PITTSBURGH - Several Major League Baseball teams fell victim to the unauthorized release of previously confidential financial information on Monday, which left them scrambling to explain the complicated numbers while the Commissioner's office attempted to determine the source of the leaks throughout the day.
Pittsburgh Pirates management got wind of the security breach as early as last week. On Sunday, it held a preemptive meeting with beat reporters to explain the numbers.
Team management told the writers that investors had not taken cash dividends from team profits, but it was concerned that the reported $20.4 million payment to the partners would be construed as a dividend. The money was reimbursement to the investors for the taxes owed on team profits, even though they were not distributed, and for interest payments on loans made to the team earlier in the decade when the organization faced a dire cash shortage.
Both the tax reimbursements and interest payments are routine and appropriate business expenses, team president Frank Coonelly said.
On Monday, four other financial statements from Major League Baseball teams appeared in various media.
In addition to the Pirates' numbers for the 2007-08 tax years, statements for the Los Angeles Angels (2008-09), the Tampa Bay Rays (2007-08), the Seattle Mariners (2007-08) and the Florida Marlins (2008-09) appeared on the Internet. The documents were not released by Major League Baseball.
While the Pirates posted profits in 2007, 2008 and 2009, investments were made on capital projects including a new baseball training facility in the Dominican Republic, an additional field, upgrades at Pirates City and the acquisition of the Class A Marauders minor league franchise that was moved to their spring training field in Bradenton, Fla.
The Pirates spent a combined $44 million in 2007 and 2008 on player development. They also have committed more than $31 million in signing first-year draft players over the last three years. That figure is near or at the top in the major leagues.
"I really believe that we are doing the right things for the club," Pirates Chairman of the Board Bob Nutting said. "I know we're acting honorably. I know we're acting in the best interest of the Pittsburgh Pirates baseball club. I know we're making good decisions that are going to help us create a winning organization.
"I really believe that what we're going through is worth it. If we didn't, there would be no reason to put up with the agony of the on-field performance this year or the public lashing that comes through. We're going to stick to the course because it's the only opportunity that the Pirates have to rebuild a 123-year franchise into something we can be proud of."
Nutting has received no salary in his capacity with the Pirates and the club pays no management fees to any entity related to an owner, Coonelly said.
"The payment of interest on a note held by a partner is equally routine and appropriate," Coonelly said. "After years of suffering significant losses, the club in 2003 was unable to meet its operational needs, including making its payroll without a significant infusion of cash. The club sought additional equity from its partners in the form of a convertible note. This significant capital contribution in 2003 allowed the club to meet its obligations and put the club in a position to move toward compliance with the new Debt Service Rule added to the players' collective bargaining agreement in 2002."
The financial data was presented to the players' association for its annual review of the major leagues teams earlier this year. It was determined that the Pirates had acted within the guidelines of the collective bargaining agreement, Coonelly said.
"While we have not publicly announced financial results, we have said that, after a period in which the club incurred large losses, the club has operated on a sound financial basis over the last several years, generating positive net income," Coonelly said. "This is a very good development for the organization and our fans, as this sound financial footing has allowed us to make the type of long-term and short-term investments in the club necessary to return winning baseball to Pittsburgh.
"We all remember the very dark days when the club was forced to trade valuable players like Aramis Ramirez in order to come into compliance with baseball's Debt Service Rule. Because we have turned around the club's financial picture, we have been solidly in compliance with the Debt Service Rule and able to make significant investments in players, our scouting and player development resources and in top-of-the-industry baseball facilities in Florida and the Dominican Republic."