“There’s just not a lot of money to be made with investments like this … I’ve always looked at the ownership of a baseball franchise as a public trust, maybe even a charitable thing, I’m serious about that. I never did forgive Walter O’Malley for moving the Dodgers from Brooklyn to Los Angeles.”
Interesting quote, right? Altruistic as all get-out. But wait.
That’s what Jerry Reinsdorf said to Dave Condon of the Chicago Tribune in 1980, shortly before MLB owners turned down the bid of very successful San Francisco 49ers owner Edward DeBartolo to buy the White Sox from Bill Veeck, who was in dire financial straits. The refusal ostensibly was because DeBartolo owned racetracks (ironic, now that MLB and teams are building themselves what are essentially casinos in ballparks), though one owner admitted at the time it was just to put a knife in the back of Veeck for supporting the players about free agency.
In January 1981, MLB did approve the sale of the White Sox to a group headed by Reinsdorf and Eddie Einhorn for $20 million, at which point the quote gets even more interesting.
That’s because Reinsdorf then spent most of a decade making a humongous liar of himself. Wanting a new stadium, he threatened to move the White Sox to Addison or Milwaukee or Seattle or just about any place this side of Kuala Lumpur, until he finally seemed to have a deal in St. Petersburg, Fla., which was building him a dome to play in.
Illinois and Chicago offered Reinsdorf $125 million in revenue bonds to stay, but that wasn’t good enough for good old Jerry. See, with that deal he’d have to pay something back, and Jerry only likes tax money to flow to him, not the other direction. So he engaged in full-out extortion, a threat to move the White Sox to Florida that led to Governor Jim Thompson strong-arming the Illiinois State Legislature up to and past the end of the 1987 legislative session (literally stopping the clocks) and getting Reinsdorf $150 million in what has proved to basically just be a gift of a stadium through an entity created on the spot, the Illinois Sports Facility Authority.
Pretty nice, huh? It got even nicer, after Jerry came back again and again for more handouts to be used for improvements. Has he ever volunteered to pay anything back he didn’t absolutely have to, since his sports properties are now valued at more than $5 billion? Heck, there’s no record he even ever said, “Thank you.”
It was Leona Helmsley who said, “Only the little people pay taxes.” Reinsdorf merely added, “And when they do, the tax money should go to me.”
Which tells you pretty much everything you need to know about Jerry Reinsdorf. But let’s natter on, anyway.
FROM BROOKLYN TO CHICAGO
Reinsdorf’s bio says he grew up in the Flatbush neighborhood of Brooklyn, and he says he lived on the same block as Duke Snider, and he used to play stickball with the Dodger Hall-of-Famer. Couldn’t have played for long, because Snider — who did indeed was famed for playing stickball with kids — only rented an apartment in Flatbush for a very short time before moving to a house in Bay Ridge, three neighborhoods west.
Still, that doesn’t make the story not true. Just be careful when Jerry claims to have shot hoops with Bob Cousy or caught passes from Charlie Conerly or taught Al Capone about the finer points of tax evasion.
At any rate, Reinsdorf eventually gave up stickball to come to Chicago for law school, and then went to work for the IRS. Like many a bureaucrat before and after him, he soon realized working on behalf of the citizenry wasn’t nearly as lucrative as working against them, and went into practice advising big real estate owners on how to avoid taxes and just make other people pay for government services.
Naturally, the joy of making other people rich, or richer, wore off, so Reinsdorf went into big realty on his own, getting very rich by using every real estate tax dodge — all perfectly legal, of course, thanks to all the politicians purchased by his predecessors — especially the benefits of selling property and leasing it back.
Where else could such wondrous tax benefits exist?
Well, as it turns out, in professional sports.
Thanks to Veeck, of all people, and a case he won, a fairly new law made it possible to get double deductions from employing athletes — once in the normal way, by expensing the amount they’re paid, and once in a pure chicanery way, in a sort of human oil depletion allowance. That made it possible to really make money while losing a lot for tax purposes, providing the extra benefit of a credit against profit in other businesses.
So Reinsdorf put together a group to buy the White Sox when Veeck was desperate, and then double-dipped a few years later by buying the Bulls for even less, shortly after the Wirtz family patriarch had died and the family had lost a major antitrust suit. See a pattern?
OFF INTO SPORTSDOM
The Bulls, of course, were immensely successful in the ’90s, when they had some gentleman with the initials MJ on the roster. Without him, bupkus — though, who knows, maybe this Bulls season will turn out to be a happy exception.
As for the White Sox, not so much.
In 41 years under Reinsdorf, who bought the White Sox at 45 and is now 86, the White Sox have been to the World Series just once (2005!!! Hurray!!!). Despite spending most of those years in a division full of small-market teams that are usually bad, the Sox have only made the playoffs seven times — and that includes 2020, when any team raising its hand and asking, “Mother, may I?” got in.
The Reinsdorf group has the second-longest ownership span in the major leagues, behind only the Yankees — and every Seinfeld fan knows that back then the Steinbrenner in charge was papa George, not son Hal, so Jerry himself has outlived everyone else.
White Sox fans think Reinsdorf is a tightwad who doesn’t spend anything near what a team in the No. 3 market should on player salaries. White Sox fans have a point.
BUT WHAT ABOUT WHAT A GREAT JOB HE’S DONE MAKING MONEY FOR HIMSELF AND HIS BUDDIES?
There’s no question that Reinsdorf has made a whole lot of money for himself and his fellow stockholders. If his comment above about baseball not turning a profit was ever true, it’s definitely not true now, with all the TV and internet money, and the coming of sports betting empires. Because only the Braves and Blue Jays are part of public entities, even Forbes has to guess — but its valuations have almost every team making a nice profit, before that double amortization benefit gets measured in and lets them lose money on paper, with the White Sox among the many with nine figures in revenues in 2019 (the last full season we have figures for).
That would be pretty decent return for an enterprise that grosses less than half a billion. It’s an incredible annual return on the original $20 million investment (plus probably some operating cash, of course). But it’s not so hot as a P/E on the current equity.
Still, a healthy yearly profit exists, even though professional sports ownership is more a growth business than a value one. A lot more. Team values just keep on soaring.
But is Reinsdorf really any good at it?
Forbes pegs the White Sox current value at $1.675 billion (14th among the 30 teams), despite being in the No. 3 market. That growth from the original investment is 11.4% per year, with the team worth almost 84 times what was paid for it. Nice, but not special given franchise values in general.
Does Jerry deserve credit for that? Nah. The Cubs were purchased by the Tribune in 1982 for even less, and they’re now valued at twice as much.
Oh, and as for any comments by owners that the stock market does better? Not true at all — not over 41 years, it doesn’t. The S&P 500 is about 35 times as high as in 1981 … less than half of the Sox ownership growth, and less than a quarter than that of the Cubs.
You do have to feel a little sorry for Jerry — the latest Forbes list of the world’s billionaires lists him with a net worth of just $1.7 billion, in a tie for 1,833rd place with 97 others, some of whom aren’t even Russian or Chinese. Heck, he’s only the 16th-richest person in Illinois — talk about embarrassment.
No wonder Jerry wants to put the screws to others. And no wonder he’s always pretending he’s not milking the White Sox for everything he can grab.
BUT HE’S REALLY IMPORTANT IN MLB, RIGHT?
Well, he certainly thinks so. But that importance isn’t necessarily positive.
You can find quotes from other owners saying Reinsdorf wasn’t as dominant as generally regarded in prior labor strife. Still, he was a definite leader in the collusion in the mid-80s that cost the owners more than $100 million in damages. And his name just keeps popping up whenever the owners try to crush the players or the MLBPA, decade-in and decade-out.
Reinsdorf’s term on the owners’ executive council just expired. Maybe that’s why negotiations finally re-started.
But he’s no doubt still lurking. Maybe that’s why MLB has been so intransigent that talks collapsed.
It’s not like Reinsdorf only hates players who want a fair share. He has total disdain for the media, too — except for personal lapdog Bob Nightengale of USA Today, who just types up whatever Jerry tells him to — some of it even accurate.
And, of course, there’s his long-standing feud with agent Scott Boras, which goes back to a he said/she said years ago about Joe Crede. Maybe Reinsdorf thinks Boras shouldn’t be so mean as to seek the best contracts he can for his clients, or maybe he just realizes that he can’t meet with Boros because there’s not a room on the planet big enough to hold both of their egos.
THE OWNER! REALLY?
One of the fascinating things about the White Sox is how Jerry Reinsdorf is almost always referred to as White Sox owner. He isn’t.
Oh, he’s the controlling owner, all right — the company is set up so an entity which he runs has the only votes. No way he lets anyone else have a say in anything, which you may have noticed in the Tony La Russa hiring.
But he’s not called the “controlling owner,” “principal owner,” “general partner,” or any of the usual phrases for a minority stakeholder who gets to run everything. He’s almost universally referred to as “owner,” and he apparently likes it that way.
Back when Einhorn was alive, Eddie was also referred to as an owner, and he and Reinsdorf were often called “partners.” But since Einhorn died in 2016, you’d be hard-pressed to find a reference that doesn’t call Reinsdorf “owner,” pure and simple.
Because the White Sox are a private entity, just who owns how much isn’t publicly revealed. You’ll find sources that say Reinsdorf owned 10% or 14% (Jerry didn’t like that one, and complained) at the time of writing. Forbes says he now owns 19%, and Jerry hasn’t complained about that number.
It’s not like Reinsdorf has even been the largest shareholder. Uncontested articles said that when chemical company magnate Robert Mazer invested in 1988, he owned 30% of the White Sox, way more than Reinsdorf. Mazer died in 2013, and whatever happened to his stock hasn’t been divulged.
So Reinsdorf is very much a minority owner, albeit the controlling one. That’s not particularly unusual, even among public companies, which often have both voting and non-voting shares on the market. (Mammoth Berkshire Hathaway is an example, with its A and B shares.)
Heck, even the one recent foray into public stock ownership of an MLB team was set up that way. When Cleveland sold shares on NASDAQ in 1998, the buyers had no votes, and thus had no say when the team was sold two years later, though they did make a nice profit. You can’t buy shares of a team on the open market directly these days, though the Braves and Blue Jays are subsidiaries of much larger publicly-traded companies (Liberty Media and Rogers Communications, respectively).
Still, it’s Reinsdorf who makes all the decisions, even though despite all the machinations the White Sox do have a Board of Directors. Honest — the members are listed right there on the ball club’s web site.
The directors couldn’t be more of a collection of old Reinsdorf cronies, most coming from his roots in real estate. And we mean ooooold cronies, all pretty much Jerry’s age. That might explain no one speaking out about the La Russa hire — the directors probably all thought Tony was too young.
WHATEVER THE TITLE, ONLY REINSDORF CAN SELL THE TEAM
And would a man who has spent his entire professional life avoiding taxes on behalf of others or himself do so without one final thumbing of his nose at the government and his fellow citizens by letting his heirs use the bizarre rule that properties get re-evaluated for tax purposes at what their worth is at time of inheritance, not time of purchase, thereby saving nine figures in capital gains taxes? If you’ve been reading closely, no need to answer that.
Reinsdorf has advised his heirs to sell when he dies. With a huge tax rip-off like that, of course he does.