As Browns owner Jimmy Haslam sweats out the question of whether he’ll be indicted by prosecutors who are working their way up the Flying Pilot J corporate ladder, a question unrelated to his potential criminal liability in connection with customer rebate fraud potentially could force him to sell the team.
It’s a dynamic mentioned in last week’s Wall Street Journal treatment of the controversy and highlighted on Sunday by Terry Pluto of the Cleveland Plain Dealer. The debt that Pilot Flying J assumed from 2010 to 2012 could, if the company-owned truck-stop business falters, force Haslam to find another way to make its payments.
The company’s debt “nearly doubled” during that two-year period to $4 billion, when the company’s owners (the Haslam family) provided to themselves a total payment of $1.7 billion. In 2012, the company assumed $1.1 billion of debt, in large part to fund a $700 million dividend issued “partly so Jimmy could buy the Cleveland Browns.”
Presumably, the numbers were crunched at the time to determine that, in the normal course of business, the debt could be repaid, even though Standard & Poor’s downgraded the company’s debt, calling the associated risks “significant.”
Whatever the risks were, they became more significant after the FBI and IRS raided corporate headquarters and other locations on April 15 — and after executives began lining up to plead guilty and to volunteer cooperation in connection with efforts to prove, as one exec’s plea deal said, “senior management” knew of the rebate scam.
As a result, Jimmy Haslam’s ongoing ownership could be jeopardized on two separate fronts: Legal and financial. Even if he’s never personally charged with wrongdoing, the aftermath of the scandal could sufficiently impact the company’s business to force the kind of influx of cash that would come only from selling off the one very major asset that reportedly was acquired at least in part with the money issued by Pilot Flying J last year.