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The $126 Million Fumble
John Steinbreder
March 14, 1988
How Billy Sullivan and his son Chuck turned a $25,000 investment in the Patriots into a financial disaster
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March 14, 1988

The $126 Million Fumble

How Billy Sullivan and his son Chuck turned a $25,000 investment in the Patriots into a financial disaster

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Billy Sullivan was raised in a middle-class home in Lowell, Mass., where his father was a sportswriter for The Lowell Sun. In 1938, Sullivan convinced Boston College officials that they needed someone just like him to spruce up the school's image, so BC hired him as its first full-time public relations director. That same year, Frank Leahy was hired to coach the school's football team, and he and Sullivan remained close friends. When Leahy left BC to coach at Notre Dame in 1941, Sullivan tagged along as a ghostwriter for Leahy's syndicated newspaper column. He stayed a year in South Bend before joining the Navy. Sullivan spent most of his four-year World War II hitch stateside, doing public relations, and after the war he became p.r. director of the Boston Braves.

In 1955, Sullivan joined the Metropolitan Coal and Oil Co., a home heating company in Boston, as assistant to the president. Three years later, he became Metropolitan's chief executive. By then he and his wife, Mary, had six children. In 1959, Leahy called. He was helping Barron Hilton, the hotel magnate, put together the Los Angeles Chargers of the fledgling AFL. The league had seven teams and needed one more. Leahy wondered if Sullivan would be interested in starting a franchise in Boston.

Sullivan jumped at the offer and is fond of recalling that he had to spend his life savings of $8,300 and borrow the rest to come up with the $25,000 for the franchise. Then Sullivan lined up nine partners, who invested $25,000 each, the money going for working capital.

As the Patriots' president, Sullivan was always scrambling for money to make ends meet and to find a stadium in which to play. He and his partners raised $600,000 by selling nonvoting shares of stock to the public. Regardless of the hassles—and there were many—Sullivan was having himself a ball.

After 11 seasons, the Patriots still didn't have a permanent home. Negotiations to use area college fields had collapsed, and the city of Boston was unwilling to construct a stadium. The NFL put pressure on Sullivan to build a stadium amid concerns that the team might move elsewhere. Then, just when a move seemed inevitable, Sullivan and some of his partners hatched a plan to keep the team in the area. They decided to build in Foxboro, Mass., some 20 miles south of Boston, and proceeded to do so—in 1971—for a bare-bones $6.7 million. The Schaefer Brewing Co. picked up 25% of that tab, and the stadium was named after the beermaker. The team was rechristened the New England Patriots, and Sullivan was lauded for saving pro football for metropolitan Boston.

Although the Pats had found a home, they continued to struggle on the field and at the box office. Some of the partners thought the time had come for a change of leadership, so in a power play they ousted Sullivan as president and replaced him with Robert Marr, the son of one of the original partners.

Sullivan wasn't about to go down without a fight, but regaining control of the franchise would be expensive. Chuck quickly stepped in to help him come up with the cash. It was hard to believe that the two men were father and son: Chuck was as achromatic as his father was colorful. Personality differences aside, Chuck, then an associate with the prestigious Wall Street law firm of Sullivan (no relation) & Cromwell, was devoted to his father and wanted to do what he could to reinstate him as the team's top officer. So he acted as the point man in buying out the other voting partners and convincing the banks that the Patriots could generate enough cash to pay off the loans needed to finance the buyout. But a legal source close to the dealings says the banks wouldn't lend the Sullivans money unless they could put up the team as collateral, which meant they also had to persuade the hundreds of nonvoting shareholders to sell Billy their stock.

After much wrangling, they bought the voting stock of the very people who had given Billy the boot. The key to the deal was cajoling a widow, Hessie Sargent, who had inherited more than 10% of the team from her husband, another of Billy's original partners, into selling. Most of those with nonvoting stock—there were 139,000 nonvoting shares held by the public—were reluctant to give up their shares. Under Massachusetts takeover law, two thirds of the nonvoting shareholders had to approve a proposed buyout, and the Sullivans hadn't lined up that much support.

Attorneys and family sources familiar with the transaction say that the Sullivans went to the state legislature for help. Barney Frank, a family friend and a state representative who now serves in the U.S. House of Representatives, and David Schwartz, then a member of the Massachusetts House, pushed through a bill that amended the takeover law: Now a simple majority would suffice where once a two-thirds majority was required. The Sullivans received just enough support for their a takeover and bought back the nonvoting shares at $15 apiece. Chuck arranged financing plan that met with the banks' approval, and Billy owned the team. (Billy holds 100% of the Pats, now valued by one appraiser at $75 million; Chuck owns the stadium, which is valued at $15 million.)

The takeover had put the Sullivans, and the Patriots, $11 million in the hole. But that didn't seem to bother Chuck. A source close to the family who is a former shareholder says, "Chuck came up to me after the deal was completed and said, 'We just got a $30 million team for $11 million.' "

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