Trouble never seems to end for Cleveland Browns owner Jimmy Haslam: Terry Pluto

It's been a rough 2013 so far for Cleveland Browns owner Jimmy Haslam. (Wade Payne, Associated Press)

By Terry Pluto, The Plain Dealer

on June 30, 2013 at 6:39 PM, updated June 30, 2013 at 6:46 PM

http://www.cleveland.com/pluto/index.ssf/2013/06/trouble_never_seems_to_end_for.html

Pilot Flying J Investigation

• Trouble never seems to end for Cleveland Browns owner Jimmy Haslam: Terry Pluto
• Cleveland Browns owner Jimmy Haslam selling Tennessee Smokies minor-league baseball team
• Pilot Flying J's top executives knew about scheme involving rebates, former employee tells prosecutors
• Three more Pilot Flying J workers plead guilty in federal investigation
• More Pilot Flying J employees plead guilty in federal investigation

CLEVELAND, Ohio -- Nearly every week there is a something in the news that makes me wonder how Jimmy Haslam will be able to be the long-term owner of the Browns.
The latest is a report in the Wall Street Journal that Haslam's Pilot Flying J has about $4 billion in debt and its credit rating has been "downgraded."
Obviously, Haslam has a lot of assets, including about 600 truck stops and the Browns. But you like the owner of your team to have a steady cash flow and not a mountain of legal concerns.
Most Browns fans know about the FBI's investigation into Pilot Flying J for possible fraud. Haslam has denied any knowledge of the questionable business dealings. But there are major problems with how Haslam's company did business.
At a May 16 truckers convention, Haslam said he's been contacting hundreds of trucking companies because, "I want to look everyone in the eye and say we'll do everything we can to make things right."
That means something was very wrong, even if Haslam didn't approve it.
So far, a dozen trucking companies have sued Pilot Flying J.
And five former employees have pleaded guilty to charges stemming from the FBI investigation.
And last week, the Haslam family sold their shares in the Class AAA Tennessee Smokies.
At the news conference to announce the transaction, new Smokies owner Randy Boyd said Haslam called him in January about possibly buying the Southern League franchise. Boyd agreed to the idea, and it took several months to finalize the sale. That was four months before the FBI raided Pilot Flying J.
At the same news conference, Haslam insisted Browns fans have "absolutely zero to worry about."
Perhaps.
But right after the FBI raid, Haslam held a press conference and said: "(The investigation) appears to be centered on a very insignificant number of customers and the application of rebates . . . rebates owed to customers were not paid . . . we of course disagree with that."
He's since had to reconsider that statement, as he's been offering settlements to trucking companies.
But of even more concern about Haslam's future with the Browns was contained in a story in Tuesday's Wall Street Journal:
"The company's debt nearly doubled to $4 billion in a two-year period through last year, as its owners paid themselves two payments totaling $1.7 billion from it, according to Moody's.
"Last year, Pilot issued $1.1 billion of the debt -- largely to fund the second one, a dividend for $700 million, according to S&P. That was partly so Jimmy could buy the Cleveland Browns."
So Pilot Flying J was $4 billion in debt before the FBI raid?
The Wall Street Journal also reported: "S&P downgraded Pilot's debt, calling its financial risk 'significant.' "
Moody's Investors Service specializes in providing credit ratings, research and risk analysis. Standard and Poor's Corp. (S&P) is a financial services company that provides research on stocks and bonds.
Yes, nearly every NFL owner turns a profit every year, and that may be true of the Browns.
But all that debt? It is indeed "significant," as reported by Standard and Poor's.
The sale of the Smokies brought in some cash, although no purchase price was made public.
The Haslam group bought the Smokies for a reported $7.5 million in 2002. Most Southern League franchises are now priced in the $12 million range.
Haslam purchased the Browns for about $1 billion from Randy Lerner. The sale was announced Aug. 2, finalized on Oct. 16.
Lerner received $700 million up front, the remaining $300 million to be paid on Oct. 16, 2016.
In the same story, the Wall Street Journal reported, "If necessary, Mr. Haslam says, Pilot could pay down the debt quickly."
Maybe so.
But $4 billion is big money, even in the world of Jimmy Haslam.