Saturday, February 28, 2009

Did I Say $45 Million? Sorry, I Meant $10 Million

Now that the smoke has cleared from the Dodgers' fourth attempt to sign Manny Ramirez, one which blew up with Ramirez rejecting the Dodgers' offer and the Dodgers hurriedly issuing a press release trying to position themselves as the victim, one realizes that the guy with egg on his face isn't Ramirez, or even the devil that goes by the name of Scott Boras. No, the idiot here is, unsurprisingly enough, Frank McCourt, whose disingenuousness shone through after details of the deal made their way out later on Friday.

Thursday, McCourt's press release made it sound like the Dodgers' deal was simple: two years, $25M in year one and $20M in year two. Year one's salary would put Ramirez as the highest paid player in baseball, short of Alex Rodriguez. And at a player's option for year two, Manny could take the $20M or test the market again, it was his choice. This, the Dodgers' press release indicated, led to Boras' rejection, and the Dodgers' sorrow that a reasonable and generous offer was not accepted.

Of course, LA Times resident McCourt publicist (and Ramirez hater) Bill Plaschke took the bait, hook line and sinker, in Friday's column:

Think about this.

For the first year, he would earn $25 million, making him the highest-paid athlete in Los Angeles and the second-highest-paid player in baseball.

If he failed, the following year he still would earn $20 million.

If he succeeded, he could immediately void the contract and sell himself for millions more.

It was a real offer. It was written on a real contract. It was handed over during a time of real national economic distress.

This week, by every stretch of the wildest imagination, the Dodgers made Manny Ramirez a no-lose proposition.

By rejecting it Thursday, Ramirez has officially lost it.

He's lost his dignity. He's lost his perspective. He's lost his marbles.

Plaschke went on to say how Ramirez and Boras have lost another bunch of things, all strung together in short punchy sentences with similar sentence construction. Sort of like this. Sort of like that. Sort of like the kind of thing you'd expect from a middle-school newspaper writer.

But enough about Plaschke. The point is, Old Bill, just like the rest of us, didn't know the true story. By midday Friday, it became clear that the Dodgers' offer had enough deferred payments and options, that it was nowhere near the two-year $45M deal they had said they proposed. Boras wisely leaked the truth about the Dodgers' offer, and suddenly, McCourt's victim card backfired in his own face:

Dodgers General Manager Ned Colletti confirmed Thursday the club's offer to Ramirez was for $25 million this season, and another $20 million in 2010 at the player's option for the second year.

What Colletti didn't mention Thursday, the source said, was that most of Ramirez's salary would've been deferred. Two other sources previously told The Times that the proposed deal included deferred payments.

Under the terms of the contract that Ramirez was offered by the Dodgers on Wednesday, he would receive $10 million this year. And by exercising the option for the second year, he would receive $10 million in 2010. Colletti confirmed today that deferred payments were involved.

"The deferred component was part of the deal from the very beginning," Colletti said, though he would not discuss specifics of the deferred payments.

Ramirez, who turns 37 in May, would've been paid the remaining $25 million over the next three years without any added interest. He would've received $10 million in 2011, $10 million in 2012 and $5 million in 2013.

So let's recap. This was NOT a $25M first year, but rather, a $10M first year. In fact, it's a $10M one-year deal, with the option to receive the other $35M ONLY IF Ramirez executes the option. And even then, the remaining $35M would trickle in over a four-year period.

Let's pause here, for the mathematically challenged:

  • McCourt tells us in a press release that year 1 is worth $25M.
  • Boras clarifies that in fact year 1 is worth $10M.
  • Ramirez pulls out his HP-12C and realizes that $10M <<<<< $25M. He rejects the "offer."
  • Dodger fans smell a rat. And it's McCourt.

Now, getting back to this whole deferred compensation thing, which was "always part of the deal" according to Colletti, except for when the Dodgers neglected to mention it in their press release or Plaschke forgot to reference it in his Thursday column. Deferred compensation is in theory a good thing--you can take some of your salary when you're in a lower tax bracket, right? But at $10M+, I don't think the tax bracket implications matter that much (at least, they didn't for me).

And Manny's no fool--even Manny knows the time value of money. If you're giving me money at a later date, in order to make it "whole" versus receiving money today--you'd better give me interest.

Frank McCourt's deal deferred Ramirez' money, and paid NO interest. So the extra $25M in deferred money (beyond the two-year period) was in fact worth much less than that. And so, it's no surprise that Manny and Scott said no.

McCourt can keep trying to snow the fans into thinking that he, and the Dodgers, are the ones being left out here. But the fact of the matter is that his handling of this Manny Ramirez deal has been horrendously inept. McCourt trying to use inciting press releases to out-spin Boras and Ramirez, armed only with false information and what appears to be a cash-poor quiver of arrows, is a losing battle. No, it's a massacre. It's like a fifth-grade basketball team going up against the NBA West All-Stars. Every shot attempt is not only getting blocked, it's also getting rejected out to the loge level. And McCourt stands there, without the ball, looking like he's way out of his league.

I actually feel bad for Josh Rawitch, VP of Public Relations for the Dodgers. What an uphill battle.

Plaschke, by the way, tries to avert culpability for being played like a fiddle 24 hours prior, saying that McCourt and Boras both need to find a way to get along. Which I suppose are relatively bold words for someone so far in the pocket of McCourt in the first place.

If one ever wondered if Frank and Jamie McCourt were fit to run a large-market major league baseball team, the Manny Ramirez negotiations bumbling should make it abundantly clear. They're in way over their heads. At this stage, I've become so pro-Ramirez, that I find myself rooting for him almost against the Dodgers.

We'll see if that sentiment changes once I see him suited up in orange and black.

Earlier: Did I Say $45 Million? Sorry, I Meant $55 Million (SoSG)


casey said...

nailed it!!

NicJ said...

I wonder if mr McCourt will agree to defered money when I go to buy dodger tickets this year, If I buy tickets this year.

I think manny would still get alot if cheers at the ravine in orange and black. Reserve the boo's for frankie.

Kyle Baker said...

wow...i want to say you're over-reacting, but alas i think you're dead on.

Eric Karros said...

I don't think the tax issue is about whether it puts Manny in a lower bracket, but rather if the highest bracket will be taxed at a higher rate after 2010 when $25m of his money would be received. So it's another factor that (potentially) hurts, not helps, the value of the offer.