Madison Square Garden Corp., owners of the Washington Diplomats, has received clearance from San Juan Racing Inc., the team's former owners, to sell the franchise elsewhere or fold it within the next two weeks, Jack Krumpe, Garden executive vice president, said today.
Krumpe also revealed that it is possible the contract of Johan Cruyff the Diplomats' major asset, could become the property of the Cosmos on Dec. 1 if new owners do not made payment to Warner Communications, owner of the Cosmos, by that date.
Breaking a two-week silence by top Garden officials, Krumpe said he and Chairman Sonny Werblin had received a letter Friday from San Juan Racing Inc. in which San Juan Racing forfeited its right of first refusal to buy the team back from the Garden. SJR owned the team until October 1978, then sold it to the Garden Corp. Part of the agreement at the time was that in addition to the $1.1 million purchase price, SJR would have first refusal rights if the team was to be sold again.
When Werblin and Krumpe decided to sell the team, they informed SJR of its intentions, then waited for a response. Now that SJR has opted not to purchase the team, Krumpe said MSG has four options:
It can operate the team next season. That has been ruled out.
It can sell the team, either to a group being put together by Diplomat President Steve Daminsky, to a separate group being put together by Diplomat General Manager Andy Dolich or to an outside group.
Working with the league, it can merge the team with another North American Soccer League franchise. Four teams, Houston, New England, Minnesota and New England, have reportedly failed to post operating bonds for the 1981 season. The deadline is Jan. 1.
It can fold the team on Nov. 23 and sell the team's assets -- the players.
If the fourth option is exercised, Cruyff will become a Cosmo contractually on Dec. 1. The 33-year-old Dutchman initially signed a NASL contract with the Cosmos two years ago. That contract was sold, in May 1979, to the Los Angeles Aztecs under a deferred payment plan. When the Dips purchased Cruyff in February 1980 they picked up the balance of the deferred payment liabilities. The next payment to the Cosmos is due Nov. 30. If that payment is not made, Cruyff belongs to the Cosmos again.
If the team is sold or merged, the new owners will have to make pauments by Nov. 30 to the Cosmos in order to retain rights to Cruyff. The amount of that payment could not be determined yesterday.
The Diplomats posted their operating bonds for 1981 on Oct. 24. Under league rules, they have 30 days after that posting to change their minds and "voluntarily terminate" by turning their certificates of ownership over to NASL Commissioner Phil Woosnam. Krumpe said he expected Woosam to fly to Washington Monday to talk to potential buyers.
During their two-year ownership, MSG lost about $5 million on the Diplomats.
Krumpe said he thought the chances of finding a buyer who will keep the team in Washington were "pretty good." Because it purchased the team from SJR on a deferred payment basis, the first $1 million of any purchase would go to SJR. Krumpe indicated that any offer which would offset the Garden's debt to SJR would be accepted. "We're not looking for profit at this point," he said.
Krumpe also said he and Werblin had made the decision to sell the team with out pressure from Gulf and Western, the parent corporation of the Garden.
"But if we had decided not to sell they probably would have pressured us to sell," Krumpe said. "Their additude would probably have been "It's not productive, let's get out."