SOCCER / JULIE CART : Rothenberg Might Have Stepped Over Line
Alan Rothenberg, president of the World Cup Organizing Committee, the U.S. Soccer Federation and of a proposed new professional soccer league, has always danced closed to the edge. In fact, he seems to revel in the risk.
It’s not always a bad thing. Soccer leaders in this country have traditionally been conservative, narrow and slightly afraid of venturing beyond familiar borders. They had the gumption to bid for the 1994 World Cup, got it, and then very nearly lost it through inaction. Along came Rothenberg. Where the former regime would examine a risky situation and ask, “Why?” Rothenberg--without pausing to take a breath--would say “Why not?” He would detail an attorney to come up with a business plan, and find a way to fund the project.
Some risks are calculated, however, and some are foolish. And lately, World Cup ’94 might very well have taken the latter course. For months, money has been trickling from World Cup coffers into the bank account of Major League Soccer, the proposed new pro league. The trickle has grown into millions of dollars and the Internal Revenue Service is reviewing the legality and tax ramifications of the situation.
A few things to consider: Rothenberg is president of World Cup and heads the management team of the proposed league. World Cup is a tax-exempt, nonprofit entity. MLS is a private company that will operate for profit. World Cup is charged with organizing this summer’s finals and, stop if you’ve heard this before, leaving “a legacy for soccer in the United States.” MLS exists to form a viable professional league and make money for its investors.
Few noticed or seemed to care when nearly half a million World Cup dollars were used to fund the sophisticated business plan that MLS presented to the U.S. Soccer Federation. The MLS bid won. Remember who’s president of the USSF. Too bad the two other bidders didn’t have the advantage of a multimillion-dollar sugar daddy.
Members of the World Cup board of directors, who are supposed to vote to approve all such expenditures, are a little slow or a little uninterested. But a few began to notice that the trickle of money to MLS had become a torrent. At a board meeting in Las Vegas last December, a tax attorney was present, at the request of some board members. The question: What are the potential problems when a nonprofit corporation funnels money to a for-profit company?
Surprisingly, even with the questions being raised about the advisability of such money transfers, the World Cup board of directors voted to give Major League Soccer $3.5 million for start-up costs. All but two board members voted for the expenditure. One, Charles Cale, voted against it and another, Marian Wright-Edelman, abstained because she couldn’t hear the proceedings clearly over the telephone.
What’s still not clear is if the money was a loan or a gift or, as some say, an investment in the league. MLS, if it ever exists as a viable corporate entity, is under no compulsion to repay the $3.5 million. Why should it? Nothing was put in writing and board members say it will be settled after the World Cup. Where does the line form for that kind of deal?
The tax issue is thorny. World Cup tax attorneys met with the IRS last month in Washington, D.C., to seek a ruling. The IRS could say, “No problem. Keep giving your money away.” It could allow the transaction and begin to tax the gift/loan. Or, the IRS could revoke World Cup’s tax-exempt status and take all that legacy money for itself.
One member of the USSF who has knowledge of tax laws called World Cup’s decision to fund MLS, risky, at best.
How sensible is it to spend the legacy money now and risk any future profit? What business does the World Cup organizing committee have in funding or becoming otherwise involved with the proposed professional league? The international soccer federation’s mandate to launch a Division I league was to the USSF, not World Cup.
If the United States sports market can embrace professional soccer, and if MLS is the right approach, why not let it stand on the strength of its own proposals and plans, rather than being propped up by World Cup? This country has one of the most competitive marketplaces in the world, and if MLS is truly a viable and worthwhile business it will do just fine on its own.
Why bankrupt the World Cup? Why take the risk?
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The other shoe was finally dropped this month, when the American Professional Soccer League made it clear it was going to challenge the MLS for the title of North America’s premier professional soccer league.
The soccer community had been waiting for the APSL, which had bid for Division I status but lost to Major League Soccer, to declare if it was going to accept its secondary position or fight. With the announcement of the league’s expansion by three teams, the APSL clearly is going to fight.
League chairman William De La Pena notes that his league is currently the only professional outdoor league and its longstanding position within the soccer community makes it perfectly placed to become the new Division I league that is expected to begin in 1995. The APSL expansion is projected to bring the league to 12 teams by 1995 and De La Pena says that should speak volumes about the APSL’s financial viability.
“There are a significant group of people who want to be part of traditional soccer,” said De La Pena, who is also the owner of the L.A. Salsa. “There are business people who are entrepreneurs and want to run their own team.”
His reference was the MLS’ single-entity concept, where all players, coaches and team administrators are employees of the league.
De La Pena said the APSL does not want to have an antagonistic relationship with the USSF, but said the league would be willing to go to court to protect its right to exist.
“We will protect our ability to play, that’s for certain,” he said. “We will meet them on the field--let’s compete on the field. That’s where people will decide the best team or league, on the field.”
Regarding the possibility that the professional mess could end up in the courts, De La Pena said the APSL’s attorneys are confident.
“Look at the 1967 antitrust case,” he said.
That case involved three competing professional soccer leagues in the United States. The USSF awarded Division I status to one, prompting a lawsuit by one of the others. By the time it was settled, remnants of the three leagues became the North American Soccer League, the last viable pro league in this country.
Soccer Notes
The schedule for the U.S. national team is intensifying. The team’s next game is March 26 against Bolivia at Dallas and World Cup preparation begins in earnest next month. Three games are scheduled in mid-April to approximate the World Cup’s first-round schedule. The United States plays Moldova April 16 at Jacksonville, Fla., and again April 20 at Davidson, N.C., then Iceland on April 24 at Southwestern College in Chula Vista. Tentatively scheduled is an April 13 game against Argentina at Buenos Aires. The team plays Chile on April 30 at Albuquerque, then three games are scheduled against as yet unnamed opponents: May 7 at Cal State Fullerton, May 15 at East Los Angeles College and May 21 at Cleveland. The U.S. will play Saudi Arabia May 25 at an undetermined location and Greece May 28 at New Haven, Conn. Bill Nuttall, U.S. team general manager, said he hopes to schedule Mexico on June 4 at the Rose Bowl.
