Carolina Hurricanes owner Tom Dundon is having a case of buyer’s remorse. But it could be too late for Dundon to get a refund.
Daniel Kaplan of TheAthletic.com reports that Dundon has filed a claim in the Alliance of American Football’s bankruptcy case. Dundon alleges that his investment happened due to “misrepresentations,” and he seeks a full refund of the $70 million he paid to keep the league afloat for five or six weeks during its only season, before Dundon shuttered it.
“Even though AAF executives told [Dundon Capital Partners] its contribution would get the AAF through the first season, those executives knew at the time of the execution of the Term Sheet that the AAF would likely need an additional $50,000,000 (including League revenue) on top of [Dundon Capital Partners’] investment of up to $70,000,000 to get through the first season,” the document alleges. “The AAF and its executives never disclosed this information to [Dundon Capital Partners].”
In other words, Dundon claims that the AAF led Dundon to believe that an infusion of $70 million would get the league through its first season, but that the AAF knew that in reality $120 million would be required. More specifically, Dundon claims that the AAF led him to believe that an amount considerably less than $70 million would be needed to finish the campaign.
“The AAF further represented that it could survive the season with only $55,000,000, leaving substantial capital to prepare for the following season,” the document contends. “During the weeks following the execution of the Term Sheet, [Dundon Capital Partners] learned a number of alarming facts that revealed that the AAF was not forthcoming with Dundon and [Dundon Capital Partners]. [Dundon Capital Partners] learned that, in addition to not having the funds to pay salaries after the first week of the League’s games, the AAF also had accumulated more than $13,000,000 in unpaid debts and commitments. The AAF did not disclose these unpaid debts or commitments to [Dundon Capital Partners] prior to the execution of the February 14, 2019 Term Sheet.”
Dundon also contends that the AAF failed to disclose the existence of “ongoing threatened litigation from a past associate who claimed to be a co-founder of the League and who was suing to obtain a 50% interest in the AAF.”
With precious few assets available to be distributed to the AAF’s many creditors, Dundon’s filing feels like the first move in a fresh game of chess/checkers/chicken against those who lured him to pump millions down what ultimately became (and possibly already was) a dry hole. Dundon could be trying to ensure that creditors won’t target him personally, he could be trying to lay the foundation to target personally those who lured him into the business, and/or he could simply be trying to ensure that the record is clear and unambiguous in the event the pending legal proceedings eventually take a southerly turn from the civil justice system.