Now baseball is tearing them apart.
In a series of bitter lawsuits that have transfixed Washington’s private-school crowd, the former teammates are feuding over Headfirst Baseball, the District company they built into a multimillion-dollar enterprise of pricey baseball showcases for high school players that college coaches attend and $425-a-week summer sports camps held at St. Albans in Northwest Washington and Mater Dei School in Bethesda.
Sullivan, whose father is famed Williams & Connolly attorney Brendan Sullivan Jr., accuses Elwood, whose mother is D.C. director of protocol and international affairs Patricia Elwood, of ripping off the firm of more than $500,000 to pay for hardwood floors, European closets, a 55-inch TV, trips to the Cayman Islands, massages, maid service and at least one “high end vacuum cleaner.”
Elwood isn’t denying the purchases, saying Sullivan spent the same way and that they agreed it was okay. What the allegations are really about, Elwood says in court papers, is Sullivan’s efforts to get rid of him just as a potential acquirer — run by a New York hedge fund titan — offered $5.5 million for the company. Elwood had been fighting for equity in the company.
Sullivan, by dint of his blood ties to a litigator who has represented Iran-contra figure Oliver North, former
senator Ted Stevens of Alaska and other high-profile clients, is coming at Elwood with high fastballs. At a hearing in U.S. District Court late last month, a parade of lawyers marched in on behalf of Sullivan and his business interests. There were four from Williams & Connolly, which appears to be representing the younger Sullivan for free, and two from another firm.
In court papers, the firm’s lawyers have repeatedly called Elwood a thief. “To avoid responsibility for years of theft,” they write, “Elwood spins a fantastic, self-contradictory tale.” They add, “Apparently Elwood thought he was entitled to live as a millionaire.”
Elwood’s three attorneys have fired back, saying, “Sullivan himself authorized, was a participant in, and was the architect of the very conduct he now alleges is wrongful.” They introduced into evidence an iPhone picture of two bags of equally split cash from a Nationals game event — one for Sullivan, one for Elwood.
The vitriol escalates with every legal maneuver. One recent court filing included a letter that the elder Sullivan wrote to one of Elwood’s attorneys, refuting Elwood’s claims that his former teammate used Headfirst funds to procure an engagement ring. “You bought a lie, hook, line and sinker,” Sullivan Jr. wrote. “Your client lied to you. And, he knows he lied. Your client was so desperate and panicked that he will say anything to make his long-term, repeated conduct less repulsive.”
The main asset in this personal and professional divorce is a thriving, highly profitable sports business. It materialized thanks to the win-at-all-costs spending that characterizes youth sports, a $5 billion industry, according to Mark Hyman, a George Washington University professor of sports management and the author of “The Most Expensive Game in Town: The Rising Cost of Youth Sports and the Toll on Today’s Families.”
In the richer corners of the Washington region, parents often view sports as a potential career path for their children, whether it’s professional athletics or through college scholarships, and spend lavishly on equipment, travel teams, private coaching, camps and showcases. Headfirst became a deep reservoir for those aspirations and dollars. By the time they parted ways, Sullivan, 38, and Elwood, 40, were living handsomely on salaries of several hundred thousand dollars a year.
In happier times, there was a picture on Headfirst’s Web site of Elwood and Sullivan sitting next to each other in bright red shirts, smiling.
“Washington, DC natives and childhood friends Rob Elwood and Brendan Sullivan started Headfirst in 1996 with the vision of providing top-notch sports and summer camp programs for kids in the Washington, DC area,” their biography on the Web site said. “Rob and Brendan first met when playing on the same Little League team in 1984, and have been close friends ever since.”
The duo included a picture of themselves on that scrappy-looking Little League team — Elwood skinny with wavy hair, Sullivan a little thicker with a sweet grin.
“After attending St. Albans School and playing on multiple teams together, Rob went on to play football and baseball at Amherst College, while Brendan headed off to Stanford University and pitched on the Cardinal baseball team. After college, Brendan was drafted and played with the San Diego Padres organization, while Rob worked in the Operations Department of both the Boston Red Sox and Cleveland Indians.”
Both pictures — and the history they jointly told on the Web site — have been scrubbed from digital history. The page is included as evidence in the federal case. (There is a separate lawsuit in D.C. Superior Court.)
About 8,500 children attended Headfirst’s camps in 2012, according to court papers, which depict the company’s annual revenue at about $5 million. Headfirst summer sports camps are some of the most popular — and most expensive — camps in the region. Sports Illustrated for Kids has ranked Headfirst as one of the top 50 in the country and the District’s best summer camp. The company also runs summer camps for professional baseball teams, including the Red Sox, Cubs and Yankees.
Headfirst has a separate business aimed at high school baseball players. It’s Honor Roll baseball showcases feature dozens of coaches from elite colleges who scout players paying $995 for two days of action.
Elwood was the operations guru for Headfirst, serving as chief executive and handling the money. Sullivan was the public face of the company. On paper, Sullivan owned the key parts of the sprawling enterprise with his brother Ted. While Elwood and Sullivan shared equal salaries, according to court papers, they did not share equal equity — a source of frustration to Elwood in late 2012 when the trouble started.
Sullivan, in court papers, says the company’s bookkeeper informed him one November day that his paycheck would be short. Sullivan was shocked. He asked why. The bookkeeper said that Elwood, who had been authorized to take $200,000 for a loan, had taken an additional $400,000 without approval.
“Sullivan demanded that Elwood return all the borrowed funds and began to inspect the books,” court papers say, noting Elwood did return the unapproved loans. “The massive scope of Elwood’s serial thefts was then discovered.”
In one instance, court papers say, Sullivan discovered six credit charges for as much as $4,420 to a company called Universal Floors. “Elwood explained in the Company’s books and records that these costs were ‘Equipment Expense — Summer Camp.’ In fact, these Headfirst funds paid for a hardwood floor in Elwood’s home” in the District, court papers allege. (He now lives in Annapolis with his wife, Stacey, who is also named in one of the lawsuits.)
Sullivan alleges that he found hundreds of thousands of dollars of personal expenditures, including bank branch withdrawals of more than $40,000 to pay for “umpires.” When Sullivan confronted Elwood over the spending, court papers say, Elwood didn’t reply for several days. He finally answered by saying he would return $112,000. Sullivan fired him on New Year’s Eve.
Elwood has a novel defense, which his lead attorney, J. Douglas Baldridge of Venable LLP, neatly summarized in a recent hearing in front of U.S. District Judge Reggie Walton, a prominent jurist who has some recent experience with baseball cases, having presided over the perjury trial of former Major League pitcher Roger Clemens.
“If they’re going to say we stole, we’re going to say we’re an owner,” Baldridge said. “You can’t steal from yourself.”
His theory is that under District laws, where the overall enterprise was formed, Sullivan and Elwood were, by definition, partners. And because they were partners, Elwood was entitled to spend the money, which he says Sullivan did, too, as per an established understanding. Elwood’s legal team contends Sullivan spent $38,000 of Headfirst funds to renovate his house in Northwest and $60,000 on personal travel, including attending a Tim McGraw concert in Nashville.
Sullivan denies Elwood’s accusations, saying in a written statement, “The financial transactions that I discovered in December 2012 were not the standard practice of the Headfirst companies, and were unknown to me.”
What really happened, Elwood’s attorneys say in court papers, is that Sullivan had been “plotting to remove Elwood from the company” after becoming aware that Steel-Excel, a sports business investment firm controlled by New York hedge fund titan Warren Lichtenstein, had offered $5.5 million for Headfirst — a transaction eventually turned down, court papers says, because Sullivan thought the company was worth more like $20 million.
There are other accusations from both sides in what has become a Ping-Pong match of allegations. Elwood has accused Sullivan of shorting their alma mater, St. Albans, on profit-sharing payments for summer camp. (Sullivan denies the claim.) Sullivan has accused Elwood of interfering with Headfirst’s business after being terminated, including changing Internet passwords. (Elwood denies the claim.) Elwood has accused Sullivan of trying to retroactively cut off Elwood’s health insurance just as his wife was embarking on complicated medical procedures. (Sullivan denies the claim.)
The tightknit St. Albans community has recoiled and disappeared. Nearly two dozen classmates of Sullivan and Elwood didn’t return requests for comment or flatly said no. “I would prefer not to comment on any aspect of this story,” said Dave Baad, their former baseball coach at the school.
One former St. Albans official did talk — Oliver “Skip” Grant, the legendary retired athletic director. He was stunned to hear Elwood and Sullivan were feuding.
“I remember them being extraordinary young men and superb athletes,” Grant said. “I have the highest regard for both of them.”
A big-name guy
If settlement talks are underway, neither side is saying. The case appears headed for trial, a high-stakes showdown that could affect the future of Headfirst’s growing business. Sullivan wants more than $550,000 in compensatory damages, among other demands.
Elwood, in a countersuit, wants more than $10 million in compensatory damages and a “declaratory judgment of the legal existence of the Headfirst Partnership and Elwood’s rights as a partner and 50% owner therein.”
The question for Sullivan is whether his father’s law firm would represent him if the case goes to trial. In court filings, Elwood’s legal team has accused Williams & Connolly lawyers of a “blitzkrieg,” saying they have asked to depose about 100 people and issued more than 100 requests for documents. (Williams & Connolly represents The Washington Post in some legal matters.)
“Sullivan’s discovery strategy would be comical if it were not made possible through an abuse of power and privilege and ran the very real potential of depriving Elwood of his right to have this dispute resolved on its true merits,” Elwood’s legal team wrote.
Elwood is paying for his defense and is facing, as his legal team put it, a “war of attrition,” putting a fair trial in jeopardy. “If Sullivan is permitted to exploit his privileged status and financial resources in this fashion, that will never happen and the case likely will crater under its own weight without the proverbial ‘day in court’ to which Elwood is entitled ever taking place.”
Elwood is also arguing Williams & Connolly should be disqualified because the firm, Sullivan’s father and a former partner there had been advising Headfirst for years, presenting a conflict of interest, given Elwood’s contention that he was, in fact, a partner in the company.
The judge heard arguments about the firm’s representation of Sullivan last week.
At one point, Williams & Connolly lawyer Michael S. Sundermeyer referred to Sullivan’s father as “Big Brendan,” saying that if Elwood’s legal team was pondering putting him on the stand and expecting to elicit testimony detrimental to his own son, that could only be described as a “pipe dream.”
Baldridge replied: “I’m just a guy. He’s just a guy with a big name.”
After Baldridge presented legal arguments around the disqualification issue, Sundermeyer offered his assessment of their validity: “We disagree with basically everything they said.”
Jennifer Jenkins contributed to this report.