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Rothman sues Bank of America and others over sale of Commanders

A former longtime minority partner of Daniel Snyder filed a federal lawsuit against Bank of America on Wednesday, alleging the bank conspired with the NFL and Snyder to force his three minority partners to sell their stake in the Washington Commanders back to Snyder at a much lower valuation. the record $6.05 billion Snyder received for the team.

Tampa, Fla. billionaire Robert Rothman, chairman and CEO of Black Diamond Capital, alleges that Bank of America, along with Snyder and NFL officials, who are not named defendants in the lawsuit, “conspired” to Force it, he and his two other minority partners sold their 40% stake to Snyder for $875 million in April 2021. The sale price reflected a team valuation of less than $3 billion, according to the trial. In July 2023, Snyder sold the Commanders for $6.05 billion, which the lawsuit says “was the culmination of (Bank of America) and Snyder’s conspiratorial conduct.”

“We will vigorously defend ourselves against these allegations,” Bank of America spokesman Bill Halldin said, but had no further comment. John Brownlee, Snyder’s attorney, did not respond to calls for comment Wednesday. NFL spokesman Brian McCarthy declined to comment.

The lawsuit alleges that Bank of America turned a blind eye to “financial red flags” raised by Snyder’s financial mismanagement of the team, including an increasing reliance on debt and failure to pay partners their quarterly share of profits. The centerpiece of Rothman’s lawsuit is the bank’s December 2018 approval of the $55 million franchise line of credit that Snyder entered into without the knowledge of his minority partners and without required approval. The bank allowed Snyder to draw $38 million in March 2019 from the line of credit “without verifying that Snyder had obtained board approval,” the lawsuit says.

The bank approved the loan at the same time Snyder allegedly made “self-dealings” by paying himself millions of dollars through the Commanders, including charging $3.5 million to place the team’s logo on his private jet and $7 million in spending on “yacht(s).” ), residential properties, personal personnel, automobiles, and other personal entertainment and living expenses,” according to the lawsuit.

By allegedly ignoring Snyder’s “improper and illegal dealings,” Bank of America executives “knew or reasonably anticipated that Snyder would have to sell the franchise because of Snyder’s indebtedness,” Rothman’s attorney, Brian Kopp, wrote , in the 45-page complaint filed Wednesday. Tampa Federal Court.

The lawsuit alleges that the bank repeatedly put its own financial interests ahead of those of Rothman and the two other minority partners. Bank of America “failed to inform Rothman of the franchises’ improper conduct before or after closing the 2018 loan,” the lawsuit says. The loan “enabled bad actors to conceal improper financial transactions, cash flow problems, and internal dealings within the franchise, to Rothman’s financial detriment.”

The sale of the minority partners’ stake to Snyder — as well as the sale of the franchise to a group led by Josh Harris in July — was negotiated by Bank of America. Rothman’s lawsuit alleges that Bank of America’s actions “forced Rothman to sell his franchise stock below market value.”

Rothman, who has been a client of Bank of America’s wealth management arm since the late 1990s, is seeking at least $75 million in damages.

“For profit and prestige, BofA ignores its legal, ethical and moral obligations,” Kopp said Wednesday. “As a client of BofA’s Financial Services Division, Bob was entitled to honest financial advice, free from conflict and bad motives.”

Rothman declined to comment.

ESPN first reported on Dan Snyder’s secret $55 million credit line in February. Snyder’s undisclosed loan — and how he got it — became the most contentious issue in the bitter, year-long standoff with the three men who had been minority partners since 2003. How Snyder got the loan line of credit without providing the necessary approval documents to the board of directors. banking was a central allegation made against Snyder by Rothman and his two billionaire partners in a confidential NFL arbitration motion filed in August 2020, a copy of which was obtained by ESPN.

As reported by ESPN and as detailed in the lawsuit, NFL Commissioner Roger Goodell, General Counsel Jeffrey Pash and an NFL-appointed arbitrator have all refused to investigate the sweeping allegations of financial wrongdoing partners against Snyder, including the $55 million loan that was not approved by the team’s board of directors, as required by the team’s bylaws. The NFL ended the mediation session after two days in mid-January 2021, and the sponsors reached a deal with Snyder several months later to sell their 40% stake back to him for $875 million.

The lawsuit also states: “During this process, Snyder privately and publicly commented that ‘no one can fuck with me,’ while Snyder insinuated that he would use the ‘dirt’ he had accumulated on individuals , including, but not limited to, NFL Owners, the NFL Commissioner and other business people associated with the NFL.”

A source with direct knowledge of the arbitration proceedings told ESPN that Rothman and his two minority partners – FedEx Chairman Frederick W. Smith and Dwight Schar, chairman of publicly traded home construction company NVR Inc. .—thought Goodell and Pash had sided with Snyder over them. “They buried it, didn’t investigate and covered it up,” the source told ESPN. Rothman also alleges that Bank of America, through Elliot McCabe, managing director of its Sports Finance & Advisory group, “established a civil conspiracy…with other unnamed co-conspirators, all of whom acted concert with malicious motives…” including, but not limited to, the refusal of Defendants and the NFL to investigate and take action against Snyder. McCabe had no immediate comment, Halldin said.

“One way to get a controversial owner out is to allow him to overexploit the franchise,” Kopp told ESPN on Wednesday. “Like those who invest in real estate, owners may be asset-rich but cash-strapped. Two main beneficiaries here are Bank of America and the NFL. Ultimately, the NFL eliminates a controversial owner, Bank of America reaps significant profits and, in my opinion, it does not matter who suffers the damage.

The approval needed to obtain the $55 million line of credit from Commanders’ board of directors, on which the three minority partners sat, was never provided to Bank of America, although bank officials l ‘ Commanders executives were asked repeatedly over a two-month period. the lawsuit states.

The strange circumstances surrounding the bank’s approval of Snyder’s line of credit caught the attention of federal prosecutors in the Eastern District of Virginia. Late last year, a federal grand jury issued subpoenas for documents involving the loan, sources said. In recent weeks, two sources with direct knowledge of the investigation told ESPN that the criminal investigation is continuing.

After discovering the $55 million line of credit in December 2019, the three minority partners searched for all records relating to it, the lawsuit says. However, Bank of America allegedly refused to release documents to the sponsors without a subpoena or court order. In October 2020, the three partners received an offer to purchase their combined 40% stake in the team. But Snyder would have blocked the negotiations. The lawsuit alleges that he and the bank were motivated to block the third-party sale because Rothman allegedly had access to documents related to the 2018 loan and other evidence of Snyder’s financial wrongdoing. After the NFL’s two-day mediation ended without a deal in January 2021, according to Rothman, McCabe “maintained that Rothman’s shares in the franchise were ‘non-voting,’ subject to a ‘heavy minority discount,’ and that the franchise’s total business value was less than $3 billion.

McCabe also reportedly told Rothman, through Snyder’s representatives, that “Snyder had no intention of selling the franchise,” even in the months after the three minority partners resold their stake in Orders in Snyder. The lawsuit alleges that McCabe “intentionally withheld information from Rothman” regarding Snyder’s financial difficulties “because Rothman would have refused to sell his 15.168 percent stake in the franchise if Rothman had been aware of Snyder’s financial situation.” .

“With the assistance and cooperation of Defendants, Snyder refused to provide financial information, interfered with due diligence, and blocked the involvement of other investment banks in order to prevent Rothman from obtaining the true value of Rothman’s stake in the franchise.” the lawsuit states.

In 2003, Bank of America presented Rothman with an offer to buy 10 percent of the team. Bank of America also loaned Snyder $875 million to buy out his three partners on April 2, 2021, the lawsuit says. And on November 2, 2022, Snyder announced that he had hired Bank of America/BofA Security to market and sell Commanders.

“The defendants, along with named and unnamed co-conspirators, committed wire fraud, mail fraud, refused to provide financial information, interfered with due diligence, blocked the involvement of other banks from investment and committed corporate improprieties on behalf of the franchise in a manner that negatively impacted monetary distributions to Rothman, Schar and Smith,” the lawsuit states.

On July 20, NFL owners unanimously approved Snyder’s sale of the Commanders to Harris and two dozen backers for $6.05 billion, an American sports franchise record. The same day, following an investigation, the NFL fined Snyder $60 million over allegations of sexual harassment against him, the team’s toxic work culture and “financial irregularities.” .

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