The executive vice president of the Washington Bullets testified yesterday that although he had felt certain financial arrangements with Capital Centre were unfavorable to the basketball team, he did not protest them or try to change them because attempts were being made to sell the Bullets and the Washington Capitals.
But Jerry Sachs, who also is president of Capital Centre, conceded the arrangements "weren't exactly enhancing a sale" of either team.
"We were trying to sell the teams and protect WNA (Washington National Arena, Ltd., which operates Capital Centre) at the same time," he said.
Sachs testified in Prince George's County Circuit Court that he was aware arrangements between the team and the arena regarding box-office fees, complimentary tickets, special seating (such as sky suites) and Telscreen user fees "were lousy elements for the Bullets." Under adjustments made in June 1982, the arrangements, retroactive to 1980, in effect returned $862,000 to the teams.
Abe Pollin, owner of the teams and chairman of the board of Capital Centre, is being sued by Arnold Heft, a limited partner in the arena who contends that, through the 1982 adjustments, Pollin improperly diverted money from the profit-making Centre to the financially struggling teams. Heft asks that the adjustments be rescinded and that an accounting of their effects be made. Pollin has called the suit "groundless."
As the trial began its second week, Sachs testified that Pollin was attempting to sell one or both of the professional sports teams in 1980. Pollin said in late 1983 that the teams had lost $27 million in 10 years, and that Capital Centre had a profit of $2.3 million in 1982.
Sachs, who said yesterday he receives two-thirds of his salary from Capital Centre and one-third from the teams, testified he was "looking at the bigger picture at the time" when he felt the Bullets were paying more than they should for services provided by the Centre. These included a 3 percent box-office fee for tickets sold and a Telscreen fee of $650 a game, as well as providing complimentary season tickets to Centre employes.
Sachs, the only witness yesterday, said by 1979 he was convinced it was unfair to charge the teams for use of the Telscreen because advertisements shown on it were an "intrusion" that unfairly affect the flow of games. He said he did not press for alterations in the arrangements because "we did not want to change this unless we had a buyer."
Under the June 1982 arrangements, the teams were reimbursed for Telscreen user fees by Capital Centre.
"There were extensive efforts at that time to sell one or both teams," Sachs said. Asked by Stephen Grafman, one of Heft's attorneys, why he didn't attempt to change the arrangements, Sachs testified, "We wanted the provisions to stay if the teams were sold."
To that effect, Sachs said, "working papers" were drafted by Capital Centre in June 1980 and April 1981 to identify leasing arrangements between the teams and the arena that might be picked up by any prospective buyers. Of the first letter, written by Sachs to David Osnos, legal counsel for the Bullets, Capitals and Capital Centre, Sachs testified he "was concerned that practices that favored WNA would not continue."
Under further questioning, Sachs said, "These were negotiated points. You don't start out at the bottom and negotiate up."
Grafman asked if these conditions might not have deterred prospective buyers.
"It certainly didn't help," Sachs acknowledged.
Grafman several times asked Sachs if he, as executive vice president of the Bullets, had made any efforts to change the arrangements before the adjustments were made in June 1982.
"Sometimes we favor one entity over the other," Sachs said. "Sometimes it just isn't fair . . . What is favorable to one entity may not be favorable to another."
Sachs said he accepted the arrangements until June 1982, when he, Pollin and Edmund Stelzer, comptroller of the Centre and the Capitals, began examining the teams' financial agreements. Sachs said the examination was done "when it became clear that there would be no buyers for the teams . . . In order to keep these teams alive, Abe would have to take action himself."
Grafman asked if the adjustments were made because at that point the two teams owed more than $1 million to the Centre, well above the $400,000 limit set for any 90-day period under the arena's bond agreement.
"Absolutely not," Sachs responded.
In testimony last week, Stelzer, comptroller of the Centre and Capitals since January 1975, said he "felt derelict in my duties" in not pressing to make the adjustments sooner.