King owner Bruce McNall resigned Friday from one of the most powerful positions in the National Hockey League amid a federal grand jury investigation of whether he falsified loan documents.
The NHL announcement that McNall is resigning as chairman of the league’s board of governors--the top position among hockey owners--followed a report in The Times revealing the ongoing federal investigation. McNall officials have confirmed that the investigation has started but said that McNall believes no action will be taken when it is concluded.
The resignation--which the NHL attributed to “personal reasons"--comes amid growing turmoil in McNall’s business operations and developments that have clouded his plan to sell a majority interest in the team to ease his growing financial strain, notably a $92-million debt to Bank of America. On Friday, sources confirmed that an undisclosed number of employees were laid off from McNall’s operations.
Creditor sources confirmed that bankruptcy has been discussed as a possibility for McNall’s operations should the deal fall through to sell the majority stake in the Kings.
But lawyer Kenneth N. Klee, who is one of the nation’s top bankruptcy specialists and has been working with McNall on his financial matters, said: “There are no bankruptcy papers being prepared, or that have been prepared, for Bruce McNall or McNall Sports and Entertainment Inc.”
Meanwhile, NHL officials are getting involved in trying to salvage the deal and keep the Kings out of any bankruptcy action.
“Bankruptcy would be the last resort, and we believe we can work things out to avoid that,” NHL Commissioner Gary Bettman said in an interview.
There is a provision in the NHL bylaws for the league to step in and take over the team if there was a bankruptcy or considerable financial problems. During the 1970-71 season, the unwillingness of Pittsburgh Penguin owner Donald Parson to take further financial losses forced the NHL to take over operation of the franchise.
Bettman said that Jeffrey Pash, NHL senior vice president and general counsel, is in Los Angeles speaking with all the parties and doing fact-finding. At this point, Bettman is not planning to come to Los Angeles, but will if necessary.
Telecommunications executive Jeffrey P. Sudikoff and Joseph Cohen have been on the verge of buying 65% of the team for $60 million in a deal that sources confirm was to have been financed by insurance giants Cigna and Allstate.
Sources close to Sudikoff and Cohen said that news of the investigation alarmed the two lenders, causing them to shelve their participation in the deal. Sudikoff and Cohen are scheduled to hold talks during the weekend with Bank of America in an effort to persuade the bank to finance the transaction temporarily until the extent of McNall’s legal and financial problems is known.
According to a source close to the deal, one scenario involves Sudikoff and Cohen buying a larger percentage than the 65% previously planned, with whatever percentage McNall retains being put into a trust.
Bettman credited McNall with helping hockey expand--it was during McNall’s tenure as chairman of the NHL board that Walt Disney’s Mighty Ducks of Anaheim and Blockbuster Entertainment Chief Executive H. Wayne Huizenga’s Florida Panthers entered the league--and helping hockey return to network television.
McNall said in a statement that Bettman reluctantly accepted his resignation.
“On a personal level, obviously I hope everything works out for Bruce,” Bettman said. “On a professional level, I need to do everything I can to ensure the Los Angeles Kings franchise is healthy and stable.”
McNall was elected chairman in June of 1992. His term was to have expired in June.
Possible successors to McNall include progressive governors such as Ronald L. Corey of Montreal or Howard L. Baldwin of Pittsburgh. The board thinks highly of Disney’s Michael Eisner, but he is somewhat removed from day-to-day operations.
Times staff writers Helene Elliott and Robyn Norwood contributed to this story.