June 11, 2012

I am not a lawyer and will never be one. I have almost no skills in either legal research or Googling. So, please take anything I have to say with that in mind when you decide whether anything I have to say here makes sense. Yes, in the title I did use the perjorative “hoser” for the entertainment of our Canadian fans. For those of you south of the border who aren’t fluent in words such as “hoser”, “toque” and “poutine”, a hoser is essentially a clueless rube sort of person. In this case, we’re going to take a ride back to 2011 and discuss conflict of interest, motivations and tortious interference.

Remembering When

It seems like years ago, yet it was only 18 months ago when Matt Hulsizer was within inches of buying the Coyotes hockey club. The Glendale City Council (CoG) had passed the necessary resolutions and city type stuff, the National Hockey League (NHL, owner of the bankrupt Coyotes) boffins Bettman and Daly were in attendance at that last meeting along with what seemed to be a sufficient number of accountant and lawyer types to have the look of a done deal. Coyotes fans rejoiced, I got to briefly meet all the principals (maybe in hope of scoring some season tickets if I was their buddy) and celebrations began.

Then, like the Eye of Sauron, a specter arose with a puffed out chest and a hammer of writs, subpeonas and speculation. The specter in this case was the Goldwater Institute. I, for one, was not nearly as familiar with Goldwater as I may be now. The basis of the case that Goldwater threatened to take to court was that a “gift clause” in the Arizona Constitution would be violated if the terms of the arena lease and Coyotes sale to Matt Hulsizer came to fruition. Essentially, the gift clause was written to prevent government entities from enriching private entities unduly. It seems apparent from the cases brought to court by Goldwater that this gift clause is their favorite tool.

The gift clause was used recently against the Phoenix Law Enforcement Association (the police union), where Goldwater asserted that allowing officers to perform union work on police time was unconstitutional because it was basically a “gift”. Goldwater prevailed in their initial court appearance, yet, because the new police contract approved recently by the Phoenix City Council expired at the end of June, both parties will have to go BACK to court with the same arguments (and expenses) and do it all over again to cover the new contract.

Can’t Win Them All, Bucko

The gift clause was also used against the City of Phoenix in the “CityNorth” case where Goldwater argued that a tax incentive agreement made between the developer (Thomas J. Klutznick Company) of the massive CityNorth development and Phoenix was a “gift” from the city to the contractor. Their basis was that the studies of the economic impact of CityNorth were exaggerated, thus making the projections of financial benefit to Phoenix overstated. They provided a study from their economic hired gun Dave Wells to dispute the Phoenix claims. Goldwater lost this case, making them at .500 in the cases I bothered to read about.

But, we’re not here to discuss the gift clause (the AZ legislature should really consider changing the language, though), we’re here to ponder conflict of interest and overstepping bounds, if not the bounds of legality, certainly the bounds of ethics.

One of the key components in making the Hulsizer deal work would have been the issuance of $100M worth of municipal bonds by CoG. Right or wrong, and by the way my personal opinion is that the Hulsizer deal WAS a little shaky (not SHADY) on the financial end. I believe Matt was a little short on funds and managed to negotiate a deal that was better for him and the Coyotes than it was for Glendale. The Jamison deal looks, to me, like a solidly fair deal for all parties involved.

So now, for the Hulsizer deal, Glendale needs to float a hundred million in bonds, things like that are routine in the life of a city, even in large amounts. Glendale’s credit rating at the time was very good to excellent.

Enter Goldwater Institute. To jump ahead in a jarring fashion before we get back to our discussion, the bottom line is that Goldwater managed to completely submarine the entire Hulsizer deal with nothing more than the THREAT of legal action, simple coercion. The merits of their threats were never tested. Permit me to jump ahead yet a little more and opine that, in the case of this current deal with the Jamison group, I believe coercion and a constant barrage of negative publicity and veiled threats from north of the border (NOT Goldwater) caused investors to pull out of their commitments to the group, causing Jamison to go back out and round up more investors who had stronger stomachs. It also seems to me that Mr. Jamison has taken the possible machinations of Goldwater under advisement, constructed a bulletproof deal, and considers the drum beats of Goldwater to be so much white noise.

Thanks For The Help, NHL! Now, buzz off!

In my mind, the most distasteful episode of this entire Coyotes fiasco was when Jerry Moyes and Jim Balsillie pulled their genius bankruptcy filing end-around on the NHL, despite the fact that the NHL had supported WITH CASH Mr. Moyes’ team for some time. People expected moves like that from the ever slick and ethically challenged Balsillie, maybe not so much from Moyes. The SECOND most distasteful move came about when Carrie Sitren of the Goldwater Institute, on Institute letterhead and in her position within a TAX EXEMPT (meaning you and I pay them) organization wrote two letters aimed at derailing the issuance of the bonds necessary to close the Hulsizer deal. I’m not sure, really, how these letters can be justified as protecting the taxpayers of Glendale. I really don’t know if this may be common practice wherein an organization feels they are compelled to write threatening letters to companies who are about ready to consider backing 100 million dollars of municipal debt.

I’m Just Sayin’, Bankers…

There were two letters, one to a bunch of Moody’s offices, Standard & Poors and Fitch, Inc. (Click here to read PDF) The second one (Letter to associated Banks) was to The Bank of New York and U.S. Bank National Association. The second one has more potential impact on Goldwater if somebody pursued it, I think, while the first one is simply transparent in its intent to manipulate the interest rate of any Glendale bonds HIGHER, clearly not a benefit to the taxpayers of that city. But, Ms. Sitren chose her wording in the letter carefully, after all that’s her job, to make the letter legally (I think) nothing more than “an FYI” to the potential underwriters of bonds.

The second letter, however, was written to businesses that already had (and maybe even had at the time the letter was written), a working business relationship with the City of Glendale by dint of the two banks having underwritten bonds as Ms. Sitren says in her letter “in the recent past”. She also cites as an example the aforementioned “CItyNorth” case which Goldwater LOST (later, I believe), usually not the best way to make a point. Now, again, I have never spent two seconds in a law school, but I do recognize when something appears to have crossed the boundary from the poor taste and ethically ugly (the first letter) to the “that should be illegal” area. Being a newbie, I looked around for a few minutes last January and found something called “tortious interference” which purportedly prevents a person or organization from attempting to mess with a business relationship between two other parties. It usually comes into play when something happens like an employer poaches another employer’s employee (say that three times fast), but it seems like it may even apply in this case. Since you’ve stuck with me so far into this diatribe, let’s do some vocabulary work and use the word of the day “tortfeasor” (the person who interferes in a case like this).

I really have no idea about this sort of thing, and don’t want to have any organization or person be stressed out by potential trouble. But, what do you guys think? Is writing these sorts of letter a valid thing to do? Does ANYBODY think that Goldwater acted in good faith in this letter writing campaign, with the best interests of the citizens in mind?