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Old 03-19-04   #1
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Wow - Bush and Business


Bush's Deal for the Texas Rangers
How George W. Parlayed $600,000 into $14.9 Million

Charles Lewis is the founder and executive director of the Center for Public Integrity.

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When George W. Bush first embarked on a deal to buy the Texas Rangers professional baseball team in 1988, he already had his eye on the governor's mansion in Austin. But he knew that to have a shot at winning, he would need better credentials than a string of unsuccessful oil companies and a failed bid for a seat in the U.S. House of Representatives. In 1989 he told Time magazine, "My biggest liability in Texas is the question, 'What's the boy ever done?' He could be riding on Daddy’s name."

But his father's connections were instrumental in helping Bush overcome that perception. Back in 1973, when the senior George Bush was the chairman of the Republican National Committee, Bush befriended one of his father's assistants, Karl Rove. Rove cut his teeth alongside the senior Bush's chief political strategist, Lee Atwater. Rove would become George W.'s own Atwater, helping to run his 1978 bid for Congress and laying the groundwork for his 1994 run for governor. As the Rangers deal got under way, Rove told Bush that baseball was his ticket to the big time. "It gives him ... exposure and gives him something that will be easily recalled by people," Rove said.

Rove's calculation turned out to be right on the money.

It all began in fall of 1988, when William O. DeWitt Jr., Bush's partner in a Texas oil-and-gas exploration company called Spectrum 7, called to let him know that Eddie Chiles, the owner of the Texas Rangers, was looking for a buyer.

Ueberroth Presses for Deal

Chiles, a family friend who called Bush "Young Pup" when he was a kid, was eager to sell to Bush. And so Bush and DeWitt quickly assembled a team of investors. They hit a snag when Peter Ueberroth, then commissioner of Major League Baseball, told them he wouldn't approve the sale without more investors from Texas. Ueberroth believed that local owners would be less likely to relocate the team. The commissioner, a GOP donor himself, wanted the deal approved before his term expired at the end of 1989, and so he and then-American League president Bobby Brown took it on themselves to line up Fort Worth financier Richard E. Rainwater.

Rainwater and Bush weren't exactly strangers. Rainwater was a contributor to his father's presidential campaigns and, later, an overnight guest in the Bush White House. Until 1986, he was the chief money manager for the Bass brothers, Fort Worth billionaires who financed drilling in Bahrain by the Harken Energy Corp., a company that in 1986 had bought out Spectrum 7, one of Bush's oil companies.

By 1988, Rainwater was managing his own fortune. He agreed to put money in the Rangers, but only if his trusted associate, Edward "Rusty" Rose, was installed as general managing partner along with Bush.

With this arrangement in place, Bush and his partners bought the team from Chiles on April 21, 1989, for $86 million. To scrape together his $500,000 stake in the Rangers, Bush borrowed the money from a bank in Midland where he once was a director. He owned 1.8 percent of the Rangers. (He later invested an additional $106,302).

Bush made up for his minor stake by taking more than his share of credit for bringing the owners together. "I wasn't going to let this deal fail," he said last year. "I wanted to put together the group. I was tenacious."

Others close to the deal paint a different picture.

"George W. Bush deserves great credit for the development of the franchise," Ueberroth said. "However, the bringing together of the buying group was the result of Richard Rainwater, Rusty Rose, Dr. Bobby Brown and the commissioner."

Bush Gets Another 10 Percent

Nonetheless, Bush's partners rewarded him by upping his ownership stake in the Rangers, giving him another 10 percent of the team.

"He had a well-known name, and that created interest in the franchise," Tom Schieffer, the Rangers' former president, said last year. "It gave us a little celebrity."

Usually parked in a front-row seat by the dugout, with his feet up and a bag of peanuts perched in his lap, Bush put a congenial face on a suspect deal, at the heart of which lay a complicated land play.

When they bought the team, the Rangers were playing in an old minor-league stadium. It didn't have the fancy sky boxes and other amenities that helped make other franchises much more profitable. As a result, the team couldn't compete with other big-city teams for good players. But the new owners weren't willing to finance the construction of a new ballpark. They decided to hit up taxpayers for the money.

First, the new owners threatened to move the team out of Arlington, Texas, sending local officials scurrying to put together a deal they couldn't refuse. Under the resulting agreement, the taxpayers of Arlington would raise $135 million, the bulk of the cost of construction, through a hike in sales taxes. During a campaign to sell the sales tax increase to Arlington voters, then-mayor Richard Greene said the team owners would put $50 million of their own money into the deal up front. It didn't quite work out that way; the owners raised a hefty portion of their down payment from fans, through a one dollar surcharge on tickets.

Sales Tax Hike Approved

The city spent $150,000 on an advertising campaign to persuade voters. Opponents of the deal couldn't compete with glossy brochures, telemarketing calls, and a "Hands Around Arlington Day." On January 19, 1991, citizens of Arlington voted two-to-one to approve a sales-tax increase dedicated to building the new park.

Between the sales-tax revenue, state tax exemptions and other financial incentives, Texas taxpayers handed the privately owned Rangers more than $200 million in public subsidies. Taxpayers didn't get a return from the stadium’s surging new revenues, either. The profits went almost exclusively to the team's already wealthy owners.

The stadium's lease is a case in point. Unlike an apartment tenant, the rent that the team's owners pay is applied toward purchasing the stadium. The maximum yearly rent and maintenence fees for the Rangers are $5 million; the total purchase price for the Ballpark at Arlington is $60 million. Thus, after 12 years the owners will have bought the stadium for less than half of what taxpayers spent on it.

But Bush and his partners weren't satisfied lining their pockets with average Texans' hard-earned cash. They wanted land around the stadium to further boost its value. To that end, they orchestrated a land grab that shortchanged local landowners by several million dollars.

As part of the deal, the city created a separate corporation, the Arlington Sports Facilities Development Authority, to manage construction. Using authority granted to it by the city, the ASFDA seized several tracts of land around the stadium site for parking and future development.

Puppet for Bush, Partners

While on paper the Arlington Sports Facilities Development Authority was a public entity, in practice it was merely a puppet for Bush and his partners. According to documents obtained by the Center for Public Integrity, the owners would identify the land they wanted to acquire. A Rangers owner, Mike Reilly, a Realtor, would then offer to buy the parcels for prices he set, which in several cases were well below what the owners believed their property was worth. If the landowners refused to sell to the Rangers at the offered price, the Arlington Sports Facilities Development Authority could take possession of their land and leave the price to be determined in court.

Several of the landowners took the authority to court over the seizures and won settlements totaling $11 million. In a final insult to taxpayers, the Rangers resisted paying the settlements, trying to pass off yet another cost to Arlington residents. (The Rangers, under new ownership, finally agreed to pay up last year.)

When confronted with the seamy details of the land grab, Bush professed ignorance. But Schieffer, the team's former president, has testified that he kept Bush aware of the land transfers. In October 1990, Bush also let this slip to a reporter for the Fort Worth Star-Telegram: "The idea of making a land play, absolutely, to plunk the field down in the middle of a big piece of land, that's kind of always been the strategy."

It was a strategy that would have an enormous payoff for Bush personally.

After he became governor of Texas, Bush put his all of his assets into a blind trust, with one notable exception: his stake in the Rangers. Schieffer kept Bush apprised of the owner's efforts to sell the team to Thomas O. Hicks, the chairman of Hicks, Muse, Tate and Furst, Inc., a firm that specializes in leveraged buyouts and until recently owned AMFM, Inc., the nation's largest chain of radio stations. Hicks and employees of his companies are Bush’s No. 4 career patron, having given him at least $290,400.

25-Fold Return on Investment

In 1998, Hicks helped provide Bush with an even greater windfall. He bought the Texas Rangers for $250 million, three times what Bush and his partners had paid ten years earlier. The new stadium and the real estate around it greatly boosted the final sale price. And, since his partners had upped Bush's stake in the team from 1.8 to 11.8 percent, his cut from the proceeds of the sale was $14.9 million, a twenty-five-fold return on his investment of $606,302. Rainwater, who had put far more money into the team than Bush, made $25 million.

Just as important as the cash, however, was the cachet that came with the deal's success. The Ballpark at Arlington finally opened in April 1994, just as Bush was running for governor. He touted the new stadium as a win-win proposition for taxpayers and the team. "Am I going to benefit off it financially?" he asked reporters. He answered his own question: "I hope so." Four years later, everyone would know by how much.

Published: Jan 19 2000
Bismarck once said "Fools say they like to learn from their experiences, but I prefer to learn from the experience of others."

"Move that one of your pieces, which is in the worst plight, unless you can satisfy yourself that you can derive immediate advantage by an attack." -Adolph Anderssen
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Old 03-19-04   #2
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Don't you wish YOUR name was worth $14 million?
Bismarck once said "Fools say they like to learn from their experiences, but I prefer to learn from the experience of others."

"Move that one of your pieces, which is in the worst plight, unless you can satisfy yourself that you can derive immediate advantage by an attack." -Adolph Anderssen
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Old 03-19-04   #3
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