David Freeman stepped down as the chairman of the Nashville Predators yesterday as a result of his income-tax problems, but he said he will not sell his share of the NHL team.
The move came four days before a deadline imposed by the Predators' landlord, Nashville's Metro Sports Authority, for Freeman to settle the tax lien placed on him by the U.S. Internal Revenue Service. If he does not clear up the lien, which was for $3.3-million (all currency U.S.), then the Sports Authority could find the Predators in default since the lien affects the guarantee of net worth each of the team's owners must maintain with the city.
Tom Cigarran, the chief executive officer of Healthways Inc., the largest disease-management company in the United States, took over as the Predators' chairman. Cigarran and his family own 4.2 per cent of the Predators, while Freeman controls the largest individual stake of 32.6 per cent. About 27 per cent of the team is still tied up by the U.S. Bankruptcy Court after former part-owner William (Boots) Del Biaggio was found to have obtained it fraudulently.
Freeman told The Globe and Mail in an e-mail message that he is not selling his share of the team. He did not respond to questions about the status of his tax lien or if his resignation will help the Predators reach an agreement with the Sports Authority.
J. Allen Roberts, Freeman's lawyer, told The Tennessean newspaper in Nashville that Freeman has taken steps to settle the lien, which was for non-payment of his 2007 income tax. Roberts said Freeman is trying to get a more favourable ruling from the IRS and, in the meantime, has deposited enough money to cover what he believes he owes in taxes with the agency. However, this does not mean the IRS is going to accept it and remove the lien.
The Sports Authority told the Predators recently it expects the team to waive the early-termination right in its arena lease as part of settling Freeman's status in the ownership guarantee. Freeman's portion of the guarantee promises he is worth $29-million to cover his share of the team. At present, the Predators can break their arena lease in May if they do not average 14,000 fans a game and post a cumulative $20-million in losses since the ownership group took over in June of 2007.
The guarantee is to protect the city's investment in the franchise when it paid $35-million toward the Predators' expansion fee when they joined the NHL in 1998, plus made substantial improvements in the arena. The city also gives the team about $9.5-million a year in direct and indirect subsidies. If the Predators go bankrupt, the guarantee calls for the owners to reimburse the city for the value of the franchise.
Rusty Lawrence, the chairman of the Sports Authority, could not be reached for comment. NHL deputy commissioner Bill Daly said the resolution of the guarantee is "ultimately up to the Sports Authority in consultation with the ownership group."
The Predators did receive some good news when they signed a naming-rights agreement with Bridgestone Americas Inc., a tire manufacturer based in Nashville. The Predators are suing the former rights holder, the Sommet Group, accusing the conglomerate of missing payments. Effective today, the Sommet Center will now be known as the Bridgestone Arena.