BLACK ARMY PURCHASE ATTEMPT OF CHIVAS USA
ALTAY TASCIOGLU
MARCH 2014
MARCH 2014
ISSUE
The issue presented is whether the Chivas USA supporter group Black Army (BA) violates any legal or ethical guidelines by their fundraising efforts to purchase the club. As a general ethical rule, attempted purchases of professional sports teams should be void of impropriety and do no damage to the existing reputation of the club or fan base. My analysis will address the process more than the end result because the likelihood of success by the BA is slim. However, especially in the social media age, significant funds can be raised which could lead to allegations of misrepresentation, misappropriation of funds, and possibly fraud. The intentions of the BA are no doubt innocent, but the process leaves much to be desired.
FACTS
The MLS purchased Chivas USA from Jorge Vergara after a dismal club performance both on and off the field over the last four seasons. The BA wrote a letter to MLSCommissioner Don Garber and requested an opportunity to purchase the club at market value while citing a desire to never repeat the ownership mistakes exhibited by Vergara. The letter announced a fundraising initiative with a pledge to donate 100% of the funds to MLS Works (non-profit arm of MLS) in the event the bid is unsuccessful.
PURPOSE
The purpose of this essay is to voice concerns regarding the fundraising efforts. 2014 will mark my sixth season as a Chivas USA season ticket holder. I love the club, city, and its supporters. The BA shares my passion. In a time where Chivas USA fans are few and far between, the BA is one of the few groups that stuck with the club during tough times. They are lead by smart and energetic supporters who truly want the club to prosper. While I understand the BA wants to parlay passion into more control over the club, the group shows no signs of the experience needed to manage millions of dollars and an MLS Franchise. The same holds true for any potential interest in the club. Hopes and dreams aren’t enough without planning, preparation, organization, resources, and qualifications.
MOTIVE / CHARITABLE DONATION
Why is the BA launching the fundraising drive? My first inclination was publicity. The self-proclaimed “Infamous” BA is a group that prides itself on having called for the firing of two coaches before their eventual termination. Yet, this is the same group that rightly criticized former ownership and their commitment to the club. In essence, they requested the firings of coaches who were attempting “mission impossible.” The BA enjoys their fare share of attention.
During an interview with TheGoatParade.com, BA President Angel Mendoza outlined the group’s plan. He said, “The next step [after buying the team] would be to hold a celebration on doing the impossible. Then setting up a structure of the right staff to make sure the club is successful. We would be looking for a location and investor for a stadium.” Therefore, Mendoza admits to not having a staff structure before fundraising begins.
The group recently proclaimed the primary objective is ownership of the club and not publicity. Yet, the BA chose to attach a charitable donation to their bid if/when they fall short of the goal. The question is why? If the group wants to purchase an MLS Team, the public should expect an all out effort to present a comprehensive bid which includes financing, personnel, corporate structure, endorsements by community leaders, potential soccer operations staff, scouting, youth development, media relations, corporate partnerships, leadership structure, accounting, and many other necessities before fundraising begins. This is known as a prospectus. Merriam-Webster defines prospectus as “a printed statement that describes something (such as a new business or investment) and that is sent to people who may want to be involved in it or invest in it.”
According to Investopedia, “a prospectus should contain the facts that an investor needs to make an informed investment decision.” Such a plan is only fair to a potential donor or investor if expected to part with hard earned money. Common sense indicates that if the above elements are missing prior to soliciting funds, the bid can only be considered a ploy to get publicity. The BA most likely attached the MLS Works pledge to acquire some legitimacy in the project.
The group may also choose to fundraise exclusively for MLS Works if they feel passionately about the cause. Why involve Chivas USA? Also, nothing is stopping the BA from soliciting funds and simply making refunds if they fall short. Mendoza added, “Even if we do not reach our goal to purchase the club, we would like to raise enough to invest into it.” So from start, the BA is straddling between ownership, investment, and a charitable donation while still not offering a prospectus for each situation.
Mendoza was also quoted as saying, “We are realists and not dumb, our chances are very low, but it is fun to do the impossible.” Yet earlier in the interview he insisted the BA wanted to “put our money where our mouth is.” To summarize, the BA wants to have fun and celebrate while soliciting other people’s money and re-directing it to charity in the event they fall short. No refunds allowed.
LEGAL ISSUES
Why is this bad you ask? What’s wrong with donating a few bucks to charity? Simple answer—Misrepresentation. The BA has not started to fundraise at a large scale. With the Internet and social media, anything can happen. Donors could make contributions all across the world. The 2014 World Cup may attract new followers to MLS and possibly new donors. Lets say the BA raised $100,000 from 2,000 people. The BA may personally know only a fraction of the donors. That means the majority of donors are banking on assumptions that a somewhat serious and comprehensive prospectus exists and contains the required elements. Or else, they (donors) would have just donated money directly to MLS Works. However, what if no plan currently exists? What if it’s just a few guys on social media trying to raise funds? How do donors know that the $100,000 won’t be mishandled? How about oversight? The questions are endless. If it is proven that no prospectus exists and the internal goal was notoriety, the BA meets all 9 elements of common law fraud.
(1) a representation;
(2) its falsity;
(3) its materiality;
(4) the speaker’s knowledge of its falsity or ignorance of its truth;
(5) the speaker’s intent that it be acted upon by the recipient in a manner reasonably contemplated;
(6) the hearer’s ignorance of its falsity;
(7) the hearer’s reliance on its truth;
(8) the right to rely on it;
(9) the plaintiff’s consequent and proximate injury.
(2) its falsity;
(3) its materiality;
(4) the speaker’s knowledge of its falsity or ignorance of its truth;
(5) the speaker’s intent that it be acted upon by the recipient in a manner reasonably contemplated;
(6) the hearer’s ignorance of its falsity;
(7) the hearer’s reliance on its truth;
(8) the right to rely on it;
(9) the plaintiff’s consequent and proximate injury.
It only takes a handful of upset individuals to say, “Hey wait, I thought this was a serious bid. I want my money back.” Allow me to use an analogy. Some politicians run for President of the United States when they know the odds of winning are slim to none. They do so to advance a message and make speeches. However, they typically present some campaign and strategy plans before soliciting funds. The pubic would find it highly inappropriate for the candidate to not offer a comprehensive plan before soliciting funds and simply converting the money to charity knowing they (candidate) could reap the benefits of the public donation and halfhearted campaign. The notice of a possibility of charitable donation and subsequent consent mean nothing if the donor did not make an informed decision. This would be against public policy.
WHY DOES THIS MATTER?
My gut instinct tells me the BA was attempting to raise funds first and worry about the planning later. In my opinion, that course of action is highly unethical. The BA can create an infrastructure to refund donations in the event of an unsuccessful bid. This alleviates the problem. While it may create accounting work, so would managing thousands of dollars and guarding against impropriety. If the BA refuses to refund the donors, one could ask what their true motives are.
I write this essay because I care about Chivas USA and its future. The club has suffered on and off the field over the last four seasons. From discrimination lawsuits, negativeHBO segments, poor marketing, awful attendance, and club futility, Chivas USA was the model of dysfunction in professional sports. All of this changed when the MLSpurchased the club. Garber wrote the following to Chivas USA supporters in an open letter. He said, “In the coming months, the league will work to find a new ownership group that will establish a new vision and plan for the team, and will be committed to building a new stadium in Los Angeles. We have already had initial discussions with a number of very qualified potential owners and it is our intention to transition the team to a new owner sometime this year.”
I trust Garber after seeing the league grow over the last decade. I’m finally excited about the direction of the club. In my opinion, even if one donor is upset with the handling of funds, the botched fundraiser further tarnishes the reputation of the club and its fan base.
CONCLUSION
The BA is smarter than this. The decision to purchase the club and raise funds came approximately one week after the MLS purchased Chivas USA. If they had this plan all along, one would assume some prospectus would be available now to potential donors. Most likely, the plan was concocted shortly after the sale. In that event, the plan lacks considerable thought and several deficiencies are obvious.
Nobody can question the passion of the BA. Nobody can doubt their love for the club. Nobody believes the BA is doing this for money. I admire and respect the BA. However, this is a bad move and I hope the BA will at least consider switching to a refund policy.
FC BARCELONA STATUTES
The following link points to the FC Barcelona statutes. The BA can use the statutes as a guide in preparing a detailed prospectus before soliciting funds.
