Howling Financial Woes

The wagering scandal enmeshing Wayne Gretzky through his wife and an assistant coach is the least of the Coyotes' problems

Gretzky, a revered figure in hockey known as the Great One, is the NHL's all-time leading scorer and has long been the sport's most important ambassador. His wife's involvement in the gambling scandal unleashed an international media firestorm that eclipsed the start of the Winter Olympics.

The NHL has stated that no bets on hockey apparently took place. But if it turns out that any of the NHL players allegedly involved placed wagers on his sport, the fallout from the betting ring would be devastating to a league that already is hurting.

In any case, the Coyotes franchise is clearly a house of cards built on massive debt. To make matters worse, the team's primary financier displayed a seeming lack of good business judgment in his final years at the helm of Swift Transportation.

Clockwise from left: Jerry Moyes, Steve Ellman, Rick 
Tocchet, Janet Jones and Wayne Gretzky.
Mark Poutenis
Clockwise from left: Jerry Moyes, Steve Ellman, Rick Tocchet, Janet Jones and Wayne Gretzky.

At first glance, Moyes appears to be the classic American success story. He built Swift from a one-truck operation into a sprawling Phoenix-based company with more than 20,000 employees and $3 billion in annual revenue. Earlier this year, the Arizona Republicdescribed Moyes as a billionaire who derived his wealth from his trucking empire.

But he also appears to be a billionaire who's deeply in debt.

If allegations contained in the class-action suit against Moyes and Swift are true, Moyes has pledged nearly all of his Swift stock holdings as collateral for loans. Moyes and trusts controlled by his family members owned about 34 percent of Swift's 94 million shares of outstanding stock in March 2004, worth about $600 million. More than 96 percent of the Moyes family shares, however, were pledged to secure loans with undisclosed lending institutions, the lawsuit alleges.

Many of these loans were used to cover the Coyotes' burgeoning losses.

Adding further doubt about Moyes' financial condition are some rather unusual actions for a man supposedly flush with cash.

The SEC alleged in its complaint that Moyes purchased 187,000 shares of Swift stock just before the company's May 24, 2004, announcement that it was projecting better-than-expected earnings.

Swift's stock soared 20 percent on the day of the announcement, giving Moyes a $622,000 paper profit.

The SEC alleged in its complaint that Moyes breached his fiduciary duty to Swift by using insider information to purchase 87,000 Swift shares on May 21 and 100,000 Swift shares on May 24.

I can't understand why Moyes would take such action to garner (for a reputed billionaire) a relatively small profit when it was virtually certain that regulators would discover what he had done.

In fact, after Moyes filed a disclosure with the SEC about the stock purchases, independent members of the board of directors instructed him to place an amount equal to the potential profits in escrow. The SEC subsequently began a formal inquiry.

The insider stock trading scandal was the beginning of the end for Moyes at Swift. He stepped down as president in November 2004 and agreed to "relinquish his position" as CEO in December 2005, according to a September 22 statement released by the SEC.

Moyes' financial and legal problems are far from over.

He not only faces unknown liability stemming from the class-action lawsuit pending in Phoenix alleging that he and others improperly propped up the price of Swift stock, he's dealing with another shareholder suit from his ownership in Central Freight Lines, a Waco, Texas, trucking company.

The Texas suit filed last month -- which includes among the plaintiffs brother Ronald Moyes -- alleges that Jerry Moyes and others "operated CFL in a manner designed to enhance their own or Jerry Moyes' wealth, to the detriment of CFL and its shareholders." No doubt Jerry Moyes will deny wrongdoing in this suit, too.

With his direct control over Swift Transportation now severed and at least two class-action lawsuits hanging over him, Moyes' ability to raise substantial cash to cover future Coyotes losses and finance development at Westgate is clearly in question.

From where I sit, it looks like Glendale had better get used to digging into its reserves to cover bond payments on the arena.

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