How a disputed $55M loan plays into feds’ probe of Commanders
DANIEL SNYDER FINAL The parting ways with his longtime Washington NFL minority franchise partners began with a footnote in an April 2020 financial report.
The note disclosed a $55 million line of credit that the team received 16 months ago without knowing it, and required approval from Snyder’s minority partners — three billionaires who owned 40% of the franchise, according to documents obtained by Sportzshala.
The secret $55 million loan has become a major focus for Virginia federal prosecutors who are investigating allegations of financial misconduct by Snyder and the Washington military, several people with direct knowledge of the investigation told Sportzshala.
A federal grand jury issued a subpoena to obtain a cache of documents related to the team’s finances, including a loan. Prosecutors received the NFL partners’ petition for arbitration and other supporting material, including emails and letters between team leaders and bank lawyers, documents show. A group of FBI and IRS agents are leading the criminal investigation, sources said.
During a confidential arbitration, the former partners demanded that the NFL investigate the origin of Snyder’s loan. But neither NFL commissioner Roger Goodell, whose signature gave the league approval for the team to take on the new debt, nor an NFL referee investigated the partners’ allegations of financial wrongdoing, according to hundreds of pages of confidential NFL arbitration documents obtained by Sportzshala and other sources. over a dozen interviews.
According to the documents, loans and lines of credit obtained without the approval of the Washington board of directors violate the team’s shareholder agreement. The documents also show Bank of America officials repeatedly asked team leaders for proof that the board had approved the loan. But team leaders never handed over a copy of the board’s approval prior to closing the loan, and one of the team’s lawyers later admitted in a letter that the board’s approval does not exist, the documents show.
The documents show that four days after the partners asked an NFL arbitrator to prove that the loan was legally obtained, the NFL decided to close the arbitration. The partners reluctantly agreed to a mediation led by Goodell, sources familiar with the matter told Sportzshala. The mediation resulted in the partners selling their shares, silencing their grievances against Snyder, the sources said. The NFL never conducted a loan investigation requested by the partners, and the league did not sanction Snyder over allegations of financial impropriety.
One source with direct knowledge of the proceedings told Sportzshala that the partners believe Goodell and NFL General Counsel Jeffrey Pash sided with Snyder.
“Three billionaires — quite a few whistleblowers — told an NFL referee that their partner may have committed bank fraud,” the source said. “This is a prison-type scam. The NFL owes them as much honest shake-up as it does Snyder. And the league was not interested in finding out what happened. They buried it, didn’t investigate and covered it up. “
Documents obtained by Sportzshala show minority partners Robert Rothman, Dwight Shar and Frederick W. Smith protested the loan after they discovered it in a small print financial statement. They then began to take a closer look at the team’s finances and discovered that Snyder had been using the team as his “personal piggy bank”, including charging the team $4.5 million to put its logo on his private jet, as they alleged in an arbitration lawsuit filed in NFL.
John Brownlee, an adviser to commanders and a team spokesman, declined to answer any questions about the $55 million line of credit. In a statement, Brownlee said, “The team has been fully cooperating with the Eastern District of Virginia since it received a record request last year. The records requested are only for customer margin deposits and team sales and earnings. continue to cooperate with this investigation.”
A spokesman for the US Attorney’s Office for the Eastern District of Virginia declined to comment to Sportzshala.
The NFL did not grant Goodell an interview. NFL spokesman Brian McCarthy said in a statement: “A number of disputes have arisen between the parties, which have been referred to the commissioner for arbitration in accordance with the requirements of league rules. The commissioner appointed a respected lawyer as arbitrator, and neither side objected. to this appointment.”
“Months later, the parties asked if they were interested in engaging in confidential mediation with the Commissioner, to which they agreed,” McCarthy continued in a statement. “The mediation lasted two days and the parties subsequently reached an agreement whereby the three limited partners sold all of their shares in the team to Mr. Snyder at an agreed price and on different terms. Each was represented by very sophisticated legal and financial advisers. The agreement included a complete waiver of all claims that were or could be made by either party to the arbitration.”
McCarthy declined to answer further questions, including whether the NFL had received any subpoenas related to the criminal investigation.
Bank of America, which regularly makes loans to NFL teams, declined to comment through spokesman William P. Haldin.
None of the three minority partners or lawyers from the law firm that represented them in the dispute responded to Sportzshala’s requests for an interview. Smith is the founder and executive chairman of FedEx, Rothman is the CEO of Black Diamond Capital, and Shar is the chairman of NVR Inc., a publicly traded home building company. They made up half of the board of directors of the six-man team; according to the charter, they had to approve all important financial decisions.
Snyder’s undisclosed loan and how he got it has become the most contentious issue in his bitter year-long feud with three men who have been his teammates since 2003.
Their dispute was fought in closed motions filed as part of a Maryland federal litigation before moving to a confidential hearing under an NFL arbitrator and eventually to a closed mediation overseen by Goodell and NFL lawyers.
In the spring of 2021, as a result of the mediation, Snyder paid his partners $875 million for their 40% stake. Nearly two years later, Snyder wants to sell the team for $7 billion. At this price, the share of former partners in the team would be $2.8 billion.
ORIGIN Snyder’s line of credit at Bank of America was destined to remain a private unresolved dispute in the high-stakes billionaires’ clash were it not for the current criminal investigation.
The list of minority partners’ allegations, from misuse of team funds to staffing Snyder’s yachts and private jets to breaching corporate charters, is detailed in their 61-page arbitration petition filed confidentially with the NFL. June 26, 2020, retrieved by Sportzshala.
More than two years before they noticed this footnote hidden in the course of the audit, the partners began to consider selling some or all of their stakes in the team. They were disappointed with Snyder’s leadership. However, according to the documents, Snyder made it almost impossible to sell them.
In 2018, Smith received an offer to buy his 10% stake in the team. But Snyder blocked the sale, telling Smith “the proposed buyer is not acceptable to the NFL,” the documents show. The proposed buyer was Alan Kestenbaum, chairman and chief executive officer of Canadian steel company Stelco. A year later, Kestenbaum bought Arthur Blank’s minority stake in the Atlanta Falcons after it was approved by the full NFL ownership. Kestenbaum did not respond to Sportzshala messages.
In their arbitration motion, the partners argued that Snyder blocked the sale to Kestenbaum because the due diligence required by the new limited partner “would have revealed misconduct.”
All three partners hired consultants to sell their shares in August 2019. While investigating the sale, the partners received financial information that Snyder “mishandled” “team assets and engaged in amateur activities and other misconduct,” according to the documents. The partners claimed that Snyder kept them in the dark about the team’s financial decisions.
In April 2020, the same month that the partners discovered the $55 million credit line, Snyder for the first time failed to pay his partners their quarterly share of the team’s profits, as the arbitration lawsuit alleges. The partners said they already knew the team’s local revenues generated outside of NFL media rights deals had dropped by a third from the previous decade, from $241 million in FY2009 to $160 million in FY2020.
The partners confronted Snyder about a missed quarterly payment in May 2020 and asked why he got a line of credit. They also demanded an explanation for what they called “standalone transactions”. Snyder ignored their questions, the partners say in the documents, except for eventually telling them that the team had borrowed more than $20 million from a line of credit.
When Rothman complained that the team’s board hadn’t met in years, Snyder responded, “Why the hell do I need a board meeting?” according to the documents.
In a letter dated June 5, 2020, Snyder’s attorney told partners that Snyder planned to spend over $7 million in “unreimbursed business expenses” between fiscal year 2017 and 2020. Snyder also revealed that he is seeking a $1 million reimbursement for the vehicle. “and the added security needed during foreign travel (because of his high position as an owner).”
In the letter, Snyder said the expenses included a July 2018 yacht party in southern France, hosting fellow owners Jerry Jones of the Dallas Cowboys, Robert Kraft of the New England Patriots and Terry Pegula of the Buffalo Bills.
“This includes ‘world-class cuisine cooked…