Something Smells in Glendale: Did the City Steer the Phoenix Coyotes Franchise to an Insider?
Something is rotten in the city of Glendale.
That's my conclusion after poring over bankruptcy files for the Phoenix Coyotes, reading hundreds of pages of municipal records, and getting an earful from some insiders.
I can't say for sure what's happening — Glendale officials are using the specter of litigation to dodge key questions.
But I can tell you this: It smells pretty damn bad.
The record suggests, in fact, that Glendale City Manager Ed Beasley is trying his best to hand over the Coyotes to his friend, lobbyist John Kaites, and Kaites' Chicago buddy, Jerry Reinsdorf. The deal might well suck for the team's current owners (who stand to lose millions) and its creditors (who suggest they're getting a raw deal). And never mind that the Valley has never shown much interest in driving to Glendale for hockey games: Beasley has been working for months to make a deal that would give Kaites and Co. the franchise and force the team to stay in town.
Some of my sources insist that's okay. As a good city manager, Beasley has to do whatever he can to keep the Coyotes in Glendale. That's the only way to save Glendale's multimillion-dollar investment in Jobing.com Arena.
But it's one thing to fight to save a team. It's another thing entirely to fix the playing field for connected insiders.
And that, I think, is exactly what's happened here. Even more than Phoenix, where Frank Fairbanks rules the roost, Glendale is a town run by its city manager, Beasley. And city records suggest that long before Beasley let the city's elected officials know that the Coyotes were in trouble, he was helping to wire the deal for Reinsdorf and Kaites.
And that begs the question: Was Beasley trying to find the best ownership deal for the team or favor some longtime associates?
Here's what I've learned:
In the fall of 2008, Coyotes owners Jeff Shumway and Jerry Moyes began explaining to City Manager Beasley just how bad the team's financial situation was. They asked the city to sweeten the pot and give them incentives to help the team stay in Glendale.
Instead, in October, Beasley inked a deal with a small Massachusetts firm, Beacon Sports Capital Management. (Because Beasley kept the contract below $50,000, he didn't need the city council's involvement. To date, Beacon has come in just under the threshold, at $48,175.)
Beacon was ostensibly hired to assess the Coyotes' finances. Its report, filed in January, has become Exhibit A in the city's argument that the current ownership screwed up and that another group could do a better job. That, of course, opened the door for Reinsdorf and Kaites.
But get this.
Beacon was in Glendale for just three days. And during that time, according to Beasley's own calendar, the sports analysts actually had a meeting with Kaites and Reinsdorf!
To understand how shocking that is, you have to understand the timing. Kaites and Reinsdorf weren't being talked about by anyone as prospective buyers at that point. At that time, in December, as far as owners Shumway and Moyes knew, they were asking City Hall for help — not a buyer.
Some of the best investigative reporting on the Coyotes situation has come from Channel 12's Brahm Resnik. But even Resnik doesn't put Kaites and Reinsdorf into negotiations with the city until February.
Yet Beasley's calendar shows that the Reinsdorf and Kaites were in the loop as early as December.
And new information makes me suspect that Beacon's hire was little more than a setup to bring in Reinsdorf and Kaites — which puts the duo in the picture even earlier.
Michael Reinsdorf, Jerry's son, had been hired to help manage the Arizona Cardinals' stadium in 2004. (His firm, IFG, got the contract as a joint venture with Global Spectrum, a Philadelphia-based firm that just happens to employ Kaites as a lobbyist.)
In the fall of 2008, Glendale hired Michael Reinsdorf's IFG to assess stadium operations at the Coyotes' home, Jobing.com Arena. It was IFG — which, again, is Michael Reinsdorf's firm — that suggested Glendale hire Beacon, as city officials confirmed to me.
The Reinsdorfs have a history of working with Beacon. In fact, court records show Beacon was sued in Los Angeles by a client who claimed Beacon had leaked a confidential report to, yes, Michael Reinsdorf.
So when the Coyotes ran into trouble, Ed Beasley brought in Michael Reinsdorf's firm. At the suggestion of IFG, he brought in a second company, one that had a history of dealing with Michael Reinsdorf. Then he stood by as that firm secretly met with Kaites and Jerry Reinsdorf.
And now we're supposed to look at the firm's analysis as neutral, looking out for Glendale's best interests?
I simply don't buy it.
In May, the Coyotes filed for bankruptcy. Its current owners want to sell to an investor who'd move the team to Canada; it's their only hope to recoup even part of their investment, they say. Meanwhile, for reasons that are still unclear — to me, at least — Kaites and Reinsdorf have become the NHL's pick.
The team's ownership, and future location, rest on whether a bankruptcy judge agreed in court August 5.
Now, Kaites and Reinsdorf might actually be the solution to Glendale's hockey woes. They might be its nightmare. We just don't know: Bid details have been sealed.
When the Goldwater Institute asked Glendale for information about what incentives the city was offering to keep the team under the Kaites/Reinsdorf plan, the institute was flatly denied access. It sued. Even though Superior Court Judge Edward Burke has ruled that some information should be released — and quickly — the bids and information about the incentives was deemed confidential.
But secrets have a way of being revealed, and it's clear to me from city records that no other prospective buyers enjoyed as much access to City Hall as John Kaites and his cohorts. I surveyed a full year of Ed Beasley's daily planner, and no one came to close to Kaites in lunches and scheduled telephone calls. Kaites' omnipresence can't help but have affected Beasley's attitude toward the team's current ownership.
According to an affidavit signed by Jeff Shumway, the team's CEO during the period of time when Kaites and Reinsdorf were meeting with Beacon, Shumway attempted repeatedly to get Beasley to tell his city council about the team's problems.
Instead, Shumway writes, Beasley seemed mostly interested in bringing in a new owner.
"Mr. Beasley reiterated to me that Glendale would not provide [current ownership of the team] concessions because Glendale was only interested in renegotiating when a new entity purchased the Phoenix Coyotes hockey team," the affidavit says. "I explained to him that there was no way Coyotes Hockey . . . would be willing to survive without concessions and that even with the concessions he was willing to make, a new owner would likely need additional concessions . . .
"Mr. Beasley made it plain to me that Glendale was not interested in making financial concessions to Coyotes Hockey . . . while Mr. Moyes was owner of the team."
But Beasley appparently has been willing to make those same concessions for his hand-selected bidders, Kaites and Reinsdorf. The city manager did what he could to put the prospective owners in position — hiring Reinsdorf's son's firm, bringing in Beacon as a "neutral" analyst, sitting back as Beacon met with Reinsdorf and Kaites.
Finally, the Arizona Republic reported Friday that part of the deal for Reinsdorf and Kaites could involve as much as $23 million annually in incentives, through a special voluntary tax on businesses near Jobing.com Arena. And, if the team continues to lose money, Glendale could have to give the Coyotes' owners another $15 million a year.
Even Cardinals president Michael Bidwill is crying foul on this one.
Glendale wasn't even willing to talk about concessions with Moyes, but it seems ready to hand over the keys to the bank vault to Reinsdorf and Kaites.
See what I mean by "rotten"?
John Kaites has a backstory common to many lobbyists. He's a lawyer and a former politician. Before that, though, he was a weatherman for the local NBC affiliate, Channel 12.
A short man with TV-ready hair, Kaites worked as an assistant attorney general, then a deputy county attorney, and finally served three terms as a state legislator before running (unsuccessfully) for AG in 1998.
These days, Kaites practices law at a firm called Ridenour Hienton & Lewis. He also runs a lobbying firm in central Phoenix, Public Policy Partners, and has formed a "consulting" business with the former president of the powerful Phoenix firefighters union, Billy Shields. Perhaps not so coincidentally, Kaites now lobbies for a host of ambulance companies, the public safety personnel retirement system, and the union itself.
Kaites' star crossed with Chicago Bulls and Chicago White Sox owner Jerry Reinsdorf while Kaites was still in politics.
Author Charles Fountain described their meeting this way in a book called Under the March Sun: The Story of Spring Training.
"Long an admirer of the White Sox owner, Kaites asked if he could buy Reinsdorf dinner and pick his brain," Fountain writes. "'I'm buying him dinner,' said Kaites, seemingly struck more by the audacity of his having asked than the irony of the young politician picking up the millionaire's dinner check."
In no time, Reinsdorf became a big backer of Kaites' political career, loaning the politician $28,000 for the attorney general's race. And, according to author Fountain, Kaites played a small role in helping move the White Sox's spring training operation to Tucson in 1998.
Just a few years later, Reinsdorf wanted to move the team's spring training to the Valley, and Kaites was out of office and ready to lobby. He eventually helped Reinsdorf get his deal in Glendale — with nearly two-thirds of the financing coming from the Arizona Sports and Tourism Authority.
How did Kaites get such a sweet deal for Reinsdorf, especially on an intrastate deal like the Sox move? It surely didn't hurt that Kaites knew the ins and outs of Arizona politics, including all about the pot of gold the Sports and Tourism Authority had been sitting on. And as a former legislator representing Glendale, and a lobbyist in partnership with the powerful firefighters union, which can be a singularly important force in municipal politics, Kaites surely had no problem getting anyone in Glendale to return his calls.
Kaites and Beasley, in particular, have long been rumored to have an association that's more than just business. They serve on the board of at least one non-profit agency together and are said to be friends, something a city spokesman didn't deny when I asked him directly. (Kaites didn't return several messages seeking comment.)
"Ed Beasley and John Kaites have a good professional relationship," said Gary Husk, the city's longtime consultant and spokesman for the Coyotes deal; all requests for comment from the city were referred to him. "I can assume over the years as they've worked together, they've become friends."
Beasley's calendar shows repeated meetings with both Kaites and Reinsdorf over the past year. Kaites and Beasley had no fewer than four scheduled meetings or conference calls in August and September 2008, which is right around the time the Coyotes' ownership began asking City Hall for help.
An e-mail that New Times obtained through a public-records request suggests, at minimum, a lack of formality in their dealings. In May, as the Coyotes' current ownership filed for bankruptcy, some fans planned a "Save the Coyotes" rally.
It was Kaites who forwarded the information to Beasley. His note: "See below. They are working on this for Thursday. You need to be involved to make sure there is maximum impact."
For the record, Beasley e-mailed other staff to say that the city would not be involved. He told them he'd follow up with Kaites directly.
By now, of course, Kaites isn't just an audacious young pol asking a power player out to dinner, shocked by his own hubris. He's become a player himself.
In fact, when Kaites registered a limited liability company called Glendale Hockey LLC in June 2009, the company had two members: Kaites and Reinsdorf.
The ownership was split 50/50.
In bankruptcy court, attorneys for the team's current ownership have made repeated attempts to question Kaites. So far, they've been rebuffed: The judge has ruled that the lobbyist isn't the issue, at least not now.
But Tom Salerno, an attorney with Squire Sanders & Dempsey, which represents the team, said any connections between the city and Kaites/Reinsdorf bear examination.
"The ultimate issue is, can they be impartial?" Salerno asks. The possibility that the city's consultant met with Reinsdorf and Kaites in December, Salerno agrees, "does create some issues."
Salerno's clients also hope to explore whether there was collusion between the NHL and the Reinsdorf team, he says. "The judge has allowed us to take depositions in respect to that, and we'll be asking a lot of questions," he told New Times.
It's terrible, timing-wise, to try to explain all this. The situation is literally changing day by day. Blame Glendale for the lateness of my reporting this news: It took the city well over a month to process my records request.
For now, though, the team's ownership — which will determine whether the Coyotes stay in Glendale or leave for Canada — is in question. Last week, the NHL put its blessing on the Kaites/Reinsdorf bid. On September 10, the bankruptcy judge should decide which bid he likes. The emphasis is on "should": Everything is up in the air at this point, including Reinsdorf's participation. (Stung by leaks about the incentive package he's requesting, Reinsdorf is now threatening to pull out.)
The battle could get ugly.
For one thing, Moyes has shown that he won't go down without a fight.
For another, the Goldwater Institute, which successfully struck down Phoenix's incentives for the CityNorth shopping center, has vowed to fight any similar package that Glendale offers to keep the Coyotes in the Valley. The Goldwater Institute is now attempting to intervene in the bankruptcy, warning the judge that any deal may well require the Arizona Supreme Court's review.
Trust me: No matter what happens next, it's going to be a long, tough slog.
At some point, though, Ed Beasley will no longer be able to hide between "ongoing negotiations" and "active litigation." Then, he's going to have to explain just how long he's been talking to Reinsdorf and Kaites about this deal.
He's going to have to explain how he decided to hire Beacon Sports Capital Management — and how they ended up meeting with his favored bidder long before anyone else knew there was a chance to bid.
He's going to have to answer questions about his relationship with John Kaites.
Glendale may not have a hockey team in six months. That's up to the bankruptcy judge, the Glendale City Council, and ultimately, maybe even the state Supreme Court.
But as the smoke clears, we'd better be getting some answers about what exactly transpired with this deal. That part is up to us, and I hope we're pushy.
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