Peter Bower, the accountant in charge of auditing Capital Centre, the Washington Capitals and the Washington Bullets, testified yesterday that, contrary to statements he had given in depositions, he was aware of three check transactions involving the arena and the teams in 1982 and 1983.
Two weeks ago, an accountant from Arthur Young and Co. described the actions as "sham transactions."
Also in testimony in Prince George's Circuit Court, two employes of Capital Centre said that in May and June of 1982 they warned Abe Pollin, the arena's general partner and principal owner of the teams, that lucrative advertising and special-seating arrangements were in jeopardy because of reports regarding the Capitals' financial plight.
Arnold Heft, a limited partner in Capital Centre, has filed a civil suit alleging that Pollin, as general partner, in June 1982 improperly diverted money from the profitable arena to the unprofitable teams. Heft wants adjustments in license agreements between the Centre and teams rescinded.
Bower is a partner in the Washington office of the accounting firm Alexander Grant. Under the Capital Centre's bond agreement, he certifies its annual financial statements. He had testified on Tuesday that three check transactions between the teams and Capital Centre had met generally accepted accounting principles. In each case, the teams sent checks totaling hundreds of thousands of dollars to the Centre, then received the same amounts back as loans a few days later.
Stephen Grafman, one of Heft's attorneys, has contended the checks obscured the fact that the teams' debts had exceeded $400,000, the limit established in Capital Centre's bond agreement.
Grafman asked Bower yesterday if he had known of the check transactions when he prepared financial documents for the teams and the Centre in 1982 and 1983.
"It is obvious from looking at (the teams' and Centre's financial) work papers that I had my initials on them," Bower responded.
Grafman then quoted from Bower's Jan. 8, 1985 deposition, in which Bower said he first had become aware of the transactions the month before. Asked about that statement, Bower answered, "I review thousands and thousands of documents . . . I can't have immediate recall regarding something that happened 2 1/2 years ago."
When Grafman cited a deposition of Jan. 30, 1985, in which Bower said he had first learned of the transactions the month before, Bower answered, "It is obvious that I looked at them during the course of the examination."
Grafman asked if an accountant, when reviewing financial documents, scrutinizes transactions involving a business and its affiliates.
Bower responded, "You're more cognizant of interaffiliate transactions . . . There's opportunity for greater manipulation."
Later, Tom Hipp, vice president of marketing at Capital Centre, said that in May 1982 he told Pollin that reports of the Capitals' financial problems were affecting his ability to sell advertising within the arena. Hipp said several major advertisers threatened to amend or not renew their advertising agreements if the Capitals were folded, sold or moved.
Nancy Lacy, vice president of special seating (sky suites, loges and portal boxes) at the arena, testified she made a similar warning in June 1982, saying that at least $600,000 of leases with suite holders would have been in immediate jeopardy without the Capitals.
Under cross-examination by Grafman, Lacy acknowledged that Heft, who along with Pollin had received sky suites without cost since the arena opened in 1973, was charged for his shortly after Heft's lawsuit was filed in December 1983.