Metro subpoenaed in Del Biaggio case 6/12/08
Metro subpoenaed in Del Biaggio case 6/12/08
Metro subpoenaed in Del Biaggio case FBI seeks info about role in Predators deal
By BRAD SCHRADE Staff Writer
Predators investor William J. “Boots” Del Biaggio III’s trail of financial and legal troubles drew closer to Nashville Wednesday, as the FBI subpoenaed documents from Metro concerning the California businessman and his role in the purchase of Nashville’s pro hockey team last year.
It also has become more clear in recent days that as much as $27 million in debt Del Biaggio incurred on his way to bankruptcy may have direct ties to the Predators deal.
An arena management company, AEG Facilities Inc., is the latest to accuse the high-flying 40-year-old San Jose venture capitalist of fraud, according to a lawsuit filed Friday. The company is a division of entertainment giant AEG, which manages sports arenas and owns the NHL’s Los Angeles Kings, and says it loaned Del Biaggio $7 million to help him buy a share in the Nashville Predators.
It was the second lawsuit filed in the past two weeks claiming loans Del Biaggio took out to buy his 27 percent stake in the team were acquired fraudulently.
The other involves a loan Modern Bank made for $10 million to Del Biaggio. Both creditors accuse Del Biaggio of defrauding them by misleading them about his financial wherewithal and collateral available to back the loan.
Del Biaggio’s bankruptcy filing Friday also lists former Predators owner Craig Leipold as a creditor, claiming that Del Biaggio owes Leipold $10 million. It’s unclear from the filing how that loan relates to the deal for the team, and neither Leipold nor his former team would provide details.
Metro will cooperate
The FBI’s subpoenas appears to be tied to a federal investigation of Del Biaggio out of Northern California. They were delivered Wednesday morning to the Metro Council and the Metro Sports Authority, which acts as landlord on behalf of the city at its big-league sports facilities.
The subpoenas request all records pertaining to Del Biaggio’s dealings with the city and the purchase of the team. The feds are seek any documents that relate to his “finances and financial condition,” according to the subpoenas.
Metro Council assistant director Jon Cooper said the FBI agent was in the council office for about five minutes Wednesday. Cooper said the council office plans to fully cooperate, and he has forwarded the request to the city’s law department.
The subpoenas are standard in a federal investigation focused on financial fraud, said David Raybin, a Nashville attorney and former prosecutor. He said investigators may start with one allegation of fraud, and then branch out to other business dealings of a person or entity.
“They are trying to show what I call the footprints of fraud,” Raybin said. “You have one isolated, fraudulent action. It doesn’t carry much weight unless you can connect it to a pattern.”
Del Biaggio is from a wealthy Northern California family. He owned a stake in the San Jose Sharks NHL team before joining a group of Nashville-based investors who bought the Predators last year.
He also was linked to AEG before the Predators deal through a contract to bring a hockey team to Kansas City, Mo., and the new Sprint Center there, which AEG owns a stake in and manages.
Del Biaggio first emerged last year as a bidder for the Predators, but later joined the local group, led by David Freeman, that eventually bought the team for $193 million. Del Biaggio was seen as a key investor to make the deal work.
In its lawsuit, AEG said that on or about Oct. 29, 2007, it agreed to loan Del Biaggio the $7 million for the sole purpose of helping him buy his stake in the Preds. A day later, Del Biaggio said in an interview that he had cut ties with AEG regarding the Kansas City arrangement, but that he remained close to the company’s top executives. He made no mention of the $7 million loan.
Freeman on Wednesday said he was surprised to learn Del Biaggio still had a financial relationship with AEG. “We didn’t have any knowledge of any kind of business relationship between Boots and AEG until we saw it in the bankruptcy filing” last Friday, he said.
Preds say they’ll survive
Since Del Biaggio’s spiraling financial troubles became public two weeks ago, the Predators have maintained that the problems will not affect the team’s operations. The team is believed to be trying to buy out his share or seeking someone who can.
John Vrooman, a Vanderbilt University economist who specializes in the business of sports, said he doesn’t think Del Biaggio’s problems will disrupt the team.
The fact that Del Biaggio is a minority owner should help, and Vrooman expects another investor to seamlessly step in.
The NHL is better positioned since the 2004-05 lockout, and the team has a generous deal in Nashville, he said.
“As long as your general partner is stable you’re in good shape,” Vrooman said. “Since the bankruptcy of the (Pittsburgh) Penguins in the mid- to late-’90s, the NHL has become very aware of bankruptcy problems