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Lawsuit Provides New Details About Arena Negotiations

Daryl Katz is suing the owner of the Erie Otters, and because of that we've learned some new things about how he handled the arena deal negotiations with the City of Edmonton.

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At this point I'm hesitant to write anything about Edmonton's new downtown arena. Not because I don't believe that there are to be things to say, but because, with the debate over the funding now over, anything written about the arena is often met with responses of "It's done, move on," and while that is a very compelling argument, it's not something that interests me a whole hell of a lot. But then there stories like the one that David Shoalts wrote in yesterday's Globe and Mail that make it simply impossible for me to say nothing.

If you haven't read the story I strongly suggest that you do. What seemed like a very simple case of business deal gone bad, which in turn led to the Oilers owner, Daryl Katz, suing Sherry Bassin, the owner of the OHL's Erie Otters, is anything but simple. Yes, the business deal went south, but Shoalts does a fantastic job of illustrating the motivations of the Katz Group in pursuing this particular deal, and of course leveraging the city for a better deal on the new arena was a big part of it. From the story:

Katz made the deal with Bassin not because he was interested in the welfare of fans in Erie. Instead, if he could quietly buy the Otters, he could move them to Hamilton and take control of his ultimate prize – the hockey lease at Copps Coliseum – even though a fellow NHL owner, Michael Andlauer, was the existing leaseholder at the Hamilton arena. Andlauer, who made his fortune in the transportation and logistics industries, has a minority stake in the Montreal Canadiens and also owns their American Hockey League farm team, the Hamilton Bulldogs.

Bassin agreed to be his front man in the Hamilton transaction because Katz insisted on a low profile. No one is saying it straight out, but the timing of Katz’s move on Copps in late 2012 suggests he may have been interested to use the Copps lease as leverage to get more public funding in Edmonton in a deal to build a new downtown arena for his Oilers.

As you might recall, it was in the fall of 2012 that Katz made a trip to Seattle, a trip that had all the subtly of a hammer to the head and was was meant to convince Edmonton's City Council to take a very good arena deal and make it even better. The relocation threat is standard stuff right out of the "How To Shakedown Your City For A New Stadium" manual, and luckily for the taxpayers in Edmonton, Council saw through the threat and the move backfired, forcing Katz to issue an apology, What we didn't know at the time was that Katz was also looking at options to try and move the Oilers to Hamilton. An email from Patrick LaForge to Bassin contained the following:

"we are all working on our plan to get the Otters relocated to Copps Coliseum" and "[the Oilers] will get the hockey opportunity we have been looking for in that market."

What struck me as odd throughout the arena negotiations was how many people wanted to assume that Katz's motives in this were altruistic, that all he really wanted was what was best for the the City of Edmonton, to me he always came off as shady (sometimes worse). But between the poorly veiled threat to relocate team to Seattle and dealings with Bassin that could have resulted in the team moving to Hamilton, it should be clear to everyone by now that maximizing his revenue stream is priority number one for Katz. And there's nothing necessarily wrong with that, Katz is a business man and it's completely reasonable that he wants to make money, but that shouldn't be a concern for Edmonton City Council, they need to strike deals that makes sense for the residents of the city, not just the owner of a hockey team.

I've made the point repeatedly that I don't think the City struck a good deal with Katz (and for what it's worth, an economist agrees with me). They didn't question the costs, they didn't look at alternatives, they simply wanted an arena and were bound and determined to make it happen. But even though that deal is done, the City's days of negotiating with the Katz Group are far from over. As development continues within the arena district there will be items that come up where the City and he Katz Group don't see eye to eye, and even though these items will never be near the size and scope of a half billion dollar arena, perhaps now the City will understand that Katz is looking out for himself at all times and that they're the ones who need to look out for the best interests of Edmontonians.

Maybe this time they'll be a little less willing to back down. And who knows, if the City really stands their ground maybe Katz will write the mayor a letter even more comical than the one he wrote to OHL commissioner David Branch when things didn't go his way.

Katz called Bassin’s loan in June, 2013. Things took a nastier turn in 2014 when the Otters’ lease at the rebuilt Erie arena came up. After failing in an attempt to prevent Bassin from signing a new lease, Katz wrote a letter to Branch on Oct. 9, 2014, demanding that the Otters be turned over to him.

"As matters transpired," Katz wrote, "I am now very concerned you have not taken a leadership role in finding a hockey solution that will keep this from becoming a very public legal dispute. If this is not resolved, unfortunately, Sherry Bassin, the OHL and all the sponsors and fans of major junior hockey will witness a public legal dispute instead of looking forward to the 2014-15 hockey season."

Katz ended the letter with a most unsubtle remark. "I am providing references of my partners in other hockey organizations," he told Branch, and listed NHL commissioner Gary Bettman, Hockey Canada president Tom Renney, AHL commissioner Dave Andrews, Western Hockey League commissioner Ron Robison and East Coast Hockey League commissioner Brian McKenna. Court documents filed by Bassin’s lawyers indicated Bettman and the other leaders were all sent a copy of the letter.

Personally I doubt he could top that, but he's a man that's continually surprised me throughout this process, reaching new low after new low, so I won't count him out just yet.

A note from the author: I had wanted this post to have a lot more snark in it than it does but for whatever reason I just couldn't tap into that, maybe all of the insanity surrounding the Daryl Katz Ice Palace of Awesome has finally worn me down. I'll try to do better next time.