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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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In 1981 the Sullivans moved to get sole ownership of Schaefer Stadium. Once again Chuck, using his father's assets, led the attack, offering to buy out the shareholders for $12 a share. They jumped at his offer because, as one former business associate of the Sullivans says, "The price was way above what anybody else would've paid. The Sullivans always paid too much."

One of the Sullivans' first moves after completing the deal was to rename the structure Sullivan Stadium in Billy's honor. They also added luxury boxes and a dazzling DiamondVision scoreboard. Cost of the sale and improvements: about $15 million, some of which was borrowed from Crocker National Bank of California.

The Sullivans had almost scary borrowing power, even while they were shackling the Patriots and the stadium with nearly $30 million of debt. The value of NFL franchises was appreciating wildly, and banks became less leery of lending money to football tycoons, especially those who had complete control of their teams.

The Sullivans kept wheeling and dealing. Chuck spent $1.5 million on some acreage across the street from the stadium, with hopes of turning it into a shopping complex. The Sullivans then paid a total of $1.5 million a year to lease a harness race track and 100 acres of land that adjoined the stadium grounds. Having regained their team and their stadium, the Sullivans were looking to increase their holdings in the immediate area. But in doing so, they were mortgaging the future.

Their power was also growing within the league. Chuck had impressed the other owners with his financial wizardry and in 1977 was named chairman of the NFL Management Council's Executive Committee. When Leonard Tose, then owner of the Philadelphia Eagles, was in danger of going bankrupt, Chuck secured a $12 million loan that bailed out Tose. During the players' strike in '82, Chuck strengthened the league's ability to withstand a long walkout by negotiating a $150 million line of credit from Crocker Bank that the owners could use as a strike fund.

Chuck seemed to get carried away by power. "The team and the league had become terribly important to him," says Camille Sarrouf, a lawyer and former Patriots shareholder who successfully sued the Sullivans. "He once said to me, 'There are 100 U.S. senators but only 28 owners of an NFL team.' "

But even as Chuck ascended in the NFL hierarchy, his family's decline was beginning. The 1982 strike sapped the team owners of revenues. The Sullivans were hurting more than most because they were still paying off the debts they had assumed when they took over the Patriots. Interest rates soared in the late 1970s and early '80s, when the Sullivans had done most of their borrowing, and the Sullivans were paying several million dollars a year just to service those loans. Then Chuck came up with a plan that would not only clear the books but also give his father and his family lifelong financial security: In 1984 he decided to promote a 15-city international music tour—the famous Victory Tour—featuring Michael Jackson.

Chuck had dabbled in music promotion before, having brought Duke Ellington and the Kingston Trio to Boston College for concerts while he was attending law school there. When he was stationed in Thailand, during the Vietnam War, he worked as the Army's front man for Bob Hope's 1968 Christmas tour. In the early '80s he brought such big names as David Bowie and The Police to Sullivan Stadium.

This time, however, Chuck was in over his head. He eventually signed a deal that guaranteed Jackson $41 million, and he had to borrow much of that money. Once again he put up Sullivan Stadium as collateral by taking out another mortgage.

Chuck gave Jackson too much. He had guaranteed 75% of gross revenues from anticipated ticket sales. For various reasons—for example, because of lack of familiarity with stage construction and design, the promoters overestimated the number of tickets that could be sold in many of the stadiums—receipts fell far short of estimates. Chuck also had to cover most of the Jackson entourage's considerable expenses. Chuck employed 120 people for the tour and provided Jackson and his large troupe with everything from their favorite foods and beverages to two 175-ton stages that had to be assembled and taken down at every stop. Total overhead expenses ran about $1 million a week, which was far more than expected.

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