The Miami Marlins’ latest legal shenanigans have revealed facts about the franchise that tell a larger story about how the business is structured.
A Miami Herald report about the Miami Marlins’ attempt to change the venue of a lawsuit involving the MLB franchise and the local municipalities focuses on how off-shore holding companies which own part of the team could affect that lawsuit. That framework affects much more than just the lawsuit, however.
The drama began months ago when Miami-Dade County and the city of Miami sued former Marlins owner Jeffrey Loria and the new ownership group headed by Bruce Sherman for what they allege is a violation of the contract between the franchise and the two municipalities that entitled both government entities to a portion of the proceeds from the transaction which made Sherman the primary owner of the MLB team.
As that litigation has played out, the Sherman team has filed a motion with the court to move the case from the county court to a federal court. The argument revolves around the fact that one of the companies which is listed as part of the ownership group is based in the British Virgin Islands. Court procedure dictates that civil disputes between international parties must be litigated in federal court.
The likelihood of success of this maneuver is low because if even one of the holding companies is based in the United States, and more specifically within Miami-Dade’s borders, the dispute will probably stay right where it is. What this reveals about the framework of the Marlins’ business structure is much more telling.
It’s unclear how much of the franchise is owned by this off-shore holding company, called Marlins Teamco. It is clear that the company was created for the specific purpose of putting at least part of the team under its umbrella. Unless the Sherman group had some great foresight that this dispute would surface, there’s only one reason to make such a move.
The existence of this company in the British – not the US – Virgin Islands allows the Marlins to do some creative but legal accounting when it comes to tax time. Much of the revenue could theoretically be “shifted” to this off-shore holding corporation and the US companies could show a loss, allowing the Marlins to avoid paying federal, local and/or state taxes.
While the Marlins aren’t the first and won’t be the last or only for-profit American business to employ this strategy, it becomes problematic considered against the fact that Miami-Dade County taxpayers will be footing most of the bill for Marlins Park for decades yet.
Regardless of how the lawsuit plays out, this news makes it clear how the Marlins are more than willing to benefit from domestic tax dollars while using resources at their disposal to avoid returning dollars to those coffers.