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Major League Baseball's $25M loan to Nationals compromised its impartiality, MASN says

Orioles Nelson Cruz hits a 2-run homerun in the first inning of game one of the ALDS between Baltimore and Detroit.
Orioles Nelson Cruz hits a 2-run homerun in the first inning of game one of the ALDS between Baltimore and Detroit. (Kenneth K. Lam / Baltimore Sun)

Major League Baseball compromised its impartiality in the Orioles-Washington Nationals TV rights fee dispute when it made a nearly $25 million loan to the Nationals that gave it a financial stake in the outcome, attorneys for the Orioles' television network allege in a new court filing.

The attorneys say Major League Baseball linked the 2013 loan's repayment to the "inflated proceeds" it anticipated an arbitration committee would award the Nationals in annual TV rights fees from the network, which is controlled by the Orioles but broadcasts both teams' games.

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"In doing so, MLB acquired a direct financial stake in the Award and with it a powerful incentive to ensure that the (arbitration committee) would return an Award more favorable to the Nationals," the attorneys say in the document.

The allegations are contained in a legal memorandum filed late Tuesday night in New York State Supreme Court by lawyers for the Mid-Atlantic Sports Network and joined in by the Orioles.

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The filings are the latest by MASN to accuse baseball officials of predetermining the outcome of the long-running telecast rights fees dispute between the neighboring teams.

Baseball, which says the process was fair, had left it to its Revenue Sharing Definitions Committee — composed of the owners of the New York Mets, Pittsburgh Pirates and Tampa Bay Rays — to settle the dispute. The committee decided on June 30 to award the Nationals about $60 million in TV rights fees per year — an amount MASN believes is too high. MASN now pays the club $40 million annually.

In August, the court blocked the committee's decision from taking effect while it considers the matter.

Asked about the new allegations Wednesday, a spokesman for Major League Baseball forwarded a recent court affirmation in which incoming commissioner Rob Manfred defends the propriety of the loan. Manfred is Major League Baseball's chief operating officer and will succeed Commissioner Bud Selig in January.

"I understand that in this litigation, MASN and the Orioles claim that it was improper for MLB, beginning in August 2013, to have advanced funds to the Nationals to make up the difference between, on the one hand, what MASN was willing to pay the Nationals for their telecast rights and, on the other, what the RSDC had internally decided MASN should pay based on the fair market value of those rights," Manfred said in the filing.

"These advances were fully justified, were done with the Orioles' and MASN's knowledge and encouragement, and were intended to allow additional time for the parties to negotiate a settlement," Manfred said.

MASN and the Orioles maintain they knew there was to be an advance, but that the amount and repayment terms were kept secret from the club and the team.

In court documents, they said they learned the details when the Nationals "recently produced" an August 2013 letter from Manfred to Edward L. Cohen, a principal owner of the Nationals.

In the letter — attached as a court exhibit — Manfred said the commissioner's office "will pay the Nationals $13,488,825 no later than August 29, 2013," followed by a payment of $11,085,313. The document said repayment could come directly from MASN out of the funds owed to the Nationals.

Manfred said the loan was made because of the "ongoing hardship to the Nationals, and to allow the settlement discussions to continue and avoid possible litigation by the Clubs or MASN."

Nationals' attorney Stephen Neuwirth did not return an email or phone call seeking comment.

Earlier this month, MASN attorneys alleged Manfred and Major League Baseball exerted "dominance and control" over the arbitration committee, which baseball officials maintain was impartial. MASN attorneys argue the same outside counsel — New York-based Proskauer Rose — represented the Nationals, Major League Baseball and the three teams whose owners made up the arbitration panel.

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But Manfred said the panel members "exercised their own independent judgment."

Major League Baseball is opposing MASN's request that it release documents related to Manfred's "control" over the process.

The dispute over Manfred's role appears likely to delay any resolution of the case. Final arguments had been scheduled for Dec. 15, but it now appears that issues related to Manfred's role will push those arguments into March. The court will use the Dec. 15 hearing for discussion on what documents are considered relevant to disclose.

Procedures for determining TV rights fees were brokered when the Nationals, formerly the Montreal Expos, moved to Washington in 2005.

A 2005 agreement was weighted toward the Orioles — giving the team a bigger ownership stake in MASN and a proportionately larger share of the profits — after the team argued that the Nationals' arrival into the region deprived Baltimore of a third of its market.

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