There’s Shrewd, There’s Genius, Then There’s Marlins Owner Jeffrey Loria

Jeffrey LoriaThe Toronto Blue Jays and Miami Marlins pulled off a 12-player trade, one that’s being hailed as a gigantic upgrade for the Jays and the latest fire sale for a Marlins team with a long history of them. All of which overlooks one critical takeaway from this blockbuster for the ages: Jeffrey Loria is a genius.

In dealing Jose Reyes, Josh Johnson, Mark Buehrle, Emilio Bonifacio, John Buck, and $4 million to the Jays for Jake Marisnick, Justin Nicolino, Anthony DeSclafani, Yunel Escobar, Henderson Alvarez, Adeiny Hechavarria, and Jeff Mathis, the Marlins shed nearly $160 million in payroll. They’re now committed to only eight players for next season — Ricky Nolasco, Greg Dobbs, Mathis, and Escobar, major league contracts for recently arrived prospects Jacob Turner, Zack Cox, and Hechavarria, and $4 million for Heath Bell to play in Arizona. For 2014, they owe money to only two players, Mathis and Bell.

Thing is, the Marlins weren’t going to win with the players they had, at least not for the foreseeable future. Last offseason, they signed Reyes, Buehrle, and Heath Bell while narrowly whiffing on Albert Pujols, breaking the bank in an attempt to build an exciting, winning team as they moved into a new ballpark. After all that, they won 69 games, finishing second to last in the National League in runs scored while allowing more runs than all but four other NL clubs. Free agents tend to produce their best results early in long-term deals, while they’re still at or near their prime, then fall off in later years. The Marlins got productive Year 1 performances from Reyes and Buehrle, bundled them with a talented but hugely injury-prone pitcher in Johnson plus a couple of fungible veterans, and cashed them in for some intriguing prospects, plus the GDP of a Pacific island nation in salary relief.

Still, this isn’t an ideal exchange of talent from an on-field perspective. Nicolino is a polished pitching prospect … who’s probably a mid-rotation starter in The Show if everything breaks perfectly. Marisnick is a great natural talent … who might struggle to hit .240 in the big leagues. DeSclafani wields a mid-90s fastball … but has no secondary stuff, and is likely nothing more than a relief prospect. Hechavarria is an excellent glove man … and will be lucky to hit like Rey Ordonez. No, what makes Loria a genius is something more elemental, something that goes well beyond any one trade, even one this big: The system is rigged, and Loria is taking advantage of it better than any other owner in baseball history, other than Frank McCourt.

It’s a system, first and foremost, in favor of owners who fall in line with the commissioner’s office. When McCourt bought the Dodgers for $430 million in 2004, he did so using approximately no dollars of his own. This was not a problem at all, because McCourt said all the right things, choosing compliance over controversy, curtsies over Cubanisms. When he finally sold the team to Guggenheim Partners last summer, McCourt owed heavy debts to numerous creditors. Still, the final purchase price was $2.15 billion. Even after settling his accounts, this was a pretty decent return for an initial investment of nothing.

Loria hasn’t made McCourt money from baseball yet. But he’s pulled off a series of shrewd and increasingly profitable business moves, exploiting all the advantages afforded to members of MLB’s ownership cartel.

First came his purchase of the Montreal Expos. Loria had spent years trying to buy a major league club, making early inroads through his purchase of the Triple-A Oklahoma City 89ers, then ratcheting up his association with the Lords of the Realm through his failed attempt to buy the Baltimore Orioles in 1994. When he finally bought into the Expos in 1999, it was for a minority share in the franchise. Still, a 24 percent stake in a major league franchise for the modest sum of about $12 million in U.S. dollars was a coup, even for a team as troubled as the Expos were. That was just the beginning. Loria quickly realized that the limited partners who controlled the rest of the franchise had no interest in putting a dime into the team beyond their initial investments. So he triggered a series of cash calls, heard crickets each time, and steadily increased his stake in the Expos. When he couldn’t strong-arm the provincial government into building him a new stadium and saw that the team was doomed, Loria sold the Expos back to the league for $120 million. This was a substantial profit just from the effective $50 million valuation at which he’d first bought in. Tack on Loria’s much larger stake by the time the sale took place, and he made a small fortune for his two-plus years of investment.

As thanks for the noble sacrifice he’d made in stewarding the dying Expos for a couple of years, Loria was allowed to purchase the Marlins for $158.5 million in 2002. The deal included a $38.5 million no-interest loan from the league, plus an attached discount that kicked in when Loria couldn’t secure a new stadium within five years of the purchase. Those league handouts were nice, but there was a lot more money to be squeezed out of Loria’s position of power. When government officials initially refused to cave to his demands for a new Marlins ballpark, Loria played the oldest trick in the book, the relocation threat. “San Antonio is a very viable market, and they’re very serious,” Loria said in April 2006. “Read my lips: They’re very serious.” It would take three more years of increased threats from Loria and stepson David Samson, plus the usual unwavering support (and more threats) from Bud Selig and his surrogates, before the Miami-Dade County Commission finally agreed to pay for the lion’s share of a new stadium. In the end, the Marlins agreed to pay $125 million of the stadium’s total $634 million in construction costs, with $35 million coming from another interest-free loan, this time from the county. (There’s an ongoing SEC probe that’s looking into the stadium’s financing. We’ll see if anything comes of it.) The same rigged system that put Loria in power and summoned the extortive powers of the commissioner’s office to his side had also succeeded in cajoling a sweetheart stadium deal out of feckless elected officials, with yet another baseball club passing costs to taxpayers and reaping a disproportionate share of the profits. In getting a stadium built in South Florida, Loria succeeded where his predecessor John Henry failed. Of course, Henry won control of the Red Sox as part of the same merry-go-round that landed Loria in Miami, despite not submitting the highest bid for the Boston nine. Cartel membership has its privileges. The total cost of the bonds the county will need to pay off over the next 40 years is estimated at $2.4 billion.

While the Marlins waited for their $2.4 billion gift to arrive, they kept reminding us that they were losing money, that only the windfall associated with a new park could save them. This was, of course, not true. Baseball’s profits were growing, and with them shared revenue; a team like the Marlins could expect to rake in about $70 million to $80 million before it ever sold a single ticket, thanks to pooled national revenue as well as revenue sharing, in which richer teams subsidize poorer teams forced to toil in tiny metro areas like Miami. Those numbers are about to surge, with a new national TV deal ready to funnel an extra $25 million to every MLB team starting in 2014.

Of course, now that the Marlins have dispensed with the pretense of fielding a competitive major league team for next year, we’re supposed to believe that Loria’s reckoning is coming. If fans have no faith in what you’re trying to do, they’ll surely stay away in droves. For all the snark over a lack of fan base, the Marlins did draw 2.2 million to their new park this year. If attendance drops something like 30 or 40 percent, that could cost the team about $30 million in 2013. That sounds terrible. Until you remember that the Marlins spent $118 million in payroll this past season. They’ll probably spend less than half of that next year. Do the math. They’re going to come out way ahead.

OK, but there’s the fallout within the game from this deal, where the one remaining star is pissed off and no self-respecting free agent would dare sign with the Marlins and their duplicitous owner, not after this trade and this summer’s exodus of Hanley Ramirez, Anibal Sanchez, and Omar Infante. Except Loria is smart enough to know that free-agent contracts are usually overpays; that the best players in the game are usually homegrown stars in their 20s, not past-prime mercenaries in their 30s; and that the odds of landing more marquee players were going to be slim, as more and more teams get rich and most elite players re-up before they can hit the open market. And what’s wrong with getting shunned by big-ticket free agents anyway? The A’s and Rays don’t sign them, and they field competitive teams and get books written about them.

The last remaining argument against Loria is that he broke his covenant with fans, that he’s no longer even pretending to value winning over profit. There are many Marlins fans who feel betrayed by the team’s tear-down, just as there were Expos fans who were crushed by that team’s demise. Those are legitimate concerns. They’re also not Loria’s concerns. The money will still roll in, and Major League Baseball won’t do anything to threaten his seat at the table. If and when he does decide to sell the team, another colossal payout will be his reward.

Hell, Loria even had a role model to follow in engineering this fire sale. A decade and a half ago, Wayne Huizenga went on a spending spree of his own. That time, the binge paid off, with the Marlins winning the 1997 World Series. By the time the last parade float rolled through, Huizenga was already making plans to sell off the club’s expensive veterans, resulting in one of the biggest player purges the game had seen in decades. Huizenga was roasted for violating the public trust and spitting on the integrity of the game. But if the twin goals of a team owner are to win and make money, who’s to say he did anything wrong?

Same goes for the Marlins owner now, only writ much larger, thanks to the explosion in baseball’s revenue streams. He’s got his new ballpark. He’s got his tens of millions in annual profits, and those profits will only grow now that he’s burned last year’s roster to the ground. He’s even got a World Series ring.

I don’t blame him for any of this. I’m just impressed by how well he worked everything to his advantage, taking advantage of elected officials, short-sighted businessmen, and a system that rewards the kind of behavior that might seem despicable but is impossibly profitable. When it comes to Jeffrey Loria, I’m just in awe.


A few other thoughts:

• The Jays got substantially better with this trade. But that’s more of a function of how terrible they were last year than any potential MVP-level performances from the players they acquired. Toronto finished 25th in starters’ ERA last year at 4.82, and 28th in FIP at 4.91. Any able-bodied human would have been an upgrade, let alone two pitchers with solid pedigrees such as Johnson and Buehrle. Johnson’s a good bet to hit the DL at some point and Buehrle’s getting old, with the very real possibility of regression in the rugged AL East. Still, if healthy, those two pitchers could net five or six wins above the dregs they’ll be replacing. At short, Yunel Escobar was a perfectly functional player who just happened to be a royal pain in the ass. Despite Reyes’s superstar reputation, he’s an injury-prone player whose bat has been inconsistent over the course of his career; expecting a couple more wins at short would be a reasonable expectation.

More broadly, what makes the trade a good one for the Jays is their realization that the easiest way to get better quickly is to prey on teams looking to dump salary, embrace their own large-market existence, and snatch up all the contracts signed under the previous set of market conditions. Josh Johnson’s contract, and even Reyes’s and Buehrle’s, predate Joey Votto signing the kind of 10-year deal you’d have only expected to see in free agency, as well as this offseason’s free agents likely raking in tens of millions more than they might’ve in the recent past, thanks to baseball’s skyrocketing revenues. All that without giving up any core players from the major league roster, or even the Jays’ top prospect. Toronto’s airwaves had been crackling seemingly forever, screaming for general manager Alex Anthopoulos to finally open the checkbook and acquire some high-priced talent. The people got their wish granted.

• That checkbook’s going to be busy. Per the Toronto Star‘s Rich Griffin, the Jays owe $92.3 million for 14 players in 2013. Anthopoulos is holding fast to his vow never to commit more than five years to a player, though: Reyes’s 2018 club option can be bought out for $4 million.

• Even with all that spending, the Jays aren’t done. They have 48 catchers, there’s no obvious candidate to play left field next year, Adam Lind isn’t a good everyday player, and there’s no way Anthopoulos can resist doing some more bullpen tweaking. So when trying to assess the Jays’ chances of competing next year, keep in mind that they don’t have their full 25 set yet. Not to mention the extensive remodel the Rays will likely make, and changes for New York, Baltimore, and Boston, too.

• Anthopoulos is a Montreal native who grew up a die-hard Expos fan and still laments what happened to the franchise, particularly in its final years. He did his part to keep the team’s operations humming on a shoestring budget, though, taking his first job in baseball with the ‘Spos, taking on more responsibilities in his early to mid-20s than anyone his age could ever hope to experience, and having what he called “by far the most fun I’ve ever had in the game.” Anthopoulos’s first day of work with the Expos came in May 2000. The owner of the team back then? Jeffrey Loria.

• There are lots of jokes in the Twittersphere about the Marlins clearing cap space for LeBron, A-Rod, whoever. But the lack of payroll commitments, combined with what’s now one of baseball’s premier farm systems, make the Fish a potentially dangerous team a few years down the road — even if free agents stay away and payroll’s kept really low. Lest we forget, this kind of thing has ended well for the Marlins before.

• The four-year, $39 million contract the Marlins gave Johnson in January 2010 happened because the league pressured the team to spend some money, given how bad the optics were of running tiny payrolls every year while pocketing huge sums from revenue sharing. This trade shows that the commissioner’s office doesn’t really have much ability, or at least much desire, to implement policies that truly have teeth here. Others have floated the idea of a salary floor, but there can be perfectly good reasons for your team to rebuild (the Marlins had many of those reasons, in fact), and forcing a team to spend big bucks on some crummy veterans at a time when the roster doesn’t warrant such moves would do nothing to help competitive balance. If baseball’s decision makers are truly concerned about owners’ commitment to winning and not just pocketing profits, the best solution would be to simply find better owners. Given the sport’s current massive growth, don’t hold your breath for any significant changes.

• Loria clearly has something of a Honey Badger approach to public relations, and seems to run the business independent of public opinion. But we can’t say the Marlins don’t care at all about PR, not when they signed on for the Showtime series The Franchise and built a highly visible and aesthetically controversial stadium, complete with … well, you know. Maybe we should chalk it up to Loria’s love of art in all its forms.

• Yes, the Quebec government’s refusal to build a new stadium for Loria and the Expos marked the final nail in the team’s coffin before their move to D.C. Still, given everything that has since transpired in Miami, and the taxpayer ripoffs that have ensued in other cities, maybe Quebec’s intransigence was for the best. It’d be fascinating to see what sports team owners would do if they were forced to foot the bill for new stadiums on their own. You’d like to believe that no local government will ever again hand over half a billion for a baseball park, given what’s happened in South Florida. Sadly, politicians aren’t often known for their prudence and foresight.

• The only players left from the Marlins’ Opening Day 2012 lineup? Giancarlo Stanton and Logan Morrison.

• I filed a mostly unrelated story over the weekend (running later this month) that includes the following passage:

Less than a year after taking the Hot Stove League by storm … less than seven months after opening a new, $634 million stadium built through the bamboozling of local government and taxpayers, a deal so shady that it resulted in an SEC probe … the Marlins plan to slash payroll … and that’s less than four months after they already dumped a bunch of money by trading away a former franchise player. For years, the Fish have been a reliable source of top-flight, homegrown talent, and a reliable distributor of said talent to other clubs.

[Giancarlo] Stanton is a professional obliterator of baseballs, a 6-foot-5, 245-pound behemoth who blasted homers at a rate of 49 per 162 games in 2012. He’s only 23, he’s going to win a bunch of home run titles … and the Marlins are going to find a reason to trade him before Opening Day 2015.

Time for a rewrite.

Filed Under: Miami Marlins, MLB, Toronto Blue Jays

jonah_keri

Jonah Keri is a staff writer for Grantland. His book, The Extra 2%: How Wall Street Strategies Took a Major League Baseball Team From Worst to First, is a national best seller. His new book Up, Up, and Away, on the history of the Montreal Expos, is now available.

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