Abe Pollin, principal owner of Capital Centre and the Washington Bullets basketball team and Washington Capitals hockey team, on three occasions diverted money in the form of loans to the clubs without consulting the arena's limited partner who now is suing him, the comptroller of Capital Centre testified yesterday.
The comptroller, Edmund Stelzer, said he did not question the practice -- particularly regarding the financially troubled Capitals -- because in the course of his job he makes payments "every two weeks to the tune of hundreds of thousands." He said the transactions with the teams were made according to generally accepted accounting principles.
Testifying in Prince George's County Circuit Court, Stelzer acknowledged that within days after the Capitals and Bullets had made payments to the arena, Pollin directed him to pay the same amount back to the teams in the form of a loan. Pollin is being sued by Arnold Heft, the limited partner, who contends Pollin improperly diverted money from the Centre, which operates at a profit, to aid the financially troubled teams. Heft asks that Pollin be removed as general partner of the arena or that a receiver be appointed to manage it.
Pollin, who was present but did not testify yesterday, has said through statements that Heft's contention is "groundless" and that Heft has received more than $4 million from the Centre.
Under cross-examination by Stephen Grafman, one of Heft's attorneys, Stelzer said that twice in 1982 and once in 1983 the Bullets and Capitals received back the same amount of money they had paid to Capital Centre.
On Sept. 30, 1982, Stelzer said, the Bullets and Capitals each issued checks for $100,000 to the Washington National Arena, Ltd., which operates the Centre. The next day, WNA wrote checks to the teams for the same amount.
On March 31, 1983, the Capitals made a payment of $200,000 to WNA and the Bullets one of $85,000, Stelzer testified. Checks for those amounts were written to the teams on April 4, he said.
Stelzer, who has been comptroller for Capital Centre and the Capitals since January 1975, said a similar arrangement was made in March-April 1982.
The issue is crucial because under its bond agreement with Prince George's County, WNA or its "affiliated entities" (the Bullets and Capitals) cannot have accounts receivable -- money owed -- of more than $400,000 or older than 90 days. Stelzer said WNA believed that by accepting checks from the teams at the end of one quarter of a financial year, then making loans to them at the beginning of the next quarter, the money in question was a new loan, not part of existing debts.
Under questioning from Grafman, Stelzer acknowledged that it would be difficult to know by examining financial reports that the loans were made. "You would know the teams owed the money, but not why," he said.
Asked if he questioned why the transactions were made, Stelzer said no. "Finances are and were a constant source of worry," he said. Later, regarding writing checks to cover the Capitals' expenses, he said, "Some things almost become habit-forming." Pollin said in a statement nearly 1 1/2 years ago that he had lost more than $27 million on the Capitals and Bullets.
Stelzer was the only witness to testify yesterday. On Monday, the first day of testimony, it was disclosed that in June 1982, Pollin had instituted several changes in policy that, in effect, reduced by $862,000 the money the teams had to pay the Centre. These included adjustments in the amounts they paid for using the Telscreen and sky suites, as well as charging the arena for tickets that formerly were complimentary. The policies were made retroactive two years.
"We deemed it fair to make it retroactive," Stelzer testified yesterday. "I felt derelict in my duties in not picking it up sooner. I could kick myself."
The case is expected to last at least through Friday.