L.A. Marathon operator scrambles to make good on debts

Chris Devine had big plans for the Los Angeles Marathon when the radio executive and running enthusiast acquired the race four years ago for a reported $15 million. Now, however, the race is on the sales block as Devine scrambles to meet a self-imposed June 15 deadline for paying creditors what they are owed.

That kind of uncertainty wasn’t envisioned in 2004. Chicago-based Devine Racing Management LLC viewed the annual race as a crown jewel for an endurance sports powerhouse that would buy and create races around the country. The deal also seemed to offer longtime L.A. Marathon owners Bill Burke and Marie Patrick a graceful way to disengage. And it gave the city of Los Angeles an opportunity to end costly subsidies for race-related services.

But operating marathons proved to be as difficult as running one.

The high-powered and costly marketing team that Devine Racing assembled in Chicago was disbanded after struggling to generate new revenue from advertising and sponsorship deals. And the City Council’s bid to end race subsidies crumbled after elected leaders mandated that the race be run on a politically acceptable route, despite the higher cost such a change would bring.

Burke and Patrick, who maintained an operating role in the race, have steadfastly declined to comment on the race’s problems since selling their equity stake.

Devine Racing’s cash-flow problems have grown increasingly public in recent months. Zappos, the online shoe retailer, on May 30 severed its ties with Devine Racing’s Las Vegas race, citing the company’s financial problems. And some business owners in Los Angeles continue to complain that payments are slow in coming.

“I haven’t been paid for the March race yet,” said Ron Scardera, who measured the L.A. Marathon course to make sure it met USA Track & Field marathon standards. Scardera said that his checks for the 2007 Las Vegas race also were slow in arriving.

James D. Sprinkel, founder of Buena Park-based Southern California Barricades, said that he hasn’t been paid in full for setting up road barriers for the 23rd L.A. Marathon in March.

“I’m still waiting for a percentage of what I’m owed,” Sprinkel said. “I’ve been promised payment several times, and I now have [a] June 4 promise. So we’ll see what happens.”

Devine Racing founder Devine is scrambling to make good on a promise to pay creditors what they’re owed by June 15. As part of that effort, he put the L.A. race on the market with a price tag, according to a published report, set at $9 million to $12 million.

L.A. officials, meanwhile, have been negotiating with the company over invoices for city-provided services for the 2007 and 2008 races, and have recommended a steep discount. Both sides agree that the city-mandated route change – designed to ease traffic congestion – resulted in higher costs.

The city administrative officer and the chief legislative analyst recommended that Devine Racing’s invoice “be discounted by 32.9%,” and that the city pay “additional expenses” incurred by the operator because of the routing change. A City Council motion that approved the course change indicated officials knew costs might increase and would need to be negotiated.

The 2007 race cost the city $793,749.50 and expenses for the 2008 race are expected to be at least that high. The discount still must be approved by the City Council, but suggests that the city absorb $808,830 in costs for those two races.

The city long has subsidized the race on the assumption that it drives economic benefits along the race route that attracts about 20,000 runners and thousands of volunteers.

Some business, charities and government agencies have voiced concern about more immediate economic issues.

LAPD Lt. Roger Mora said during a telephone interview that the agency’s youth Explorer program waited for a year for Devine Racing to issue a promised $11,000 check in connection with the 2007 race. The check was to help cover costs for the more than 100 Explorer scouts who served as race volunteers.

“And when it finally arrived the week before the 2008 race, it had insufficient funds,” Mora said. “They’ve since wired the money and made good, but in the future I hesitate to submit our kids to that kind of treatment.”

Just weeks after the 23rd marathon was run, Devine Racing bounced a $14,000 check to the Los Angeles Central Library to cover costs of using its Mark Taper Auditorium as the media center on race day in March.

Devine Racing dispatched a new check, and library spokesman Peter Persic confirmed that it had arrived and been cashed.

Devine Racing Chief Financial Officer Dan O’Donnell acknowledged during a phone interview last month that some checks had been mailed late or had been returned for insufficient funds. The company earlier acknowledged that it had bounced checks to some contract workers immediately after the March marathon.

“There’s no excuse,” the Chicago-based executive said. “If we send a check out, the onus is on us to ensure that it clears bank and is good. The only thing I might say is that the event size, the scale of the L.A. Marathon means we’re talking about several hundred different vendors.”

Devine Racing also has caused grumbling in the running world.

Running USA, a Ventura-based nonprofit, said that it has given up on seeking $60,000 that it maintains Devine Racing still owes. Initial payments made in 2005 were on time, but subsequent donations were slow to arrive, said Basil Honikman, a Running USA board member who recently retired as the organization’s chief executive.

“We kept waiting, talking to them, phoning them,” Honikman said. “They failed to live up to their financial commitments, and despite many, many promises from them, we decided to walk away. We have written that money off as far as Running USA is concerned.”

Devine Racing, though, disputed Honikman’s account.

“The agreement was effectively terminated, basically because of dissatisfaction with the value of what we were receiving,” O’Donnell said.

Devine Racing also suggested that Honikman’s account might have been colored by the fact that his son, Steve, had been employed by Devine Racing in its L.A. office until he left “as a result of issues Steve had with Burke and Patrick.”

Steve Honikman acknowledged that he left Devine, but tied his departure to frustration with how the race was being operated.

The younger Honikman served as production director for the 2006 race and race director in 2007. He said that when he began to line up contractors for the upcoming race, “many of them said they hadn’t yet been paid for the 2006 race. I had sent all those bills along to Chicago and assumed that they’d been taken care of. But as I was trying to stage the 2007 race, I realized that nobody had been paid. It was crazy.”

Officials at USA Track & Field, the national governing body that sanctions marathons, said that they began to hear about possible problems just months after Devine Racing purchased the L.A. race.

“We began to hear about problems with prize money, bonus money,” said Jim Estes, an associate director of USA Track & Field. “Shortly after that, we began hearing stories of unpaid vendors. We looked into all of that, and were given assurances by Mr. Devine that these were minor blips on the radar screen.

“Yet the problems and the issues seem to continue, particularly with the bounced employee checks,” Estes said.

 greg.johnson@latimes.com