
Before the settlement, the city estimated in 2014 that its share might have reached $80 million in TV revenue.
Guillen reports:
Ilitch Holdings spokesman Doug Kuiper issued the Free Press a one-sentence statement on Thursday in response to questions about why the sublease was not on file with the city as required under the master lease, and Olympia’s interpretation of the sublease language.
“This matter was evaluated, completely resolved and approved by the city’s finance department, our organization and City Council more than two years ago,” Kuiper’s statement reads.
-- Allan Lengel
