David Osnos, chief counsel for Capital Centre, the Washington Bullets and Washington Capitals, testified yesterday that several adjustments in license agreements between the arena and the teams were made in June 1982 without regard to how much money was involved.
He also said in Prince George's Circuit Court that he spoke to Arnold Heft, a limited partner in Capital Centre, about "partnership questions" two months later. Osnos' statement contradicted testimony by Heft that Osnos and the arena's general partner, Abe Pollin, never spoke to Heft about the adjustments until the latter brought the matter to Pollin's attention in late 1982.
In his civil suit filed against Pollin, Heft contends Pollin, through the adjustments, improperly diverted money from the profitable Centre to the teams. Pollin also owns the Bullets and Capitals, which, according to testimony last week, suffered cash losses during their tenure at Capital Centre of about $4.1 million and $22.8 million, respectively, as of June 1984.
The adjustments in effect returned about $860,000 to the Bullets and Capitals. Heft's attorneys have contended they were made because the teams' debts in June 1982 were over $1 million, well above the $400,000 ceiling established in the Centre's bond agreement. They also have argued that Pollin, as general partner, violated his fiduciary duty by not informing Heft "in a timely manner" of important business decisions, such as the adjustments.
Testifying on the 17th day of the trial, Osnos said yesterday that by early 1980 a decision was made at Capital Centre to try to sell the Bullets and Capitals, or both, because of the teams' losses and Pollin's heart surgery in January of that year.
Osnos said several attempts were made to sell both teams. One prospective buyer, Osnos testified, was John McMullen, owner of the Houston Astros, who in 1981 was contemplating buying the Colorado Rockies of the National Hockey League and moving them to the Meadowlands Arena in East Rutherford, N.J. (which he did).
Another potential sale, to a group headed by Harold Baldwin, owner of the Hartford Whalers, fell through in May 1982.
In a June 3, 1982, meeting, he testified, he met with Pollin and Jerry Sachs, president of Capital Centre, to discuss the team's situation. "I told them the loss of the Capitals just wouldn't be a loss of the Washington Capitals Hockey Ltd. It also would have been a total disaster for WNA (Washington National Arena Ltd., which operates the Centre)."
During the meeting, several courses of action were discussed, including changes in the agreements, he said. Growing from that meeting were the adjustments that were established in two June 29, 1982 memoranda, Osnos testified.
Sachs earlier testified that the original agreements unfairly hurt the teams and the adjustments "were righting a wrong."
Burton Schwalb, one of Pollin's attorneys, asked if, as of June 3, 1982, it had been established how much money the teams would get out of the adjustments. Osnos said he, Sachs and Pollin could not have made such a determination until detailed schedules were made. Those were made more than a week later, he testified, and projected the adjustments' effects on a basis of various years.
Osnos also produced notes that he said indicated Heft called him on Aug. 28, 1982, to "grumble about the reduction of rent in the Save the Caps campaign" that Pollin had instituted that summer. On April 10, when Heft was told that in a pretrial deposition Osnos had asserted such a conversation had taken place, Heft replied, "Mr. Osnos is mistaken."