Arnold Heft testified yesterday that, as a limited partner in Capital Centre, he negotiated an agreement with general partner Abe Pollin in April 1980 to be apprised of business transactions at the arena because "I had not been consulted in almost any matters at all."
Heft testified in Prince George's County Circuit Court that, as a limited partner in the Washington Capitals, he declined to meet a cash call for the financially struggling hockey team in 1976 because "I thought it was a losing proposition. It would be eight to 10 years before I got any of it back." If a partner does not meet a cash call, he loses his share in the enterprise.
Heft said later that during the "Save the Caps" campaign of late 1982, he received a call from Pollin requesting he buy $100,000 in season tickets as part of the campaign to keep the team going. Heft said when he offered to buy two season tickets, Pollin "slammed the phone down."
Heft has sued Pollin, who also owns the Capitals and Washington Bullets. Heft contends that, without his knowledge, Pollin improperly diverted money from the profit-making Centre to the teams, which Pollin said in late 1983 had lost $27 million in 10 years.
Heft requests two June 1982 adjustments in the teams' agreements with the Centre that in effect returned $860,000 to them be rescinded, and that an accounting of their effect be made. The adjustments concern such matters as a refund to the teams of user fees for Telscreen and box-office fees, as well as charging the arena for season tickets that had been complimentary.
Yesterday, as the trial went into its ninth day, Heft said he and Pollin had signed a "memorandum of understanding" April 7, 1972, under which Pollin would hold 66 2/3 percent interest as general partner of the prospective Capital Centre, and would oversee its construction, financing and management. Pollin and Heft had been partners in the then-Baltimore Bullets from 1964 until Heft sold his interest to Pollin in 1968.
Under the agreement, Heft said, Pollin promised to meet with his partners on a "regular basis to review and discuss the status" of business matters regarding the Centre.
"I knew he would be general partner and would be responsible in day-to-day affairs," Heft said. "I wanted to be apprised, to be aware of the proceedings and to protect my (one-) third interest."
But by 1980, Heft testified, he felt he was not being consulted on matters at Capital Centre, saying as an example he learned about the hiring of one of the Capitals' general managers "by reading it in the papers." He also testified that several items in quarterly financial reports and yearly statements were not pointed out or explained to him until he made inquiries.
Heft testified he met one cash call for the Capitals in 1975, contributing $125,000 of a total of $500,000. At that point, Heft said, he owned 25.05 percent of the Capitals, with the corresponding amount of $576,000 provided by Pollin through an interest-free loan.
The next year, Heft testified, there was another cash call from Pollin of $1 million, of which Heft's share would be $250,000. "I then made a business decision not to make another" contribution, he said.
By not meeting the cash call, he said, his share in the Capitals of more than $700,000 was foreclosed and he lost any financial interest in the team.
Burton Schwalb, one of Pollin's attorneys, noting the $576,000 loan and earlier payments made to Heft under contractual agreements, asked pointedly, "Wasn't this the first time you had to reach into your own pocket?"
"I don't agree," Heft replied.
Heft testified that although he was aware that the Capitals had lost money for years, he learned of the 1982 Save the Caps drive "from the newspapers and the radio." He said that Pollin called him the day before Pollin was to go before the Prince George's County Council to seek a reduction in the county's amusement tax, which it granted.
"He called me on a Monday morning about 10:30 or 11 and asked me to buy $100,000 in season tickets," Heft testified under cross-examination from Schwalb. "I was a little stunned and astonished, and I probably even stammered. I said I would speak to my wife."
Heft said he concluded that "I had $700,000 in the team already, more than anyone else except Abe," and that "I had reached the choking point."
He related that when Pollin called two hours later for his decision, "I said I'll buy two season tickets and he slammed the phone down."