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Saturday, March 29, 2014

How An Islanders Sale Can Fall Through

There is talk out of Canada that the New York Islanders hockey club may be up for sale. Fans of the team are generally happy about the prospect (see the vituperative comments to this article). However, a sale is far from a done deal and this article explains some of the common ways a possible deal can fall apart. I base my thoughts on my knowledge of the desires of a reasonably intelligent potential purchaser, knowledge gained through years as a former corporate mergers and acqusitions lawyer turned corporate due diligence lawyer.

First off, this is a legal, policy and economics blog, not a hockey blog. Dissertations of what's wrong with the team (the players) itself are left elsewhere.

As for a deal, the primary buyer concern is valuation. What is the right price?  A buyer does not want to overpay. This calculation is a function of revenues.  As the Islanders franchise is leaving its present arena (Nassau Coliseum) for the recently opened Barclays Center 30 miles to the west, historic revenues do not bear much on future revenue potential.  The word "potential" needs to be emphasized and this is a wild card.

A prospective buyer should be looking at an Islanders deal as buying, in essence, an expansion club moving into a virgin market.  The New York metropolitan area is obviously a historic hockey market, hosting not one but three teams (the New York Rangers since 1927 and the New Jersey Devils since 1982).  The market itself does not need to be conditioned but the ticket base and sponsor base need to be expanded.  As the team is moving far enough from its soon-to-be-vacated venue to its new home, historic revenues should not mean much (a plus given that recent revenues such as attendance have been subpar, a fact owing almost entirely to the team's on-ice product being regularly among the worst in the National Hockey League for most of the last 25 years).  The flip side and not necessarily a positive one is that the new home carries uncertainty as to both performance and potential.  

Attendance-driven revenues have a ceiling imposed by the ticket prices the market will bear, and the seating capacity of the building.  Attendance drives sponsorships and other ancillary revenue streams such as licensing and merchandising. Sponsors do not care about the sport, they care about the size and disposable income of the audience.  Therefore, a buyer has to get a grip on the audience potential, the fan base, meaning tickets sold.  The media audience (i.e., television) is more of a known quantity although the move to Brooklyn by itself will get publicity for the "new" venture.  Anything "new" gets an initial pop in attention. Whether it can be sustained over time is a big and valid question.

Other pitfalls to a deal are far less obvious. There may be issues with current debt obligations or ambiguous legal liabilities that would be discoverable only upon careful due diligence.  These liabilities cut into profitability and can reduce the probability of making a profit.  Who does your due diligence may determine whether the deal gets done.

Many large law firms do corporate due diligence and offer their clients the reassurance of using "name brand" lawyers. In reality, large law firms use very junior lawyers for vetting deals, contracts and the like. This means you have very smart but often just as unmotivated, bored and exhausted young men and women looking -- and you hope, attentively and passionately -- at contract details which could determine whether you as the owner make or lose millions of dollars a year. The firms will assure clients that partners and other experienced, mature lawyers are "supervising" the junior lawyers.  If you're the buyer, you hope you're right.

On the sale side, you care only about the sale price. But it's not as simple as you think. If it's a straight cash deal that's one thing; it's just the number. But if you are getting paid in part with a percentage of revenues going forward, you will want assurances (these are called "covenants") as to the team's operations after the sale. If you are getting paid in debt, meaning you are getting a promissory note, you are getting the equivalent of mortgage payments, interest payments from the buyer, with a lump sum payment at some future date.  If that is the case you will want to see how creditworthy the buyer is.  Even wealthy team owners default on loans and other obligations, and sometimes, they are more likely to do so because they view nonpayment as an acceptable business tactic. So, seller beware. 

And with any of these purchase price components, the questions and debate will revolve around their valuation.

This is just a short explanation of how and why a simple deal is anything but simple.

Friday, March 28, 2014

Bridgegate Report: A Legal Analysis

This brief article summarizes some points on the purpose and role of reports such as the report summarizing findings of the internal investigation by the Gibson Dunn law firm on the Bridgegate / Sandy federal aid to Hoboken controversies for the Office of the Governor of New Jersey, which was released Thursday.

(Note: Analysis of this huge document and its exhibits is ongoing. Inquiries should be made directly to the author at

First, the document is produced on behalf of an entity. The Office of the Governor. Not Chris Christie the individual, nor Governor Chris Christie.  The client is the "Office."

Why is this important? It is not to clarify who the "client" is - as some have already speculated the real client is the individual Governor. (By the way, the conflicts inherent in the various representations of the players in this entire controversy are discussed in detail in my January 17th article.)

No, the real reason is to guard against the real, if small, risk that the report could be evidence of an attempt at obstruction of justice. That is a felony.

If the report has any material misstatement or intentional falsehood, and it is given to federal prosecutors, the argument can be made that the authors - or any source identified in the report (and there are over 1,400 footnotes) - were trying to mislead federal agents investigating the matter.

Second, the report is (for the reason explained above) written in a defensive tone. That is why the effort to source its statements is so evident. Note that this objective is not "finding the truth." The real purpose of this report is to show some effort by the entity, the Office, that it tried to be accountable and will consider reforms of its operations.  The purpose, therefore, is not to find the truth as much as it is to show they made a good effort and cannot be faulted.

After all, the report -- and the law firm Gibson, Dunn's role -- is meant to advocate, not to be the objective finder of facts.

Third, the report disappoints by relying too heavily on outside press reports when it had access to insiders. The mechanics of government operations should be explained and attested to by officials. This was not done, such as in the case of the section explaining the workings of the Office of Intergovernmental Affairs. Press reports should not be the source; there should be a government official who can certify this is how things work or at least were intended to work.

The absence of such certifications gives off two messages. The first message is that people want wiggle room, that there are legal concerns. When the question or issue is so benign, that has to be interpreted as a sign of trouble.  The second message is the most logical inference to draw from my fourth major conclusion from the report.

This fourth conclusion, which draws on more than an isolated instance but really identifies a trend, is that the report is full of unsubstantiated, undocumented and ultimately unverifiable factual statements, assertions and assumptions. 

There are 1,414 footnotes and 610 exhibits. At first glance the report appears to be professionally and thoroughly sourced.  Until you examine the report.  Many of the footnotes, upon close examination, bear little or no relevance to the sentence or phrase which they purportedly support. More troubling is the tendency of the report to make assertions, cite a footnote to create the appearance of a factual basis, and then have a footnote with no relevance to the assertion one looks to verify.  The magnitude of the exhibits and footnotes appears to be a "shock and awe" strategy -- until you actually start digging. That's when you see the report has a smoke-and-mirrors feel -- and for $650 an hour for junior know-nothing lawyers the New Jersey taxpayers getting fleeced on this should be mighty angry.

Consider page 51 of the report which cites Fort Lee's mayor as being on a list of 21 Democratic mayors whose endorsement was sought by Governor Christie's reelection campaign. You would think (hope) that the list itself would be an exhibit. Why else would the law firm Gibson Dunn make the statement? If there is no list, there is no basis for the statement. But the list is nowhere to be found. And there are other -- there are many -- instances of allegations, presented as facts, but without any substantiation, none at all.. 

One such example is early in the report on pages 7-8 discussing David Wildstein's alleged actions as the bridge controversy emerged.  Consider the following passage:

"By early December 2013, Wildstein was feeling vulnerable, knew he would have to resign, and then did.75 While he continued to insist to the Governor’s Office that this was a legitimate traffic study, even if flawed in its execution, and admitted that this was his “idea,” he tried to deflect blame, telling Drewniak that he had not acted alone, identifying Kelly and Stepien as others who knew, and claiming he had emails to prove it. Wildstein even suggested he mentioned the traffic issue in Fort Lee to the Governor at a public event during the lane realignment—a reference that the Governor does not recall and, even if actually made, would not have registered with the Governor in any event because he knew nothing about this decision in advance and would not have considered another traffic issue at one of the bridges or tunnels to be memorable. Drewniak passed on Wildstein’s claims to others in the Governor’s Office. Others also heard the Kelly email rumors and reported them back to the Governor’s Office around that time.

How many facts in this passage are backed up with a source? Exactly one, that being the fact of Wildstein's resignation. And consider the cited source for Wildstein's resignation is not even the original document, the Wildstein resignation letter which should be in the possession of the Governor's Office.  The source is a third-party news article (Footnote 75 cites only the article in the Record of Hackensack, available at, reporting the resignation).  This illustrates another major deficiency in the entire report: its reliance on news reports for sourcing of elementary facts.

How many discreet facts are not backed up by any source? I count 14. At least 14. And with full access to the Office of the Governor, there is no excuse for this total lack of sourcing.  Unless there is a reason.

An internal investigation like this one, representing itself to be thorough, should have had access to core, major "primary source" documents. The fact that news reports are the primary sources suggests that either the investigative team at Gibson Dunn did not have the full access claimed, or -- and this is much more likely -- the Office of the Governor and its lawyers consciously and intentionally withheld those primary sources, whether they be documents or witness statements.

And from this last theory, one can -- actually, it's hard not to -- infer that there is something in withheld documents or statements, withheld evidence in any case, which is either seriously politically damaging, personally embarrassing, or evidence of potential criminality.

As Nucky Johnson explained on "Boardwalk Empire" once, "You're too smart to be that dumb." There is a reason the thick report is opaque on simple matters. But remember the report's very purpose is to make a show out of trying to be transparent and accountable.

Even when the real purpose is the exact opposite.

Monday, March 24, 2014

Christie Internal Investigation Report Suggests They're Hiding Dossiers on Mayors

As mentioned last week, I represent a requestor of government records who filed a lawsuit filed last week seeking the production from Governor Christie's office of certain "dossiers" on as much as -- or more than -- 100 mayors across New Jersey.

This morning (Monday, March 24, 2014), Page One of the New York Times has a story on how the Office of the Governor's internal investigation has found no evidence tying the Governor personally to the "Bridgegate" events. I urge you to read the article. The article further makes it seem as if the report containing the internal investigation findings will be released soon.

Curious, though, how the internal investigation can get to all sorts of documents and will apparently release other documents, yet a benign Open Public Records Act request gets stonewalled.

Here is my response in Serringer v. Office of the Governor, Docket MER-L-00563-14, communicated to the State Superior Court, Mercer County.  Note the bold text which is distinguished for emphasis.

Your Honor:
I represent Plaintiff Alexis Serringer in this action under the Open Public Records Act.  This letter is submitted due to exigent circumstances, namely, revelations in a New York Times Page One article (attached) entitled, “Inquiry Is Said To Clear Christie, but That’s His Lawyers’ Verdict.”  The article details the “extensive review” and scope of access of the outside lawyers retained by and given unparalled access to records and personnel of the Office of the Governor (Defendant in this OPRA action). The article cites lead lawyer Randy Mastro citing the “level of cooperation” and “volume of records reviewed” from Defendant. 
 These facts support the inferences that the Office of the Governor had unprecedented resources with which to respond to Plaintiff’s OPRA request for an unmistakably government record. Such ability to respond strongly indicates that The Office of the Governor was far from unable to respond. Rather, it indicates the Office of the Governor knowingly and willingly elected to neither produce dossiers made and kept by the Office nor to cite an exemption or justification under OPRA.  Accordingly, this lawsuit must be allowed to proceed and the previously submitted Order to Show Cause must be issued.                                                                                    
                     Eric Dixon

Sunday, March 23, 2014

Bridgegate: Degrees of Separation

Sometimes the most useful attribute of an investigative attorney is simply having one hell of a memory.

This article in the Sunday Star-Ledger questions (legitimately) whether the blended $650/hour New Jersey taxpayers are paying for Gibson, Dunn & Crutcher to represent "the office of the Governor" in the various New Jersey official investigations into the Bridgegate / George Washington Bridge lane closures and the use of federal funds for Hurricane Sandy recovery (if not other items) isn't really a disguised way to represent Chris Christie the individual.  

(Some speculate he will wind up referenced in some official court pleading from the Justice Department as "Governor 1".  Just like U.S. Attorney Christie referred to the then-sitting New Jersey Governor, James McGreevey, in connection with the prosecution of fundraiser David D'Amiano.  That's the investigation that introduced the word "Machiavelli" into New Jersey political lore. But read my June 2011 article that makes another fascinating connection.)

Now, many unexplained or opaque occurrences -- you might call them coincidences -- are explained only by "it's who you know."   Now's the time to ask: Who is Debra Wong Yang. 

Answer #1:  She was one of the corporate monitors selected by Christie as U.S. Attorney to oversee some wayward company his office prosecuted, back about seven years ago.  

But there's more.

Answer #2:  She was the former U.S. Attorney out of Los Angeles in the last decade, back when Christie was New Jersey's U.S. Attorney.

Answer #3:  After leaving the U.S. Attorney's Office, Yang went into private practice and joined a law firm.  Which law firm?  Why, it's...Gibson, Dunn.  

That would explain a lot, wouldn't it.

The ever-expanded cast of characters (or at least the revelation of same) involves people with whom the Governor of New Jersey has had some sort of working relationship in the past. I have to wonder when a certain mulch farmer from Piscataway, NJ will be revealed to be a witness.

Tuesday, March 18, 2014

For Immediate Release: Ex-Mayor's Daughter Sues Governor Christie For Access To Public Records

For immediate release
Contact Eric Dixon, Esq.
(917) 696-2442




Secaucus, NJ, March 18, 2014:  The daughter of jailed former Secaucus mayor Dennis Elwell has sued the office of New Jersey governor Chris Christie under New Jersey's Open Public Records Act to obtain potentially explosive "color coded" dossiers on the mayors, their political allies and opponents in at least 100 towns across the state.

Alexis Serringer, the daughter of former Mayor Elwell, filed suit Monday in New Jersey State Superior Court, Mercer County. The lawsuit, filed by noted New York investigative lawyer Eric Dixon, is available at docket number L-00563-14 and captioned as Serringer v. Office of the Governor of the State of New Jersey.

The dossiers, whose existence was first reported by the New York Times on January 29, 2014, were allegedly maintained by the Department of Intergovernmental Affairs within the Governor's Office. The New York Times reported as follows:

"Staff members in the governor's office created tabbed and color-coded dossiers on the mayors of each town -- who their friends and enemies were, the policies and projects that were dear to them -- that were bound in notebooks for the governor to review in his S.U.V. between events."

According to Serringer's lawyer Eric Dixon, this makes the dossiers "government records" which "must be produced" under state law. 

"We all know the legal problems plaguing this Governor," said Dixon, "but being under investigation does not relieve anyone -- not even a former United States Attorney and potential presidential candidate -- from the obligations to follow the law just like anyone else."

"There is no excuse," continued Dixon. "The dossiers must be produced.  One of the most preeminent news organizations in human history, the New York Times, has built an entire story around these documents.  The public is entitled to see these documents, without delay," added Dixon, who recently successfully sued the City of Newark on behalf of the conservative magazine National Review to obtain police records about the Wazn Miller shooting and "he fell into my arms" claims made by then-Newark Mayor Cory Booker last fall. 

"The dossier may indicate that the Governor made policy decisions based on detailed political considerations.  Such issues warrant public disclosure and scrutiny from a free, disinterested and unimpeded press corps, particularly in light of recent allegations involving the Bridgegate scandal, the Port Authority of New York and New Jersey and federal funding for Hurricane Sandy relief," said Dixon. 


Sunday, March 16, 2014

Deadbeats' Paradise: Punishing Banks For Trying To Foreclose

Some state legislators think that banks are doing the wrong thing by trying to foreclose...on anyone.

Don't pay your bills -- good. Try to foreclose on people who haven't paid their mortgage in years -- bad. That's the message of this misguided New Jersey legislation that would add an $800 surcharge to every foreclosure court complaint filed by banks in the state.  The average foreclosure filing in New Jersey takes THREE YEARS to go from initial filing to auction. This bill is meant to deter foreclosures, and not emphasized is its other desire, which is to keep absolute deadbeats in their homes.

Let's get something straight. Someone who is still living in a house rent-free or mortgage-free for years is not a victim. The people across the street cutting back and struggling to pay those bills on time every month? Those are the victims. But I digress.

Of course, the real cost will be borne by everyone else. As it gets more expensive to get a loan (because the cost is passed on to borrowers) buyers' purchasing power will decline and home values will drop. This bill helps today's deadbeats, at the expense of tomorrow's home buyers.

When Compliance Is Honored In The Breach


See this new report from the New York Post on Sunday about an internal Wells Fargo Home Mortgage manual on how to get necessary documents for foreclosures in cases where those documents were originally "missing."  This is a repeat of the infamous robo-signing scandal of earlier this decade.

It seems that the more we have Too Big To Fail institutions engaging in "compliance," the more it really means they're just trying to hide something.  Didn't these institutions -- and Wells Fargo is by no means alone -- hire thousands, or tens of thousands of compliance officers to ferret out exactly this type of abuse? 

It would seem there is either a deep breakdown in corporate ethics, or the entire premise behind compliance departments seems to be one of being a whitewash to better insulate the company against future charges of deliberate intent to commit misdeeds yet to be discovered.  If the latter theory proves true, it would mean compliance officers' true function (and value) is not in "compliance" but in its exact opposite, that being in helping the company evade detection of its misdeeds or, in the event of discovery, to evade the consequences of those misdeeds.

Left forgotten in this story is the fact which remains that thousands of homeowners are getting away with staying in "their" houses for years (and possibly indefinitely) without paying their mortgages.  That is the true tragedy and a deep moral hazard.

Running and Feeling Pain? Do Not Pass Go, Do Not Press To Finish, Go Directly To Hospital!

Extreme weather conditions are not ideal for extreme athletic competitions. 

This morning's New York City Half Marathon (13.1 miles, run in sub-freezing temperatures) is the latest example.

Two men suffered notable health calamities.  The first is noteworthy because he finished second, is 30 years old and a former Olympian.  The second is also noteworthy because he finished, and is still not that old (43), but collapsing, having a heart attack and stopping breathing at the finish line (and absent resuscitation, would have died) are all indications that the runner either ignored numerous red flags to reduce or stop all exertion, or has an underlying serious medical condition.

There is an old and tragic saying that sometimes the first sign of heart disease among the apparently very healthy among us is discovered only on the autopsy table.

PS: The author, Eric Dixon, is a twelve-time marathoner (26.2 miles) and has completed several dozen long races (10+ miles) in his 15-year running career. 

Monday, March 10, 2014

Bribing The Cannibals Not To Eat You: De Blasio's Run From Marxist Mob

The Marxist sympathies (or at least the rhetoric) of new New York City Mayor William de Blasio (nee Kaiser Wilheim) are becoming increasingly well-known.

Less well-known is the truth behind his mayoralty.

I argue (in a new policy post officially out Monday morning) that his pandering towards clearly left-wing acolytes in staffing his administration and setting its priorities going forward is far from signs of confidence or strength.

No, these actions are signs of weakness and raw fear. Fear, that is, of the left-Marxist axis that is the underbelly of much of New York City street-level politics.

An axis that can cause Bill de Blasio innumerable headaches and heartaches if it is disappointed.  And disappointment and satisfaction are relative terms. 

Mayor de Blasio is running on a treadmill. He may realize he is the tool of this mob axis.  Assuredly, he already realizes he is not its master.

Saturday, March 8, 2014

Governor Machiavelli

Politics is really not about elephants fighting donkeys, or even about principles. (Elections are about principles and strategy.) Politics is largely about power.  And politics, not principles, most determine who gets to the playing field -- the election -- and the chance to win.

Certain inaction in 2014 is designed to pave the road for a favorite son to run for President in 2016.  Here's the explanation. The deadline for submitting petitions to run for U.S. Senate or the House in the State of New Jersey is three weeks from Monday. (March 31, 2014 at precisely 4 pm.)  As of yet there is no credible candidate running as a Republican against short-term incumbent Cory Booker, who increasingly appears to have escaped Newark just in time for all sorts of scandals to break. (Like the State threatening to seize its schools, possibly control its budget, an investigation into the Newark watershed, and more...)

Booker's vulnerability was demonstrated by his mere 10-point victory over movement conservative Steve Lonegan last year despite huge fundraising and organizational advantages.  Why is the state Republican Party not mounting a challenge?  Because a serious 2014 race would indicate that Republicans -- that is, other than Chris Christie -- might actually be competitive in the state. A noncompetitive race, on the other hand, means there will be NO Republican organization at all other than the captive state organization which, for better or for worse, is all about promoting Christie 2016.  The lack of an organization means any Christie opponent coming into New Jersey would be starting almost literally from scratch.  And that, my friends, is the plan.

Should the multiple emerging scandals and criminal investigations damage the Governor, the state party and its leadership will be at risk of being severely discredited.  This is the risk when a political party is not diversified and all roads lead to or through one candidate, one power base. Just as investment portfolios concentrated in one sector can enjoy windfalls as well as wipe-out disaster, a political black swan can destroy the New Jersey Republican Party for years to come.

What does this portend for 2016? I ask one question of readers: Can anyone name a prominent candidate who became successful nationally after leaving their own party, in their home state, in worse shape than when they "arrived on the scene"? Me neither.

Monday, March 3, 2014

A New Jersey Non-Emergency State of Emergency

The abuse of power can cover seemingly benign actions which serve to inconvenience, frustrate and delay the law-abiding, patient general public.

New Jersey Governor Chris Christie has unnecessarily declared a state of emergency for the entire state for Monday, despite the fact the northern half of the state will barely get any accumulation. (Newark, NJ was predicted at midnight Sunday-Monday to get only 0.4 inch of snow.  That's right, four-tenths of one inch of snow. For this, state offices all over the state will be closed Monday!)

There is a nefarious legal reason for this: The state of emergency is the legal cover under which Governor Christie can have official state offices closed.  Why?

Here's the rationale: This allows him to claim that state agencies under his watch have an extra day with which to respond to the multitude of Open Public Records Act (New Jersey's equivalent of the Freedom of Information Act) requests they've gotten in the wake of the various scandals.  In my view, this state of emergency -- beyond being unsupportable by meteorological considerations --  is nothing more than a delaying tactic.  Here, however, the Governor is willing to inconvenience the regular public with closed state offices in order to further frustrate the rights of the same public to have transparency and openness in government.