Billionaire seeking to buy Coyotes says NHL tolerates 'criminal' owners

The National Hockey League's rejection of Canadian billionaire Jim Balsillie's offer to buy the Phoenix Coyotes shouldn't torpedo his bankruptcy court bid to acquire the franchise, his lawyers argued.

U.S. Bankruptcy Judge Redfield Baum in Phoenix will consider bids for the Coyotes Sept. 10. Balsillie, co-chief executive officer of the BlackBerry maker Research In Motion Ltd., is offering $212 million to buy the team and shift it to Ontario, Canada. The NHL rebuffed Balsillie's request to become an owner, saying he lacked "good character and integrity," according to an Aug. 18 court filing.

"There is no good-faith basis for making Mr. Balsillie the first applicant in history to be rejected" over character issues, Balsillie's lawyers wrote. "The NHL has long tolerated indicted and even convicted criminals among" its ownership ranks, they wrote.

Coyotes owner Jerry Moyes sought Chapter 11 protection for the team earlier this year, citing almost $400 million in losses. He's seeking to sell the team at an auction to recoup some of those losses. Baum will hear arguments Sept. 2 on whether the NHL's blackballing of Balsillie bars him from winning the bankruptcy auction.

"None of the cited situations are even remotely comparable to Balsillie's situation," Bill Daly, an NHL spokesman, said in an e-mailed statement, referring to the Balsillie attorneys' citing of team owners.

Key Question

The outcome will depend on whether the NHL's rejection of Balsillie must be honored by the judge, said attorney Thomas H. Allen, whose Phoenix-based firm, Allen, Sala & Bayne Plc, represents the main panel of unsecured creditors in the bankruptcy case.

"Does the bankruptcy court have the authority to look at the reasonableness of that decision," Allen said today in an interview.

The league opposes Balsillie's bid to move the team to Ontario without its permission.

Among his competitors for the Coyotes is Jerry Reinsdorf, who owns Major League Baseball's Chicago White Sox along with the National Basketball Association's Chicago Bulls. Reinsdorf has the NHL's blessing to buy the Coyotes for about $150 million and keep the team in Phoenix.

Baum delayed an Aug. 5 auction after the NHL said Reinsdorf and other potential bidders needed more time to improve their offers. The judge has said in court that so far only Balsillie's offer meets the criteria of an acceptable bid.

Antitrust Probe

The NHL cited Balsillie's cooperation with Canadian antitrust regulators, who probed the league's relocation rules in 2006 and 2007, as a reason to reject his ownership application, the executive's lawyers said in the filing.

Reinsdorf sued the NBA in 1990 when the league sought to limit the number of Bulls games televised on a cable TV channel, Balsillie's attorneys said in the filing. The suit cost the league an estimated $10 million in legal fees, they noted.

The ranks of those given the league's stamp of ownership approval have included Bruce McNall, former owner of the L.A. Kings and chairman of the NHL's board of governors, convicted of federal fraud charges, the lawyers added.

The Silicon Valley venture capitalist William "Boots" Del Biaggio III, who got the hockey league's blessing to buy the NHL's Nashville Predators after Balsillie dropped out of the bidding, pleaded guilty to fraud charges in connection with financing his purchase of the team, according to the filing.

Del Biaggio Case

Federal officials accused Del Biaggio of tricking lenders into giving him $100 million for ventures that included purchasing a stake in the franchise, according to charging documents filed in December. He pleaded guilty in February and is facing a maximum 25-year prison term.

Balsillie's lawyers also noted that Eugene Melnyk, the current owner of the Ottawa Senators, settled securities claims with both Canadian and U.S. regulators. In February, the former chairman of Biovail Inc. agreed to pay $1 million to resolve claims he failed properly disclose his ownership stake in the company.

"These examples establish that the standard the NHL seeks to apply to Mr. Balsillie is arbitrary, capricious and in bad faith," the executive's lawyers said in the filing.

Balsillie also has run afoul of securities laws, agreeing in February to settle U.S. Securities and Exchange Commission claims that he and other Research In Motion executives backdated stock options.

Melnyk said in a statement yesterday Balsillie's attempt to point to other owners foibles to justify his admission to the league "saddens me."

"I have watched with some dismay Jim Balsillie's fall from being a deserving business icon to what now appears to be a desperate man willing to say anything or do anything to buy an NHL franchise," Melnyk said. "I clearly believe the sport of hockey is better off without him."

The case is Dewey Ranch Hockey LLC, 09-09488, U.S. Bankruptcy Court, District of Arizona (Phoenix).